Copyright © 2020 Albuquerque Journal
A little more than two years ago, two major tactics were used in response to persistent financial problems by University of New Mexico athletics: The department was placed on a decadelong repayment plan for its seven-figure deficit, and four sports were cut.
The sports – men’s soccer, women’s beach volleyball and men’s and women’s skiing – are long gone.
But quietly over the spring and summer, university and state higher education officials agreed that athletics money won’t be used to correct the books for a multimillion-dollar deficit the department accumulated over a decade by overestimating its revenue and then overspending.
Instead, the $4.5 million deficit will be eliminated over 10 years using money the university makes in interest from the hundreds of millions of dollars it keeps in reserves. The interest money is typically used for maintenance and other small capital projects, according to university officials.
University administrators shifted the debt out of athletics last spring without publicly announcing their plans. UNM President Garnett Stokes approved the plans, according to university documents created in April.
Stokes said the shift is part of a strategy for athletics to be strategic and realistic with its budget.
“This includes having more granular and frequent updates to me and our Board of Regents, and an Athletics Director who has worked hard to implement a new financial model to increase both revenue and accountability,” Stokes said in a statement. “At the end of the day, Athletics – like any of our departments – isn’t just about numbers, it’s about students, and we will continue to ensure that receiving a first-class education is prioritized in our decision-making.”
Moving the debt away from athletics received approval from regents in May when they approved a Budget Adjustment Request that was needed after the coronavirus pandemic affected the university’s previously approved budget.
A footnote on Page 63 of the 227-page budget-adjustment document said that the athletics deficit was to be transferred to a “central index.”
Regent Rob Schwartz, who has said it’s time to consider downsizing the athletics department because academic units are struggling as well, said he didn’t know he voted on the transfer of the debt at the time.
But he said he had no problem with the university administration’s actions because they were working with the Higher Education Department to change plans for the deficit.
“It truly is the right hand paying the left hand,” he said.
Make athletics pay
Under the original plans, the athletics department was going to use nearly $500,000 of its annual budget, which is about $32 million, for a decade beginning in 2020 to pay off the deficit. The plan was created in connection with a fiscal oversight measure placed on UNM by then-Higher Education Department Secretary Barbara Damron.
The Higher Education Department has been monitoring the athletics department’s progress with paying down the debt. The original $4.7 million deficit was at around $4.5 million at the start of the 2020 fiscal year, according to UNM documents.
But university officials said shuffling the debt out of the athletics department was a necessary step after the New Mexico Legislature, in a state spending bill, included language that said UNM and New Mexico State University athletics departments couldn’t use state money to pay off their deficits.
Damron is no longer the HED secretary. She is now UNM’s chief government relations officer, and she was involved in hashing out new plans for paying down the deficit, according to emails describing the financial changes.
The HED approved of the new plan.
“The 2020 General Appropriation Act passed during the regular legislative session included language restricting the University of New Mexico from using general fund revenues to reduce deficits, meaning that going forward, only institutional funds must be applied to any deficit,” said Stephanie Montoya, a spokeswoman for the HED. “Both (UNM) and (NMSU) are currently in compliance with agreed-upon deficit repayment plans.”
Norma Allen, the director UNM’s Office of Planning, Budget and Analysis, said that the university took the debt from the athletics department and created a new account with a balance of negative $4.5 million. Each year, about $450,000 in interest money the university gets will go into the account until its balance is $0.
She said the process of paying off the deficit is necessary for accounting rules because UNM is a public institution.
The source of the interest money will be the university’s “plant fund reserves.”
At the end of the 2020 fiscal year, the university had about $346 million in plant fund reserves. But the fund will decline in the coming years when it is used for construction projects, including part of a hospital tower project, Allen said.
Cinnamon Blair, a spokeswoman for the university, said UNM is projecting that over the next 10 years about 20% of the interest money the university receives from the plant fund will go toward the athletics debt.
A letter from the UNM associate controller to the HED said a payment toward the debt was made in May, and the debt now stands at a little more than $4 million.
Future of Lobo sports?
The change in plan for the athletics debt comes at a time when some university leaders are publicly questioning what role athletics should play at the state’s flagship university, and athletic revenue at UNM this school year is going to be drastically affected by the ongoing pandemic.
“That’s $4 million that could be spent on maintenance, or it could be transferred to an academic department or it could be used for some other purpose,” Schwartz said of the latest plans for paying down athletics deficit. “The money is fungible. It can be used for any of those purposes.”