The college athletics arms race is on.
Has been for years, actually.
As coaches salaries skyrocket and multimillion dollar facilities are going up around the country at breakneck rates, university presidents around the nation are struggling to strike a balance between justifying more and more spending for athletics to stay competitive with the harsh economic realities elsewhere on their campuses.
At the University of New Mexico, it can be argued there is more success on the fields of play and in the classrooms for its 450 student-athletes than at any other school in the Mountain West Conference.
Yet, the athletics department has either finished each of the past six fiscal years with a budget deficit or five of the past six, depending on whose math you choose to use, including the 2013-14 fiscal year, for which numbers are not finalized.
But success is relative, and whether UNM can consistently compete on a national stage is debatable.
On the same financial statement turned in to the U.S. Department of Education that shows UNM claiming $44.3 million in revenue for the 2012-13 fiscal year, the University of Texas brought in $165.7 million. A total of 72 schools reported more revenue than UNM that year, and even that $44.3 million figure is one the school would argue is inflated far beyond reality.
In one of the poorest states in the nation, can UNM, which has only one of its 21 intercollegiate sports teams (men’s basketball) turning a profit each fiscal year, justify receiving well more than $2 million per year in state subsidies for athletics? Can it justify student fees totaling $4 million, a figure that has more than doubled in the past two years despite the objections of student representatives on campus?
University President Robert G. Frank, a former Lobo swimmer, says he’s concerned about the out-of-control spending that seems to be running rampant in college athletics. Nevertheless, he remains confident that the investment in sports is a wise one.
“I think athletics has a real value to the University of New Mexico,” Frank said, referring not only to the community pride successful Lobo teams cultivate around the city and state, but also to the immeasurable marketing value a university receives when its teams are on national TV.
But he also hears the cries of critics who call for a reining in of spending, especially on facilities and coaches’ salaries.
“It’s a value judgment,” Frank said. “I personally think we pay too much for many head coaches, and I think this nuclear race for coaches’ salaries is way out of line. … It’s creating real problems on the national scene and, as a microcosm, I see that here at the University of New Mexico. When our faculty is struggling with the kinds of salaries we have there, and we have some of these big salaries for coaches, it’s a real issue for us.”
So what exactly is the budget of the UNM athletics department?
It’s not as simple an answer as you would expect.
Numbers UNM reports to the DOE suggest it is in the neighborhood of $45 million per year, but athletic director Paul Krebs says the actual operating budget is more like $30 million.
The DOE requires public universities to disclose budgets in a uniform manner as part of the Equity in Athletics Disclosure Act.
The data are posted online for public consumption, probably most visible as part of databases posted online by USA Today and ESPN. But Krebs says differences in reporting from university to university makes drawing comparisons from the EADA reports misleading and inflates his budget “somewhere close to $8 (million) to $10 million.”
“It includes a couple of things that we typically, and nobody at the university, would include in their budgets,” Krebs said. “For instance, it includes depreciation – depreciation for your land, the facilities. Different schools fill this out differently.
“The other big one is you are supposed to list university support, and one of the things they consider university support is the lottery scholarship – the lottery part of the (student-athletes’) scholarship. So if you look at our financials, our grant-in-aid budget looks to be about $4 million. On this EADA report it’s probably $7 (million) or $8 million because the lottery piece of it, the Amigo scholarship, all of the scholarships that our student-athletes get, and frankly that any student of the university gets. I’m required to list that as part of my budget on this EADA report.”
An in-state athlete on the lottery scholarship may be going to school at a much cheaper rate than an out-of-state athlete, and UNM is required to report the difference as a subsidy it receives from the university, despite it being a benefit extended to any in-state student.
States without lottery-type programs, Krebs points out, aren’t reporting such subsidies.
Such circumstances led the EADA website to offer up a disclaimer: “(V)alid comparisons of athletics data are possible only with study and analysis of the conditions affecting each institution.”
The “funny math” Krebs says that makes up the EADA budgets shows UNM as being subsidized at a rate of 34.6 percent from student fees, university support and state funding.
That figure drops significantly from the “actuals” used by the department – 18.1 percent of $30 million in revenue.
The biggest difference accounting for the roughly $14.3 million revenue difference between the two budgets comes in the form of $9.9 million in institutional support (scholarship and facility related) reported on one, but not the other. The other $4.5 million comes in the form of contributions that do not show up on UNM’s operating budget.
A Journal request for clarification on the contributions discrepancy went unanswered.
“I never look at that,” Krebs said of the EADA data. “… The NCAA and USA Today and ESPN, those are the ones that people grill down on and do comparisons on, but I don’t even look at that because it’s not real. It requires you to add things and include things (not everybody includes). Nationally, that’s what people pick up on as a frame of reference.”
Nevertheless, while the revenue brought in or the percent of the budget that is subsidized can be debated, the bottom line cannot. Both budgets show one consistent trend at UNM: Its athletics department is not profitable.
Krebs wouldn’t say how much of a deficit he expects for 2013-14. But based on budget data reviewed by the Journal, that would mark at least the sixth consecutive year of a budget shortfall for athletics, according to the EADA data, and fifth of the past six years based on UNM budget data. (UNM showed a $17,748 surplus for the 2009-10 fiscal year.)
The deficits usually range in the $600,000-$700,000 range and one (2011-12) was over $1 million, according to the EADA. That year included a $782,061 severance payment to former football coach Mike Locksley.
For 2012-13, both reports show roughly a $700,000 deficit.
“I want (Krebs) to balance his budget,” Frank said. “If you look at his operation, though, our athletic department does more with less budget dollars than almost every athletic department in the country. Do we want them to balance their budget? Absolutely. Do I understand why they are not balancing their budget? Yes I do.”
Frank said certain unpredictable aspects of sports – travel costs, ticketing revenue or postseason bonuses – makes budgeting a challenge.
So the parts of the equation UNM can control are what they have been pushing for. Licensing, merchandising, contributions and major gifts have gone up significantly in recent years, but one piece of that equation Krebs anticipated being in place by now – naming rights for the Pit – remains elusive.
“The debt service continues to be a challenge for us,” Krebs said, referring to paying down the $60 million renovation of the Pit four years ago. “The financial model was predicated on a naming gift. We’ve said that from Day One. We thought for a year or two we might be able to make some things work, but we have an obligation to the university, and an expectation, that we’re going to balance the budget. Ultimately for us, and for any university, the naming gifts and the private support are incredibly important. Those allow us to do the things that we want to do.”
Krebs would not get into specifics, but did say he’s confident the university is close to securing what could be a “seven-figure deal” annually for selling naming rights to the Pit. Such an income source would have balanced each of the past six budgets.
“I see the steps happening,” Frank said. “We’re not going to talk about them publicly, but once those things happen, we will then see the deficit drop, and I think we’re very close to making those things happen and being public about it.”
UNM students paid $1.9 million in fees for athletics in 2011-12, with a majority earmarked at covering the costs of student admission to sporting events.
Then, despite the objections of undergraduate and graduate student representatives, came significant increases in those fees. In 2012-13 the students paid $3.2 million and that figure was right at $4 million this past year (2013-14).
“Student fees have been a godsend for us the last couple years. But we, historically, have been on the real low end, and now we’re probably right in the middle,” Krebs said. “But I think there’s a limit to what you can put on the backs of the students.”
In 2012-13, six of the 10 other schools in the Mountain West Conference received more money from student fees than did UNM, as did nearby regional schools New Mexico State University and UTEP.
“I don’t see a huge increase in the student participation around fees, but I do think some nominal increases are probably in their future,” Frank said. “How fast and how much is something we’ll talk to the students about.”
According to Krebs, there are several facility projects either already being worked on or in the works to begin shortly.
The $2 million McKinnon Tennis Stadium is being completed this month, paid for by private donations.
Permanent restrooms for the baseball, softball and new tennis facilities will start this summer at a cost of $265,000 paid through state funding.
Plans are in the works for an RD and Joan Dale Hubbard Clubhouse for the baseball team. A price tag has not been announced for construction that the school hopes starts by September.
The football weight room is being renovated and should be complete by late August, while a separate weight room for UNM’s Olympic sports has just begun construction at a price tag for both at around $1.1 million.
Athletic success comes at a cost.
And despite consistent struggles to make budget on a campus and in a state that has been forced to pinch pennies elsewhere for many years, Frank and Krebs point to the success of their student-athletes on the fields of play and in the classroom as all the proof needed that the investment in Lobo athletics is a wise one.
“We have what we need to be successful, but we’re not flush,” Krebs said. “There’s nobody living an extravagant lifestyle. …
“I think we’re generating pride for the state. We’re a source of pride for this state, the community. We’re not driving the train. We’re not at the head of the train, but I think when done, and done in the right context, we add great value to the university, as does every other college (at UNM) and every other department.”