Monthly Archives: July 2012

What is the Relationship Between Money Spent on Recruitment and Recruiting Class Rank?

Have you ever wondered if a relationship exists between the money spent on football recruitment and the subsequent recruiting class rank? In this post, we look at the top 25 public schools in both recruiting expenditures and recruiting class rank, as reported by Rivals.com. These numbers are from 2010-2011 NCAA financial disclosures and 2011 recruiting classes.

This first chart shows the top 25 public schools in recruiting expenditures for the year 2011. As you can see, the expenditures range from $1,135,211 to $433, 236, yet the class ranks range from 1st in the county to 118th.

School Recruiting Class Rank
Tennessee $1,135,211 13
Alabama-Tuscaloosa $980,882 1
Auburn $950,378 7
Georgia Tech $883,430 41
Arkansas $666,419 24
Georgia $623,224 5
Texas Tech $611,910 20
Florida $602,929 12
Oregon $590,683 9
Boise State $589,773 53
UNC $580,200 16
Texas $577,976 3
Michigan $577,663 21
New Mexico $545,867 81
Illinois $545,363 42
Army $511,840 118
Mississippi $495,233 19
Memphis $493,204 65
Clemson $490,305 8
Nebraska $478,554 15
Colorado $470,355 74
Iowa State $448,777 51
Kansas $442,911 34
Washington $440,931 23
Florida State $433,236 2

This second chart shows the top 25 class ranks, with their respective recruiting expenses.

School Class Rank* Recruiting Expense
Alabama-Tuscaloosa 1 $980,882
Florida State 2 $433,236
Texas 3 $577,976
Georgia 5 $623,224
Louisiana State 6 $302,882
Auburn 7 $950,378
Clemson 8 $490,305
Oregon 9 $590,683
Ohio State 11 $320,938
Florida 12 $602,929
Tennessee 13 $1,135,211
Oklahoma 14 $356,414
Nebraska 15 $478,554
Berkeley 17 $394,298
South Carolina 18 $132,758
Mississippi 19 $495,233
Texas Tech 20 $611,910
Michigan 21 $577,663
Washington 23 $440,931
Arkansas 24 $666,419
Virginia 25 $276,806

Both charts show that, at present, there is no real relationship between how much a school spends on recruitment, and how high their recruiting class ranks. For instance, even though Florida State had the 2nd best recruiting class in the nation, they were only ranked 25th in recruiting expenditures.  Yet, Army, which only had the 118th best recruiting class amongst public schools,  actually spent about 1.18 times more on recruiting than Florida State did.

*Omitted Class Ranks belong to Private Schools (USC-4, Notre Dame-10, Stanford-22)

Editor’s Note: There has been some confusion over why these numbers differ from previous posts, which used Department of Education data filed by each school. Those reports show recruiting in two categories: male and female. The numbers in this post are football-specific and obtained from NCAA disclosures filed by each school and obtained through public records requests.

Penn State’s NCAA Sanctions: The Impact On The Athletics Department

Yesterday, the NCAA levied what many consider to be unprecedented penalties upon Penn State.  Including within the NCAA’s sanctions, was the imposing of a $60 million fine to be paid by Penn State over the next five years.  This $60 million figure is clearly large, leading some to believe that while the NCAA did not impose the “death penalty” upon the football program, it nonetheless intended to decimate it.

How though, will the $60 million fine actually impact the operations of Penn State’s football program and the Penn State athletics department?  In the grand scheme of Division I athletics, Penn State has posted impressive revenues in recent years.  For 2010-11, the most recent year for which Department of Education data is available, Penn State’s athletics department reported total revenues of $116,118,026.00.  The athletics department also reported expenses of $84,498,339.00.  While many athletics directors will note that the numbers reported to the Department of Education are not inclusive of every cost incurred by an athletics department, these figures at least give some idea as to the type of budget Penn State’s athletics department is operating under.

That being said, it is arguable that at least when considering the Department of Education data, having to shell out on average $12 million per year over the next five years to comply with the NCAA’s sanctions is not going to destroy Penn State athletics.  However, the story is not that simple.  One has to take into consideration the multitude of budgetary factors Penn State’s athletics department is likely now facing as a result of the NCAA sanctions.  Along with losing sponsors like State Farm and facing a possible credit downgrade by Moody’s, Penn State athletics likely now has to rework its budget to determine where the $60 million is going to come from.

Frank Hardymon is the Associate Athletic Director – CFO at Georgia Tech.  While he can only explain the budget planning process engaged in at Georgia Tech, he notes, “I would guess our methods of planning and budgeting are similar to those utilized by other institutions.”  This planning begins the spring prior to the July 1 start of the fiscal year, when the upcoming year’s budget is completed.  “In our case, nearly every dollar which we project receiving is accounted for in the budget,” Hardymon noted.

Likely, a similar circumstance exists at Penn State.  While the Department of Education arguably demonstrates that the athletics department is operating with a surplus, many athletics directors are quick to note that is not the case, as not every expense an athletics department incurs is reported to the Department of Education.  As such, Penn State is likely looking towards contingency provisions in its budget to gather the money by which to pay the $60 million fine.  “We build in as much contingency as we can every year; some years we may have close to $500,000.00 in contingency factors into the budget, other years that amount is quite a bit less,” Hardymon said.

It is unknown whether Penn State’s athletics department had any contingencies built into its budget.  If so, it is highly unlikely that the contingency amount would allow for the payment of a $60 million fine.  As such, Penn State will likely have to scrape from other areas of its budget to pay the imposed fine.  Areas in which Penn State could cut from its budget would likely be from recruiting expenses, travel costs and future coaching salaries.  However, the most likely area in which Penn State could draw from is facility improvements.  While the department will have to continue paying under the loan terms for already existing improvements, it is unlikely that the athletics department will undertake any new building during the time period in which the fine is being paid.  Hardymon noted, “We also maintain a detailed five-year income projection which we update frequently.  That analysis factors in projected facility improvements needed during those five years.”

Overall, the financial sanction imposed upon Penn State by the NCAA is indeed a blow to the athletics department.  However, given Penn State’s apparent athletics revenue along with proper budgeting moving forward during the next five years, it is likely that the athletics department will be able to continue to function financially.

How Important Are Donations/Contributions and Football Ticket Sales to Penn State?

Research by BusinessofCollegeSports.com Staff

Penn State is not subject to public records requests for financial data relating to its athletic department, which makes yesterday’s financial penalties hard to analyze. (For more on why Penn State isn’t subject to these disclosures read here.) However, taking a look at public schools in the Big Ten may shed some light on how important donations/contributions and football ticket sales are to the athletic department.

The first chart shows how football-related contributions (generally tied to tickets and suites) and football ticket sales impact an athletic department’s total revenue. Keep in mind, reporting practices vary with regards to how contributions are attributed, which is why we’ve included a second chart below to show total athletic department contributions, as some schools reported a large portion of contributions as non-sport specific.


This chart shows total athletic department contributions in relation to total athletic department revenue:

For more on how contributions/donations play a role in Penn State’s future, check out this piece by BusinessofCollegeSports.com founder, Kristi Dosh, on ESPN.com.

Penn State Finances

Research by BusinessofCollegeSports.com Staff

A five-year snapshot of Penn State’s athletic department finances per filings with the Department of Education and IRS Form 990s.

It’s important to note that Department of Education filings do not always include all expenses. The 2010-2011 numbers include the information provided by Penn State regarding expenses not reported. Those notes are not available for previous years but the situation was likely similar in previous years.

2010-2011

Football

Revenue: $72,747,734

Expenses: $19,519,288

Net Revenue: $53,228,446

Athletic Department

Revenue: $116,118,026

Expenses: $84,498,339

Net Revenue: $31,619,687

*Note to Penn State’s report says: “As is referenced in the Caveat box in the Total Expenses section, Grand Total Expenses does not include $19,580,022 of debt service expense and $14,980,216 spent during the year on capital expenditures. Subsequent to addressing our debt service obligation, any remaining excess revenue is/will be used in funding current/future capital projects.”

2009-2010

Football

Revenue: $70,208,584

Expenses: $19,780,939

Net Revenue: $50,427,645

Athletic Department

Revenue: $106,614,724

Expenses: $80,260,637

Net Revenue: $26,354,087

Big Ten distribution: $20,039,504

 

2008-2009

Football

Revenue: $61,767,717

Expenses: $19,131,957

Net Revenue: $42,635,760

Athletic Department

Revenue: $95,978,243

Expenses: $76,499,957

Net Revenue: $19,478,286

Big Ten distribution: $19,172,047

 

2007-2008

Football

Revenue: $53,766,038

Expenses: $16,537,705

Net Revenue: $37,228,333

Athletic Department

Revenue: $91,570,233

Expenses: $79,275,354

Net Revenue: $12,294,879

Big Ten distribution: $18,785,520

 

2006-2007

Football

Revenue: $44,014,052

Expenses: $14,609,828

Net Revenue: $29,404,224

Athletic Department

Revenue: $76,327,504

Expenses: $76,327,504

Net Revenue: $4,353,456

Big Ten distribution: $14,010,190

Oregon’s New Football Operations Center Unique

The story of the University of Oregon’s new football operations center has been interesting from the get-go. With the $68 million, 130,000 square foot operations center set to open for the 2013 season, now is as a good time as ever to reflect on how the project came to life, and what it will include once done.

The most unique part of this building project isn’t the final product itself, but the way in which it is being constructed. Back in 2010, Oregon decided to lease the land surrounding Autzen Stadium to alumnus and Nike co-founder Phil Knight. This essentially gave a private company the ability to build on public land. At the end of the project, Knight will send the center back to Oregon as a gift. It’s not the first time Knight has done this on the University of Oregon campus, but it’s not something routinely seen in other athletic departments. The closest example is Louisiana State University where the Tiger Athletic Foundation constructs all projects and then gifts them to the athletic department once all debt is paid.

The arrangement with Knight brings up two issues. First, it must be noted that traditionally the impending construction of most buildings on a public university is opened up to a public bidding process, in which the most qualified company that can deliver the project at the cheapest price is chosen to construct the project. Thus, the fact that Oregon is essentially circumventing this process and going through private means is a departure from the norm.

Next, this brings up the issue of oversight. This kind of set-up allows Knight to control the design of the expansion and avoid public oversight. This has been a sticking point for many on the outside looking in who feel the project lacks transparency.

As for the actual look of the new operations center, less is known than with most athletic building projects. Because the project is being privately funded and built, the athletic department has less control over the outcome. Some features which have been discussed include a 25,000-square-foot weight room, climate-controlled lockers with iPod docks, and a cafeteria that will be open to all University students.

All of this looks great, especially with Knight footing the bill. However, although Knight is handling construction, the building does not come without costs for Oregon. For example, after Knight built the $41 million Jacqua Academic Center for Student Athletes, the university was obligated to pay $2 million per year for operations expenses, some of it coming from the academic budget. Senior associate athletic director Craig Pintens explains that academic support reports to the Provost’s office, and therefore that department pays the programming costs. However, the athletic department pays 2/3rds of the operations and maintenance costs.

The new project will bring its own operating costs, which will become the responsibility of the athletic department much like any other new athletic facility. According to the Register-Guard, “In the contract signed two years ago, the university agreed to staff the [new football operations] center — for six years — with a facilities manager, museum curator, museum receptionist, food service administrator and a senior administrative assistant for football operations. The building’s maintenance is also on the university’s nickel.” However, Pintens tells us the athletic department will cover 100 percent of the building’s costs.

The new operations center will help alleviate strain on the Casanova Center, which currently houses operations for every sport, including football. Since the Casanova Center was built in 1991, Oregon has added three sports and over 100 employees to the building with no expansion of the building’s footprint.

It’s also worth noting Oregon’s athletic department has seen a vast change in its finances over the past decade. In 2004-2005, the athletic department’s NCAA disclosure showed a net loss of $131,198. However, in 2010-2011 the department showed net revenue of over $9.5 million. The athletic department relied on no direct institutional support from the university in 2010-2011, although it did take in student fees of $1.4 million. The athletic department says those student fees cover football and basketball tickets and that none of those funds will be used for the operation of the new building. The increased success and exposure of the Oregon athletics department has led to licensing revenue growing from $750,000 in 2004-2005 to $2.25 million in 2010-2011, with the majority of revenue being retained by the University.

Knowing all this, is there reason for concern over the finances of the new operations center? What is your opinion on this project at the University of Oregon? Have they bolstered their facilities to a level that is necessary for recruitment of new players, or have they gone overboard? Is Knight commanding too much control at Oregon? Leave your comments below.

Editor’s Note: The original article posted July 23, 2012 contained several inaccuracies and has been edited following conversations with the University of Oregon.

SEC and Big Ten Schools Post Revenue of over $1 Billion

Guest author: Tyler Jamieson (BusinessofCollegeSports.com Intern)

When it comes to cash the SEC is king…

…but just barely.  NCAA disclosures (and EADA reports for private schools) from the 2010-2011 school year (the most recent available) reveal that the SEC is top dog when it comes to revenue.  In 2011, schools from the SEC and Big Ten conferences both posted revenues of over $1 billion.  The SEC earned top billing with earnings of $1,080,219,133, with the Big Ten right behind at $1,078,727,312.

The SEC also led the nation with a staggering 5 schools posting revenues of over $100 million.  Leading the way was Alabama ($124,498,616), followed by Florida ($123,514,257), LSU ($107,259,352), Tennessee ($104,368,992), and Auburn ($103,982,441).  The Big Ten was second with 3 schools over $100 million: Ohio State ($131,815,821), Michigan ($122,739,052), and Penn State ($116,118,025).  The Big 12 had two schools over $100 million: Texas, with the highest overall net revenue in the country ($150,295,926), and Oklahoma ($104,338,844).

What’s even more impressive about the SEC’s revenue numbers is how far they have climbed since 2004-2005.  Since 2004-2005 the conference as a whole has almost doubled their revenue, skyrocketing from approximately $600 million to over $1 billion.  Over that time the average SEC school’s revenue has jumped from approximately $55 million to a little over $91 million, which is a robust 71% increase.

Once again amongst the notables is Alabama who doubled their revenue from $62 million to $124 million, no doubt due to recent success on the football field with the hiring of Nick Saban and 2 National Championships in the past 3 years.  Also among the big movers was Mississippi State who back in 2004-2005 had a very paltry (by SEC standards) revenue of $26 million.  In 2010-2011 the Bulldogs took the SEC crown for highest percentage climb in revenue since 2004-2005 with a 131% increase up to $59 million, but that still leaves them at less than half of Alabama and Florida are earning.

With a $3 billion television deal set to kick off in 2012, the PAC-12 is in position for some serious growth.  In 2010-2011, the conference had the 2 lowest net revenue earners for all automatic-qualifier conferences.  Utah, still transitioning from its move from the Mountain West Conference, had a revenue of $38 million, and Washington State came in at just under $40 million.  Those numbers will no doubt see hugely significant increases in the coming years with each school in the conference estimated to receive over $20 million a year from the new TV deal.

Will the Big Ten Commissioner be Able to Fire Coaches in the Future?

UPDATE (7/20/12, 10:46 a.m.): The Big Ten has issues the following statement today: ”The draft obtained by the Chronicle was an early draft put together by the Big Ten staff in order to surface all of the options available. The option of giving emergency powers to the commissioner to fire personnel is not under consideration by the presidents and chancellors.”

In an article posted by The Chronicle the issue of giving Big Ten leaders the ability to fire coaches is discussed. This comes at a time when the Big Ten is at odds with what should be the proper punishment of the officials from Penn State. As most of you know, former coach Jerry Sandusky was convicted on 45 counts of child sex abuse last month. Now, following findings in the Freeh Report, it has become obvious that at least four top Penn State officials failed to report all that they knew about the child abuse allegations to the proper authorities back in 2002. As a result, the Big Ten is trying to figure out what combination of financial penalties, suspension, or termination of employment, would be suitable for this unprecedented situation.

The new plan would give ”James E. Delany, who has overseen the league since 1989, and a powerful committee of conference presidents the ability to penalize individual members of an institution, should their actions significantly harm the league’s reputation” (The Chronicle). Provisions would also be set up to prevent boosters and trustees from pressuring university leaders to act in certain ways, thus empowering presidents and ADs to act with integrity and responsibility. Furthermore, it has been noted that the Big Ten”s 12-member Council of Presidents and Chancellors could potentially suspend, expel, or put a school on probation by a 70% (or eight member) vote.

All in all, the issue of punishing Penn State is tricky. If the school were to be banned from playing, there is no contingency plan in place to replace the lost games for opponents. What do you think will happen? Will the Big Ten approve this new plan? Will Penn State be banned, or is there too much at stake for that to happen? Leave your comments below.

New Links – July 13

The latest in college sports business news from around the web:

A look at the athletic department budget at Kansas and Kansas State

Both Kansas’s and Kansas State’s athletic department budgets have grown substantially in the past five years. Through conference-generated income and an increase in donations, both schools have been able to grow their athletic department despite the economic downturn. Read this to find out more about the two school’s financial situations and the future implications of this growth on their athletic departments.

NCAA lawyers seek to dismiss lawsuit by former UNC football player McAdoo

In 2010, Michael McAdoo was one of seven players to miss the entire season while serving a disciplinary suspension at UNC. He initially sued to restore his eligibility and for monetary damages, but lost his case. Now the case is being brought before the North Carolina Court of Appeals. Read here to find out why the NCAA is looking to dismiss the appeal and how McAdoo’s career has panned out since then.

Huskies’ first game in renovated Husky Stadium moved up a week

Apparently the University of Washington is happy with its construction schedule, as it has moved up its opening game at Husky Stadium by one week from Sept. 7, 2013 to Aug, 31, 2013. Their final year at CenturyLink Field is slated to start on September 1st vs. San Diego. Want to find out more about Washington’s upcoming schedules over the next few years? If you answered Yes, you’ll want to read this.

Alabama, Auburn football programs cash cow for state, with estimated $500 million annual economic impact

Alabama and Auburn fans may not agree on much – but what they can agree on is that each team brings a windfall to their respective school. With their college football teams playing well, applications are up and stadium renovations have been ongoing. However, what is the economic impact of this prosperity on the state of Alabama? Read this to find out the answer.

Bill comes due for Missouri’s move to the SEC

So what is the price that Missouri has to pay to play with the big boys in the SEC? It’s clearly a hefty price, as Missouri operated with a $64 million budget in 10-11, whereas nine SEC schools spent over $80 million in the same fiscal year on their athletic department budgets. As the newest member of the SEC, where is MU going to get the money to be on par with these other schools? Read here to find out Missouri’s financial plan and to whom it is looking at for guidance in this transitional period.

TIF board OKs $35 million contribution to Baylor Stadium

Baylor’s new stadium will be an important contribution to both the school and Waco City. In an addition to being a more high-tech facility, community members hope that it will help beautify the city and attract more visitors. Now that Tax Increment Financing Zone No. 1 board has approved a very much, needed $35 million public contribution  to the project, what are the next steps? Read here to find out more.

New Links – July 12

The latest in college sports business news from around the web:

Razorbacks planning for new athletic facilities

Big things are happening at the University of Arkansas. Plans for major upgrades in several of their athletic facilities are now underway. Want to find out what’s being improved and how much it’s all going to cost? Check this out!

Men’s College Basketball Programs Facing Attendance Declines

In the past few years, attendance at college basketball games around the country is down. Even though conferences such as the Pac-12 have been the hardest hit, this trend has grave implications for all college basketball programs around the country. Are there any ways to bring the fans back into the stadium to enjoy the game-day experience?

Maryland officially cuts seven sports; men’s outdoor track and field spared, for now

Remember this report? Well the June 30 deadline has now passed, and Maryland has had to cut 7 of its D1 sports to deal with its multi-million dollar deficit. Read this to find out what will happen to the 131 student-athletes affected, and the school as a whole, as a result of these cuts.