Big TV deal for Gopher sports won't help University of Minnesota academics
MINNEAPOLIS — A lucrative new media-rights deal is expected to grow revenue for Golden Gopher athletics by $17 million next year, but the University of Minnesota's academic side won't get a share of that windfall.
As recently as September, President Eric Kaler predicted Minnesota soon would join the short list of universities whose athletics programs rake in more money than they spend.
"I expect us to be able to do that as new media money comes into the Big Ten," he said during a Sept. 8 budget work session with the Board of Regents.
But three months later, after a bowl win and a sexual assault scandal, the U fired its football coaching staff, including head coach Tracy Claeys. In the process, the athletics department saddled itself with $7.1 million in one-time transition costs and a new head coach who will make $2 million a year more than his predecessor.
That's on top of an $8.45 million hole in this year's athletics budget caused by weak football ticket sales, a budgeting error and a buyout paid to Syracuse University for hiring away its athletics director, Mark Coyle.
When all that's paid off, the athletics budget will start making loan payments on Athletes Village, the $166 million basketball and football practice facility slated to open around the end of this year. The U has secured donations for only about half the cost of the complex.
Altogether, the financial struggles have taken the prospect of Gopher athletics contributing to the U's academic mission off the table for the near future.
"I think we can certainly look at it, but right now, getting them back onto firm financial footing with all the things that they have going on, which is substantial, is top of mind for me," Brian Burnett, the U's senior vice president for finance and operations, said in an interview.
Worth the money?
When Coyle announced in January that he was firing football coach Tracy Claeys, he cited poor ticket sales along with weak player recruitment and concerns about the program's culture with 10 players facing discipline related to a rape investigation.
Season ticket sales were down 18 percent from the previous year, though Claeys blamed it on a new mandatory donation initiated under former athletics director Norwood Teague, which effectively raised prices for many seats by 100 percent or more.
When PJ Fleck was hired three days later with a $3.5 million salary, regents Michael Hsu and Darrin Rosha openly questioned the financial logic behind the moves.
University leaders expressed hope that the energetic young coach would fire up donors and fans, generating enough cash to pay for the coaching change.
"We have confidence that PJ Fleck will increase the attractiveness of our football program. We expect additional ticket sales as a result of that. We also anticipate revenue from other sources that will continue to enable our athletic department to function at a high level," Kaler said as regents voted to formally approve Fleck's contract in February.
Before that meeting, at the request of Hsu and Rosha, administrators compiled three years of budget projections for the athletics department.
That document, released to the Pioneer Press in response to a public records request, shows athletics borrowing $5.6 million from the U's general fund and paying it back over the next two years.
Hsu and Rosha thought the document also laid out how Fleck's presence would translate to millions in new revenue.
"I'm comfortable that the economics have been validated here," Rosha said before voting to approve the contract.
But in an interview last week, Burnett said there was no "Fleck effect" baked into the projections. A projected 9 percent increase in ticket revenue next year, for example, is related to an attractive home schedule this fall, not the coach, he said.
Burnett said season ticket sales have been good since Fleck's hire, but they wanted to be conservative in their budget projections.
Hsu and Rosha were puzzled by that explanation.
If the U isn't confident Fleck will bring in more money, Rosha said, "then why do you spend the additional $2 million?"
"They're basically saying there's no justification except they have the money," Hsu said.
Big TV deal
The money is related to a new deal between the Big Ten and broadcasters that Burnett said still is being finalized.
According to the U's projections, Minnesota's share of the TV revenue would grow to $42.5 million next year from $25.3 million this year. Total athletics revenue next year is forecast at $120.6 million.
"Obviously, it's very, very good news for us and the athletic program," Burnett said.
The projections have next year's athletics budget surplus erasing the current year's deficit. But athletics would only roughly break even in fiscal years 2019 and 2020, when loan payments for Athletes Village begin.
If the true financial picture turns out rosier than the conservative projections, the department first will look to rebuild its reserve account for the next coaching transition. Acknowledging pricey coach buyouts as a part of the business, they had set aside $1.45 million before buying out Claeys and his staff; that covered only one-fifth of the transition costs.
In an effort to control the costs of another regime change, contracts for Fleck's staff include new language that would take the U off the hook financially if a fired coach were to take a job with a different school.
"That's something that should have been mitigated but was not" in the contracts for Claeys and his assistants, Burnett said.
Paying it back
When Coyle was hired last year, Rosha said he wanted the athletics department to begin returning money to the U by the new athletics director's third year on the job.
"It's an enterprise that should be an asset to the university," Rosha said last week. "The substantial investment we have in that position comes with the expectation that the department will begin to live within its means and begin to support our general fund as opposed to be a drain on it."
Hsu notes that the yearly budget for athletics already includes a $7 million subsidy from the university.
"We are spending a lot of money that could be spent in other ways at the university," he said.
It's rare, though, for an athletics program to pull that off.
In a review of 2013-14 data provided by the schools, the Chronicle of Higher Education and Huffington Post identified only six universities with self-sustaining sports programs: Louisiana State, Texas, Oklahoma, Nebraska, Purdue and Ohio State.
Mark Nagel, a sports and entertainment professor at the University of South Carolina, said budgets for college sports departments are coming under increasing scrutiny.
Typically, universities will use a surplus in one department to cover a shortfall in another. Not so with athletics, which "in many cases has been allowed to have a one-way financial commitment," he said.
Sports departments take subsidies from universities' general fund, but those that make money are allowed to spend it all, he said.
"More and more people are asking the question, because athletics is a sub-unit of the rest of the campus," he said.
Burnett, however, cautions that spending sports revenue on academics could make the teams less competitive.
It's no coincidence that as the U benefits from new TV revenue, it's investing much of that money in the kind of practice facility they hope will dazzle top high school talent in two of its three big-revenue sports.
"You certainly can look at contributing back to the campus, but that'll move you down the scale for competitive resources. And, you know, a lot of our fans who buy season tickets have an expectation for us to be competitive," Burnett said.
The Pioneer Press is a Forum News Service media partner.