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If you are a student at ASU this government welfare program for football coaches raised your tuition by $147.

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College sports subsidies remain integral part of game

by Ronald J. Hansen and Anne Ryman - Aug. 18, 2012 11:27 PM

The Republic | azcentral.com

Arizona State University has one of the most heavily subsidized athletic programs in major-college sports, a practice that has been attacked at other schools by critics who say the money could be better spent on educational purposes.

Since 2005, ASU has given more than $80 million from its budget to help run its money-losing athletic program. The subsidy is double the University of Arizona's and is bigger than the subsidies at all but four major-conference schools during that time, according to an Arizona Republic review of NCAA data collected from universities.

Across the nation, universities are pouring millions of dollars more into their sports programs as they engage in what one independent commission calls a "financial arms race" in collegiate sports. The rising tide of spending threatens "the continued viability of athletics programs and the integrity of our universities," according to a 2010 report by the non-profit Knight Commission on Intercollegiate Athletics, an organization that urges greater focus on academics by universities.

National education critics say the subsidy of sports is a symbol of the overemphasis colleges place on athletics even as universities impose fiscal austerity on their academic operations.

"We're in a vicious cycle," said William Kirwan, chancellor of the University of Maryland system and co-chairman of the Knight Commission. "What happens in the Pac-12 people will replicate in other conferences. Just when one conference thinks it's solved its resource problem, the whole escalation in costs will come back and bite them down the road. We've had a distortion of values. Too much money is being spent on something that is supposed to be an extracurricular activity."

ASU's subsidies, which include cash from its budget and tuition waivers for athletes, made up 22 percent of the athletic budget between 2005 and 2011, compared with an average of 8 percent for major-conference schools over the same period.

ASU officials say that the subsidy has generally declined over the last seven years from 26 percent of operating expenses to 19 percent in fiscal 2011.

They hope to make athletics financially self-sustaining within five years by building up sports programs. Beginning this year, ASU is expected to get a cash infusion from a new Pac-12 Conference TV contract that nearly matches the annual subsidy.

However, the university plans to keep subsidizing athletic programs for the foreseeable future, even as it anticipates an influx of millions of dollars -- at least $7.5 million the first year -- from Pac-12 television deals and from an ambitious, untested "taxing" district. The university plans to use the revenue from both sources to improve teams and facilities, such as Sun Devil Stadium.

The belief is that as sports programs get better, more money pours in and the university benefits as a whole. But there is no guarantee this will work.

Since 2005, ASU's total spending on athletics has grown by 44 percent, to $57 million, yet its performances in football and men's basketball -- the only two sports that made money -- have been lackluster. ASU's ticket revenue spiked in fiscal 2008, then began sliding and plunged in 2011. ASU has struggled to raise money from donors. It made up for losses with a boost in licensing revenue.

ASU President Michael Crow views his university's athletics subsidy as an investment that's important for the school's future. The university has decided to offer a broad range of sports, including those that aren't traditionally moneymakers but generate a lot of interest from students and fans, such as women's basketball.

Crow said that a variety of complex factors have made it difficult for ASU athletics to make money, including federal restrictions designed to equalize men's and women's sports, an antiquated Sun Devil Stadium and a growing professional sports market.

"So yes, it's harder for us to fill the stadium in 2012 than in 1965," he said.

He is hopeful that recent changes, including a new head football coach, the new Pac-12 TV agreement and plans to renovate Sun Devil Stadium and add shading will position the athletic department to one day cover its expenses.

"We're on that track," he said. "We've never had the opportunity to be on that track." The subsidy

Nearly all college sports programs require funding from their respective universities.

In fiscal 2011, only seven of the 50 major-conference schools with publicly available data reported receiving no subsidy, according to figures reported to the NCAA.

Schools usually lose money in almost all sports except football and men's basketball. Those sports cover much of the others' costs, and whatever they don't cover is paid by the university or boosters.

The Sun Devils have been especially reliant on funds from the university. The money comes from a portion of ASU's budget that is not taxpayer funded -- it comes from tuition and grants -- but is still used to pay for operations. In recent years, about half of the subsidy is in the form of tuition waivers granted by the Arizona Board of Regents, the state universities' governing body, and offered by all three state universities.

ASU and UA each get the equivalent of 315 tuition waivers for student athletes annually, which in fiscal 2011 were valued at nearly $5 million at ASU and nearly $6.4 million at UA. Waivers exempt a student from paying all or part of tuition, which is revenue the university is not receiving. Both athletic departments also kick in cash from their own budgets to cover other financial aid for athletes, including room and board, fees and books.

In 2011, ASU's subsidy was $10.7 million. Additionally, the athletic department is carrying a $3.7 million accumulated deficit that is expected to grow because of the buyouts of former football coach Dennis Erickson and former Athletic Director Lisa Love.

ASU's subsidy was the equivalent of salaries and benefits for 88 more full-time faculty, according to The Republic's calculations based on average pay. The $10.7 million was the equivalent of about $147 per student.

ASU officials say the subsidy for sports in 2011 should be viewed in context: It represented less than 1 percent of the school's total $1.6 billion budget that year. The total sports scholarship aid, including waivers, was less than 3 percent of the $368 million the university gave out in all grants and scholarships.

Still, ASU says it wants to bring down subsidies, though it's unclear by how much. Crow said that he wants athletics to cover all of its costs but would not commit to having the athletics department pick up the tab for the tuition waivers granted by the regents.

"I don't know that we've decided yet. I'm hopeful we can do both," he said.

In an October presentation to ASU faculty, athletics chief operating officer Steve Patterson, who has since been named athletic director, said athletics could be self-sufficient within three to four years. In a recent interview, he said the timetable for ending the subsidy rests on how much more revenue the department generates.

"A lot of schools just put everything on the back of the football team and say, 'Go fix it.' I think, because of our scale, we have to look at a broader approach," Patterson said.

ASU's goal is to nearly double sports revenue to about $100 million annually, he said, and it has several strategies. New television agreements with the Pac-12 are expected to add $7.5 million to the bottom line in the coming year and even more in future years. The department plans to more aggressively court big donors and expand fee-based athletic camps and clinics.

Long term, ASU officials want to develop what they call "the district," a mix of residential, commercial and athletic facilities on 330 university-owned acres along Tempe Town Lake. A change in state law allows the university to collect money in lieu of property tax from developments on the site south of the lake. That money would be used to pay for athletic facilities, including renovating Sun Devil Stadium.

Any revenue from the district, though, won't happen until development takes place, which could take years. Patterson estimated that in the beginning, annual revenue could be in the seven-figure range and eventually increase to tens of millions in 20 years.

Regents Chairman Rick Myers said the board would like athletics to be as self-sustaining as possible, but it has not issued any directive to end subsidies. There are no plans to end the athletic tuition waivers, he said. Sports is part of the universities, he said, just as the arts and the medical school are. ASU had 517 student athletes compete in nine men's sports and 12 women's sports in 2011.

"To think of sports as something that isn't an integral part of the university is inappropriate," he said. "Sports is part of the life experience we want people to have."

The subsidy is a concern for some students.

"I do support money going into the athletic department but not $10 million a year," said ASU sophomore Sally Lopez Bravo. That's money that could be used instead in other areas, she said.

ASU's University Senate, which represents faculty, has not taken up the issue of the subsidy, but past President Joseph Carter said faculty generally feel it's a good goal to move athletics toward self-sufficiency. Disappointing teams

A key reason for the Sun Devils' reliance on university funds is their mediocre performance on the field for most of the past decade.

In football, ASU's 77-71 record since 2000 ranks fifth in its conference. The team has played in seven mostly low- level bowl games and lost five of them.

Since 2000, ASU is 5-35 against ranked opponents. Nearly a third of the Sun Devils' wins, 23, have come against non-major-conference opponents. For example, ASU has beaten Northern Arizona University and San Diego State University four times each.

The story is even more disheartening in men's basketball.

Only Oregon State University has a worse record among teams in the conference than the Sun Devils since the 2000-01 season. ASU qualified for two NCAA tournaments in that time, bowing out in the second round on each occasion.

Making matters worse for ASU, Arizona's basketball program leads the conference in wins in the same time frame. The Wildcats have made 10 tournament appearances, including a run to the Final Four in 2001.

Football hasn't gone as well in Tucson. The Wildcats' number of wins since 2000 is the lowest in the conference.

Mediocrity brings its own costs.

After disappointing seasons last year, Arizona and Arizona State fired their football coaches.

UA hired Rich Rodriguez, who went 76-48 as head coach at West Virginia University and the University of Michigan. Rodriguez is scheduled to receive at least $1.75 million this season. Arizona also owed former coach Mike Stoops a $1.4 million buyout.

ASU hired Todd Graham, who went 6-6 at the University of Pittsburgh last year in his first season coaching a major-conference program. He went 43-23 in five years at Rice University and the University of Tulsa. Graham is scheduled to make at least $2 million this season. ASU paid $1 million for the early buyout of his Pittsburgh contract and owed former coach Dennis Erickson an additional $750,000.

At least five coaches in the Pac-12 will make more than Graham this season. Lagging revenue

Lackluster performance on the field often translates into underwhelming ticket sales.

Between 2007 and 2011, Arizona State ranked fifth in the conference in football ticket revenue out of the eight schools with publicly available data. ASU ranked sixth in the conference for all sports ticket revenue.

Stanford and the University of Southern California are private institutions and declined requests to share their financial data.

In Tucson, the Wildcats were next-to-last in football ticket revenue since 2007, but second in men's basketball. In overall ticket revenue, Arizona ranked fifth in the conference.

Patterson, ASU's athletic director, acknowledged winning is necessary to generate interest in sports and drive significant revenue.

"Certainly the football team didn't reach expectations last year on the field. That's why you change coaches," he said.

Patterson wants to make each sport as self-sustaining as possible. Among the goals are to raise football's $12 million surplus to $40 million and men's basketball's $2.5 million surplus to between $6 million and $8 million. UCLA, the second-most lucrative men's basketball team in the conference, behind UA, reported $4.9 million in surplus funds in 2011.

"There's a lot of work to do," he said. ASU's sports programs need to strengthen their relationships with the community, former athletes and alumni, as well as improve facilities and the fan experience.

Fans in the seats are only the most visible source of revenue at college programs. Donations and gifts from boosters can bring more money to athletic programs than ticket sales.

That has been the case at ASU, though officials say such fundraising has been disappointing.

Over a seven-year period ending in fiscal 2011, the university reported $77.4 million in contributions toward athletics. That ranked 39th out of 50 major-conference schools with publicly available data.

By comparison, the top public school, Oklahoma State University, pulled in $411 million, largely from the support of billionaire T. Boone Pickens.

In the then-named Pac-10 Conference, Oregon took in more than double what ASU did, largely because of its own billionaire benefactor, Nike Chairman Phil Knight.

With its nationally renowned basketball program leading the way, UA reported $91 million.

Instead of relying on big-dollar donors, ASU has pursued an army of small donors, an approach it acknowledges hasn't worked.

The assistant athletic director who oversaw fundraising recently left to take a job at another university; ASU is in the process of finding a replacement and implementing a new approach.

"We've been in hiding," said Rocky Harris, an ASU senior associate athletic director who is overseeing fundraising in the interim. "We've been insulated and did a lot of meetings with ourselves."

The athletics department plans to hire more staff to bring in contributions, particularly from high-dollar donors. ASU officials also say they need to do a better job reconnecting and establishing relationships with alumni and the business community.

A successful athletics program can benefit the university beyond its finances, Patterson said. "Athletics is the front porch of the university. It's often the first impression people have of the university. That may be fair or unfair, but it's reality. It's the cards we've been dealt."

If athletics is successful, it gives the university a great platform to tell its academic story, he said. Pac-12 money

One thing ASU is assured of is a windfall from Pac-12 broadcast and live-streaming deals.

ASU officials say they do not have any written estimates of revenue from a Pac-12 contract with ESPN and Fox Sports, which was signed last year, or a new contract for the Pac-12 Networks, which debuted Wednesday.

But other universities have run the numbers and shared some in response to public-records requests from The Republic. One is Washington State University.

The Pac-12 last year signed a 12-year, $3 billion TV deal with ESPN and Fox Sports and the schools agreed to evenly divide revenue. The previous contract paid then-Pac-10 schools based on the number of television appearances.

WSU officials said they expect to get $16 million in television money from the Fox-ESPN deal and about $4 million more from conference and NCAA funds this year. That revenue is scheduled to grow each year and should reach a combined $36 million a year by 2024, according to a Republic estimate for the final two years, based on the 10-year WSU projections.

ASU would only say that for fiscal 2013 it expects to get about $16 million from the ESPN-Fox deal, a one-year increase of $7.5 million. The revenue is what WSU projects as well. At the same time, WSU expects conference and NCAA money to decline by nearly $1million this year.

If anything, the Washington State projections are likely too conservative. They don't include a likely boost in postseason revenue-sharing from the change to a playoff system after the 2014 football season. That arrangement is expected to leave Bowl Championship Series schools dividing about $5billion over 10 years.

WSU also estimated just $3million a year from the new Pac-12 Networks beginning in 2014-15, with no annual increase afterward. At least one analyst of TV contracts expects the networks could yield more than $1billion over the next 12 years, which would be evenly divided among the Pac-12 schools.

Arizona regents have asked the universities to provide details on how the athletic departments plan to spend the additional Pac-12 money by Sept. 12, but the board has not issued any directives on how the money should be spent.

Regent Dennis DeConcini chaired a task force on athletics a few years ago that, among other things, required the universities to submit more detailed financial reporting on athletic subsidies.

DeConcini supports having the athletic departments pick up the tab for the tuition waivers that are now given to them. That would be an important change, he said, because it would free up money in the universities' general budgets.

"We should attempt, and our objective should be, that athletics sustain and support themselves," he said.

Kirwan, the Maryland chancellor, said money has grown in college sports but most of it has gone to coaches and sports administrators, not the universities or the students.

"Is this really what we should be doing in higher education?" he said.

Reach the reporters at ronald.hansen@arizonarepublic.com (602-444-4493) or anne.ryman@arizonarepublic.com (602-444-8072).