Athletics programs are finding ways to increase revenues in the face of steadily rising costs, but the latest study of revenue and expense trends at Divisions I and II institutions reveals they are doing so in part with funds from elsewhere in the university.

Data in the 2003 edition of Revenues and Expenses of Divisions I and II Intercollegiate Athletics Programs suggest they also may be testing the upper limits of ticket prices and student activity fees.

The study reveals that average total revenues apparently increased more rapidly than expenses in all Division I subdivisions and in Division II.

That may have contributed to an increase in the number of Division I-A programs that reported revenues above expenses, to 47 institutions from 40 in the 2001 version of the study. Division I-A institutions' average revenues -- aided significantly by a 20 percent increase in direct institutional support and 22 percent increase in average ticket sales -- increased by 17 percent, compared to a 16 percent increase in average expenses.

Even more noteworthy percentage increases in revenue occurred at Divisions I-AA and I-AAA programs and in Division II, though those increases appeared to primarily benefit the small percentages of institutions in those membership classifications that post a profit -- and were boosted by even larger transfers of institutional funds, as well as significant increases in student activity fees.

Average total revenue increased 27 percent in Division I-AA, 22 percent in Division I-AAA, 37 percent at Division II institutions sponsoring football and 42 percent at Division II institutions without football. Those increases compare to hikes in average total expenses of 12 percent in Division I-AA, 18 percent in Division I-AAA, 17 percent in Division II with football, and 19 percent in Division II without football.

The increasing reliance on higher ticket prices and student fees may be among the most significant new trends emerging from the latest study, suggests Daniel L. Fulks, accounting program director at Transylvania University and director of the study, which is conducted every other year.

"There's probably a limit at some point to television revenues, and bowl games aren't the cash cow that people think they are," Fulks said. "So institutions are turning to what I call 'easy targets' -- fans who are willing to pay higher ticket prices to attend games or pay more for the right to buy tickets at the successful Division I-A programs, and students who are being asked to bear more of the cost of athletics at those institutions that can't raise ticket prices."

But direct institutional support -- transfers from universities' general funds into athletics accounts, rather than revenues earned directly by athletics activities -- continues to be the largest source of revenue for athletics programs at schools outside Division I-A, and is growing.

The proportion of that support ranges from 48 to 58 percent of total average revenues at those levels. Increases in institutional support are especially notable at schools sponsoring football, with Division I-AA institutions posting a 55 percent increase and Division II institutions with football programs recording a 58 percent increase.

Among institutions that do not sponsor football, institutional support increased 31 percent at Division I-AAA institutions and 41 percent at Division II institutions.

Student fees also clearly are contributing more to revenues than before.

Average revenues from student fees increased by 30 percent at Division I-A institutions, 22 percent in Division I-AA and 8 percent in Division I-AAA. In Division II, they increased 17 percent at football-playing institutions and 27 percent at institutions that do not play football.

"Whatever the merits of increasing institutional funding of athletics, we probably should remember that it essentially is students who are providing these additional revenues, either directly through fees or indirectly as funds are transferred to athletics from other areas of the university that serve those students," Fulks said. "Maybe students complain about it; maybe they don't. But that's not discretionary spending for students; that's tuition."

As institutions continue raising ticket prices and student fees, they may begin encountering resistance, which could impose caps on those sources of revenue. The question then may be, where else can institutions find additional funding for athletics?

"There's a ceiling on revenues, and I think we've got to be coming close to it," Fulks said. "That ceiling doesn't exist on the expense side."

Other trends continue

In most other respects, the 2003 revenue and expense study reveals a continuation of now-established trends, including a widening of the gap between institutions that post a profit and those whose expenses exceed revenue.

In Division I-A, excluding institutional support, schools reporting a profit increased from 35 percent of Division I-A members in 2001 to 40 percent in 2003. The average profit actually decreased slightly from 2001 to about $5 million, but the average deficit at schools reporting a loss increased from $3.8 million to $4.4 million. That 16 percent increase is comparable to the 18 percent increase from 1997 to 1999 and the 15 percent increase from 1999 to 2001.

Even so, Division I-A programs as a group held the line on average deficit, matching the $600,000 average reported in 2001. Fulks emphasizes that the survey data reflect only operating expenses at institutions, and do not account for capital expenditures or debt service.

"What that says to me is that it doesn't cost much more for a large Division I-A institution to run a football or basketball program than it does a smaller I-A institution," Fulks said. "If you're going to play in Division I-A, you have to have a minimum number of scholarship athletes, you have to put a minimum number of student-athletes on the field, you have to have stadium size, and you have to travel.

"But the revenue side is very different. It's all about ticket sales. Just like two years ago, and two years before that, the profit schools are selling tickets."

Ticket sales and cash contributions from alumni and others remain the largest sources of revenue at a typical Division I-A institution, contributing 27 percent and 18 percent of revenues, respectively. The cost of salaries (32 percent) and grants-in-aid (17 percent) again accounted for the lion's share of expenses and together are approaching the 50 percent mark

"At the profit schools in Division I-A, revenues from ticket sales increased from $6.5 million to $7.8 million, so there's a big chunk of the increase in revenues," Fulks said.

Division I-AA

The divide between "haves" and "have-nots" also continues to grow in Division
I-AA but at a more dramatic pace, where the percentage of schools reporting a profit remained flat at 9 percent (10 institutions), but saw profits increase by 160 percent. Meanwhile, the 90 percent of Division I-AA members that reported expenses exceeding revenues saw their average deficit increase by 16 percent.

Not including institutional support, the few Division I-AA schools posting a profit saw revenues outpace expenses by an average $1.3 million, up from $500,000 in 2001. But those institutions reporting deficits posted average losses of $4.2 million, up $600,000 from two years ago.

Averaging revenues against expenses across the entire Division I-AA membership, institutions posted a $3.7 million deficit, up $400,000 from 2001 -- and another step up from the $1.2 million increase in average deficit from 1999 to 2001. Before 1999, Division I-AA institutions never posted an increase in average loss greater than $300,000 in any two-year reporting period covered by the study.

Division I-AAA saw its average deficit increase from $2.8 million to $3.5 million -- despite an increase in profitable institutions from 7 to 11 percent -- while Division II institutions with football saw an increase from $1.3 million to $1.6 million, and Division II institutions without football observed an increase from $1.1 million to $1.3 million.

However, while schools at all levels outside of Division I-A contributed substantially similar proportions of direct institutional support for athletics programs, the actual dollar amounts of that support reflected the higher cost of maintaining Division I-AA and I-AAA programs, compared to the cost of Division II programs.

Division I-AA institutions provided an average $3.4 million in direct institutional support and Division I-AAA institutions supplied an average $3.1 million, compared to $1.5 million at Division II institutions with football and $980,000 at Division II institutions without football.

Program and gender data

Addressing specific sports, the study revealed that the majority of Division I-A football programs (68 percent) and men's basketball programs (70 percent) continue to post profits. However, only 24 percent of Division I-AA football programs and 32 percent of men's basketball programs show a profit, while in Division I-AAA, slightly more than one-third of men's basketball programs were profitable.

The study also again analyzed revenues and expenses for women's programs compared to men, finding that the proportion of outlays devoted by Division I-A institutions has leveled off since 1999 at 20 percent for women's programs and 46 to 48 percent for men's programs (the remainder is classified as non-gender spending).

The proportion allocated to women's programs in Division I-AAA, where there are no football programs, also has remained relatively static, ranging from 33 to 35 percent since 1997, but spending for men has declined steadily to 38 percent of the total budget.

The proportion in Division I-AA is 30 percent for women's programs (up from 20 percent 10 years earlier) and 46 percent for men's programs (down from 54 percent during that same period).

Meanwhile, women's programs at Division II programs with football have achieved 35 percent of spending (up from 22 percent 10 years earlier), and settled into a range between 35 and 40 percent at Division II institutions without football (up from 29 percent during that same period). Spending allocated to men's programs at football-sponsoring institutions has fluctuated between 56 and 58 percent during that period, and spending at non-football schools is at 40 percent of the budget (down 3 percent from the last survey).