Data from the NCAA’s most recent study on revenue and expenses at Division I institutions show a slight moderation in the rate of spending in the aggregate within the division and a reduced growth in the gap between the so-called “haves” and “have-nots,” though the gap continues to be wide.

The report summarizing Division I athletics program finances between 2004 and 2008 also reveals that 25 schools – all in the Football Bowl Subdivision – reported positive net revenue for the 2008 fiscal year, six more than in the 2006 fiscal year. Only 18 FBS institutions, however, have reported revenue over expenses when the data from all five years are aggregated.

The findings make NCAA officials cautiously optimistic that the advice from former NCAA President Myles Brand’s Presidential Task Force three years ago to moderate spending is being heeded, though those same officials acknowledge that these data through the end of the 2008 fiscal year (June) do not reflect the subsequent economic downturn that may reveal a different story on spending in next year’s report.

Key findings in the latest report include:

• All three Division I subdivisions (Football Bowl Subdivision, Football Championship Subdivision and Division I schools without football) saw increases, some substantial, in “generated revenues” (revenues generated by the activities of the athletics department and not subsidized by the school) between 2006 and 2008.
• Total expenses for that period increased at about the same pace as revenues for each of the subdivisions, contrary to the common belief that expenses are increasing at a much faster pace than revenues.
• Ticket sales, donor contributions, and NCAA and conference distributions account for well over 50 percent of total generated revenues in all three subdivisions. Meanwhile, student-athlete scholarships, and salaries and benefits for coaches and staff compose about 50 percent of total expenses.
• In all three subdivisions, total athletics expenditures as a percentage of total institutional expenditures have remained constant at about 5 percent for several years, though that percentage increased slightly (from 4.8 to 5.4) over the last two years.

NCAA Interim President Jim Isch was intrigued by the findings, though he was even more encouraged by the growing breadth of information that is available to chancellors and presidents as they make informed decisions on athletics spending.

Isch, the NCAA’s chief financial officer until he was appointed as interim president after Brand’s death in September, cited the latest revenue and expenses report as the most informative the NCAA has produced since it contains several years of data reported via means developed in conjunction with the National Association of College and University Business Officers.

Those data, Isch said, along with the “dashboard indicators” project that was an outcome of the Task Force report, give presidents the most accurate and reliable data upon which to compare their athletics programs and to study their own spending tendencies.

“As important as collecting academic data to drive decision-making on academic reform was to Dr. Brand, so, too was providing presidents with clear, concise and comparable data on athletics spending,” Isch said. “We believe we have a solid foundation now, with the help of NACUBO, upon which to continue building.”

Evidence of moderation

Dan Fulks, the faculty athletics representative at Transylvania University who has authored the revenue and expenses study for many years, said the most significant new information may be the fact that expenses appear to be growing at a rate that is comparable to revenues, if not more slowly. While the median generated revenues increased 17 percent from 2007 to 2008, and slightly less at 15 percent from 2006 to 2008, the median total expenses increased 5.5 percent and 16 percent, respectively, in the same time frames.

“The implication certainly is that expenses are increasing at only a slightly faster rate than revenues,” Fulks said.

Whether that is because presidents and administrators are scaling back is unclear. However, Fulks said schools are somewhat limited in their ability to make drastic changes on either side of the ledger.

On the expense side, much of the increase in the last few years is from a 15 percent hike in the cost of tuition. That affects athletics scholarships, which account for about 17 percent of most athletics department budgets. The other daunting line item is salaries and benefits, which accounts for about 33 percent of spending.

With scholarships being a required cost and with salaries being market-driven, Fulks said most presidents and athletics directors don’t have many options when it comes to making substantive reductions.

“Schools are looking for places to cut the budget,” Fulks said, “and the next place you see beyond scholarships and salaries is in travel, such as busing rather than flying. But travel is only about 8 percent of the athletics budget typically, and cuts there won’t save significant amounts on a larger scale.”

Interestingly, the data over the four-year period – and across all Division I subdivisions – show that general operating expenses for a Division I program seem to hover around $8 million. In other words, most schools appear willing to allocate that $8 million, and then those schools’ athletics departments spend whatever revenue they generate over and above that figure. Obviously, the schools that generate revenue above expenses have much more to spend.

Few revenue sources

On the revenue side, schools are often hard-pressed to generate dollars beyond ticket sales, alumni donations and NCAA/conference distributions. “Once you get outside of those,” Fulks said, “it’s hard to generate much money. And you usually don’t sell many tickets in sports other than football and men’s basketball.”

Fulks regards the increase in the number of institutions that have reported revenues in excess of expenses as a positive trend, “though you’re still talking about only a couple dozen schools out of more than 1,000 NCAA institutions in all three divisions,” he said.

He also said while the gap between programs that generated significant revenue over expenses and those that are heavily subsidized by the institution is growing more slowly, it remains troubling overall. The largest generated revenue of $118 million and the median generated revenue of $30 million in 2008 indicate the disparity in the FBS, Fulks said, while the largest total expense of $123 million is far more than the median of $41 million.

Overall, the median revenue generated by the 25 schools in the black is about $3 million, while the median deficit for the rest is about $8 million.

“If you’re not selling a bunch of tickets and you don’t have a large alumni/booster base making contributions, and you’re not in the right conference, you have very little chance of showing net positive revenue,” he said. “Schools that (have revenues over expenses) are selling a lot of football tickets, and schools that do are more than likely in conferences that send two teams to BCS bowls every year and six or seven teams to the men’s basketball championship.

“That combination works for about two dozen schools. Otherwise it’s probably not going to happen.”

Data from the latest NCAA revenue and expenses report show not only the wide range of generated funds and necessary expenses but also that most schools are allocating about $8 million from institutional sources to fund their athletics programs.