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Report shows DII athletics in line with institutional spending

By Gary Brown
NCAA.org

The most recent research on athletics spending at Division II institutions shows that the rate of increase in athletics continues to parallel that of overall institutional spending.

In the first Division II revenues and expenses report compiled since 2004, athletics expenses at schools with football programs represented less than 6 percent of the institutional budget and 5 percent for schools without football.

The data also show that it costs less than half as much to operate a football program at the Division II level as it would in the Division I Football Championship Subdivision. The median expense for Division II schools with football is a little less than $4 million, while that figure is about $8.6 million for FCS programs. The operating cost is about $10.1 million for programs in the Division I Football Bowl Subdivision.

While even the $4 million operating expense for Division II football schools has almost doubled from the $2.3 million median expense in 2004, the rate of increase isn’t outpacing that of institutional spending. That is similar with athletics spending at all NCAA levels.

The rate of increase in athletics spending is also not out of line with other divisions and subdivisions:

Division/subdivision              2004 $             2009 $             Pct. Increase

DI FBS                                   $5.9 million     $10.1 million   72.2%

DI FCS                                   $5.9 million     $8.6 million     46.3%

DI without football                 $5.4 million     $8.3 million     53.0%

DII with football                    $2.3 million     $3.9 million     65.5%

DII without football               $1.9 million     $2.9 million     49.1%

DIII with football                   $1.3 million     $2.2 million     64.2%

DIII without football              $0.6 million     $1.2 million     101.7%

Much of the percentages can be attributed to inflation. For example, total expenses for Division II institutions with football programs went up by 1.08 percent from 2008 to 2009. However, there is a 2.18 percent inflationary effect, which means that the real change in expenses for those two years is a 1.11 percent decrease.

Some of the expenses for this year at least will be offset by a $2.6 million supplemental distribution that the Division II Administrative Committee recently authorized. The surplus means that all 266 Division II member institutions each received checks of $9,775. Direct deposits were made Dec. 9.

The supplemental distribution comes at a time when many colleges and universities at all NCAA division levels are being affected by the recession.

The ‘cliff’ effect

While the Division II revenues and expenses report (which run through fiscal year 2009) doesn’t signal alarms with Division II officials, they warn that the data may not accurately reflect what could lie ahead at many Division II schools.

“While this particular report may not be alarming,” said Division II Vice President Mike Racy, “we do know that some of the stimulus money that institutions have been receiving that is not planned to carry on might paint a different picture, especially with state schools that have seen decreases in state support. Other than the stimulus money, perhaps institutions haven’t found those new sources of revenues to keep up with the increased expenses.”

Metro State President Stephen Jordan, a member and former chair of the Division II Presidents Council, refers to that factor as “the cliff.”

“At least for the public institutions, this is the last year of the availability of federal stimulus money. Whatever amount of stimulus money you may have had in your budget to bolster your operation will be gone as of June 30,” Jordan said, noting that the effect won’t be reflected in the current revenues and expenses report.

“States are moving into the period of fiscal challenge without federal stimulus dollars,” said Central Missouri President Charles Ambrose, also a former Presidents Council chair. “This ‘new normal,’ or ‘cliff,’ is affecting every aspect of public funding and is passed down from states to municipals to social services to the judicial system to K-12. And once K-12 is affected, higher education is affected.”

Jordan said Metro State is accommodating the shortfall for now through steep tuition increases (16 percent next year, followed by 13 percent the following year and 9 percent increases for three years after that). But that’s only if the state’s proposed zero-growth budget holds. If there’s still a deficit and the state has to adjust, Jordan said the effect could be dramatic.

“Based on the tuition numbers we’re proposing, we won’t have to reduce sports or personnel,” he said, “but our athletics director will have to absorb those tuition increases as they cut across scholarships, because there will be no new money for athletics. And it’s possible that the state may cut higher education allocations even more. If they do, the plan that we have right now can’t allow us to operate without doing some things on the expenditure side, at which point we would be looking at athletics.

“It’s a big unknown for us, and a lot of states are facing this same predicament. The economy simply isn’t rebounding as quickly as it has in past recessions.”

Ambrose, who was president at Pfeiffer before taking the post at Central Missouri last spring, agreed, saying much depends on “how long the storm lasts.”

“That fiscal reality comes to fruition this summer,” he said. “Needless to say, if you’re looking for administrative efficiencies and trying to right-size and reshape your institution, you can’t hold athletics out there on an island and say that it’s not a part of the overall institution.

“The right thing to do for campuses and employees is to try to be consistent across fiscal decision-making as best you can. If you’re not, your credibility suffers.”

Ambrose added, though, that Division II remains in a good place for navigating the choppy waters.

“I tell people on our campus that a school our size in Division I would be spending twice what we’re spending on intercollegiate athletics here,” Ambrose said. “One of the points of fiscal responsibility ties right to the Division II platform – the level and degree of competition up against the appropriate balance with the overall institutional expenditures.”

Racy agreed that the recession has affected all of intercollegiate athletics but that the challenges may be less stringent in Division II than at other places.

Ambrose credited Division II for providing improved financial data over the last several years to help inform decision-making at the campus level. Division II recently developed a values study that outlines the benefits of the partial-scholarship model used in Division II athletics, and presidents and chancellors can activate a “simulation model” that can help measure the impact of sports sponsorship and the ensuing enrollment and accompanying revenue.

“For example,” Ambrose said, “we have 116 student-athletes who receive no financial aid whatsoever. That is revenue for our institution.”

This also is the first year the Division II has deployed “dashboard indicators” with the financial reports that allow presidents to evaluate how their academic and financial data compare with those of their respective division and subgroup. The 2009 report includes 16 indicators.

“The value model and the dashboards in Division II maintain real validity,” Ambrose said, “Those are positive things Division II has done to enable presidents and chancellors to make good decisions.”

Other findings from the 2009 Division II Revenues and Expenses Report:

• Athletics aid represents about 30 percent of all athletics expenses for Division II institutions with football and about 36 percent for schools without football. Coaches’ salaries represented about 20 and 17 percent, respectively, of expenses for schools with football and without.
• Generated revenue, which is an indication of the extent to which athletics programs are providing their own support, fell from 17 percent in 2004 to 12 percent in 2009 for schools with football and from 9 to 8 percent for schools without football.
• Cash contributions, spots camps and ticket sales provide the major portion of generated revenues for both subgroups, but even when combined, those categories account for less than 10 percent of total revenues.
• Generated revenues do not exceed expenses for any Division II member institution.
• From 2004 to 2009, generated revenues at institutions without football grew by 51 percent, while total expenses grew by 42 percent. For schools with football, generated revenues grew by 41 percent, while expenses increased by 57 percent.