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Report shows widening financial gap in Division I

By Gary Brown
NCAA.org

NCAA revenues and expenses data from the 2009-10 fiscal year show a widening gap between schools with self-sufficient athletics programs and schools that rely on institutional subsidy to balance their athletics budgets.

The most recent annual report indicates that “generated revenues” (ticket sales, NCAA and conference distributions, concessions, contributions, media rights and other sources not including institutional or governmental support, or student fees) exceeded expenses at 22 Football Bowl Subdivision institutions, eight more than during the previous fiscal year.

The median net surplus at those 22 institutions was about $7.4 million (ranging from $211,000 to $41.9 million), compared with the median net deficit for the remaining Football Bowl Subdivision schools of about $11.3 million. That gap – almost $19 million – is significantly higher than the $15.6 million separation in 2009.

The data indicate large disparities by quartiles, as well. The fourth shows the lowest rate of growth in generated revenues, for example, while the top quartile is growing expenses at the highest rate. The median expenses in the top quartile in fact are about $80 million, compared with a median of about $21 million in the lowest quartile. The disparity among quartiles in revenue generation also is striking, ranging from a median of about $86.9 million in Quartile No. 1 to a median of about $6.8 million in Quartile No. 4.

Also notable in the report are the sources of revenue for FBS quartiles. The top three quartiles rely mostly on ticket sales and alumni contributions, while the leading revenue categories for Quartile No. 4 in the FBS are student fees and direct institutional support.

NCAA President Mark Emmert said the disparity this report shows among athletics programs in Division I is cause for concern and likely will drive the agenda at a presidential retreat Emmert is convening in August.

“That gap in revenue, either from self-generated or institutionally allocated sources, is significant,” Emmert said. “Indeed, it is coming to redefine what we mean by competitive equity. This will undoubtedly be a discussion point at the August presidential retreat.”

The total of 22 self-sufficient programs appears to be more in line with previous years and indicates that last year’s total of 14 may have been a recession-driven anomaly. For both the 2006-07 and 2007-08 reporting years, 25 schools generated revenues above expenses. There were 19 such institutions in 2005-06 and 18 in each of the two previous years.

The number of self-sufficient athletics programs may actually increase, given recent media rights agreements from some of the major conferences. In the FBS, 10 percent of programs showed net losses of between $40,000 and $2.9 million. Increases in conference television revenue could move many of these into the group with positive total revenue.

Spending may be easing

While the NCAA has been collecting revenue and expense data for several decades, 2004 is considered the baseline for this particular report since collection methodology and definition of terms changed that year to provide clearer and more consistent data. Thus, data collected before 2004, while relevant, aren’t necessarily comparable to the more recent research.

Since 2004, the amount of generated revenue in the FBS grew by 54.6 percent, while total expenses grew by 61.4 percent.

While that may be alarming, over the past two years, generated revenue grew by 15.9 percent and total expenses by 12.9 percent, which indicates that athletics operations may be becoming more sustainable.

That was the desire of a Presidential Task Force that convened in 2006 to address fiscal trends in Division I that presidents believed at the time were heading in the wrong direction.

In addition, the report shows that the “increase gap,” which measures the difference between the increase in athletics expenditures over total institutional expenditures, remains very low in all of Division I – essentially zero for the FBS.

That gap, which is calculated by subtracting the annual percentage increase in institutional expenses from the annual percentage increase in athletics expenses, has decreased steadily since 2005. In the early years of the 2004-10 period, athletics expenses were growing at rates that were up to 5 percent faster than institutional expenses. However, in the last year of data, the median gap in the FBS had closed to zero.

Other highlights

• The revenues and expenses report shows the “real cost” of athletics is about $9 million for Division I schools. That figure, which has fluctuated between $8 and $10 million over the past three years, represents the median institutional subsidy necessary to balance the athletics budget. It also remains fairly consistent among the three Division I subdivisions. The median actually dropped at the FBS level between 2009 and 2010, reflecting a rebound in generated revenue for the average FBS institution.
• As in the past, ticket sales, alumni/booster contributions, and NCAA/conference distributions make up more than 50 percent of total generated revenues. Also as in the past, two expense line items – compensation and grants-in-aid make up more than 50 percent of the total.
• Football continues to drive the revenue train. In the FBS, 58 percent of football programs showed revenues that exceeded expenses by about $9 million. Although 56 percent of men’s basketball programs generate revenues over expenses, the net gain is much less than in football – approximately $3.7 million.
• The percentage of total revenues that come from either direct or indirect institutional support, or student fees (that is, “allocated revenue”) is 26 percent in the FBS, 73 percent in the FCS and 80 percent for institutions without football.