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Publish date: Oct 9, 2012

NCAA report reveals consistent financial allocation among DI schools

Median subsidy for all subdivisions is $10 million; reports also released for Divisions II and III

By Gary Brown
NCAA.org

The most recent NCAA financial data on spending patterns among Division I schools show that the median allocation from institutions to subsidize their athletics program – regardless of subdivision – is about $10 million.

While the median Football Bowl Subdivision institution spent about $50 million in 2010-11, versus $12 to $13 million, respectively, for the Football Championship Subdivision and schools without football, the research reveals a more consistent contribution from all Division I schools as the value they place on their athletics programs.

“Clearly, not all institutions in Division I are on similar financial footing,” said NCAA Chief Operating Officer Jim Isch. “But even with the large differences in revenues and expenses that we observe, the overall amount of money provided to the athletics department from the university is remarkably similar across all three subdivisions.”

That was among several key findings in the latest Division I Revenues and Expenses report, an annual collection of financial data compiled by the NCAA research staff and written by Dan Fulks, the former faculty athletics representative and accounting program director at Transylvania University.

Other findings include that in 2010-11 for almost 1,100 NCAA institutions in all three divisions, only 23 (all in Division I) generated more revenue than their overall athletics expenses. That number has ranged from a minimum of 14 during the recent recession to a maximum of 25 over the past several years, including 22 in 2009-10. The median FBS institution generated more than $38 million in revenue, as opposed to less than $3.5 million in the other two subdivisions.

The 2010-11 report also shows a gradual decrease in the difference between the growth rates of spending for athletics and the institution overall. In 2004 when then-NCAA President Myles Brand assembled a presidential task force to address athletics spending that was outpacing its institutional counterpart, the data supported the concern. Athletics expenses were indeed growing more rapidly than institutional expenses – by rates as high as 5 to 6 percent per year. However, the growth rates have been much more similar (within a percentage point) over the last few years, though the 2010-11 year revealed a slight uptick.

“It’s a statistic that bears watching closely over the next few years to ensure that athletics expenses remain in line with broader institutional spending patterns,” Isch said.

Quartile gaps

The report also reveals the large disparity among Division I Football Bowl Subdivision schools in terms of generated revenues (that is, revenues earned by activities of the athletics programs) and athletics spending, a factor that is at the heart of the competitive-fairness discussions that drive legislation and policy in Division I.

The 2010-11 data show an $80 million difference in median generated revenues between the highest and lowest quartiles in the FBS. Some schools generated almost $150 million in revenue in the most recent year, compared to the median of about $38 million. A $40 million gap exists in median generated revenues even between the top two quartiles, which is double the gap from eight years ago.

On the expense side, the median gap between the top and bottom quartiles is more than $60 million, with the top schools spending more than $130 million. The gap between top and bottom quartiles has grown by $25 million over the past eight years. And again, the gap between the top two quartiles has doubled in that time.

Isch noted that the differences in revenues and expenses lead to different operating outcomes for the various quartiles. For example, the median institution in the top quartile has positive net generated revenue of almost $2 million. Those in the bottom two quartiles show negative net generated revenue of between $12 and $13 million.

“It is certainly important to examine whether this type of disparity is sustainable both financially and competitively in the long run for institutions within the same NCAA subdivision,” he said.

As for how the money is allocated, the 2010-11 report shows that NCAA Divisions I and II institutions provided more than $2.3 billion in direct financial aid to their student-athletes. Another $2.9 billion went to other items that directly benefited the student-athlete experience – expenses such as travel, equipment, facilities and academic services. About $2.2 billion was spent on compensation for head coaches and assistant coaches, while about $1.8 billion was devoted to administrative compensation, leaving the remaining $1.8 billion for other operating expenses.

Small portion of the pie

While the overall dollar amounts for intercollegiate athletics – especially on the expense side – may appear relatively high in raw terms, they still represent a small portion compared to other entities.

Athletics spending also continues to represent a small percentage of overall university budgets – about 5 to 6 percent in the past several years. (When generated revenues are netted against expenses, the median percentage of athletics expenditures of total expenditures is less than 3 percent in the FBS.)

NCAA schools in all three divisions spent about $330 billion in 2010-11 educating their students. The $12 billion spent on athletics represents a little more than 3.5 percent of total spending. That shrinks to less than 2 percent when the $6 billion in revenues is factored into the equation.

More Division I findings

Other notable findings from the 2010-11 Division I report include:

There was an upward movement in median generated revenues for Division I institutions in all subdivisions from 2010 to 2011. Football Bowl Subdivision schools saw a 9.7 percent increase, while median generated revenues increased by 4.6 percent in the Football Championship Subdivision. The increase was 12.6 percent for schools without football.
Total expenses for the last year increased at a lower percentage than generated revenues for FBS, FCS and schools without football. The FBS median expenses increased 8.8 percent from the previous year. The increase was 1.0 percent at the FCS level and 3.2 percent for schools without football.
The portion of total athletics revenues that are allocated by the institutions was 20 percent in the FBS, 71 percent in the FCS and 77 percent for schools without football. This rate increased among the non-football schools and stayed steady in the other two subdivisions.
As in past reports, three revenue sources accounted for between 60 and 75 percent of generated revenues: ticket sales, contributions and NCAA/conference distributions. Similarly, in all subdivisions, two expense line items – grants-in-aid and salaries and benefits – accounted for more than 51 percent of total expenses.
In all subdivisions, the number of participating student-athletes remains fairly constant, while the expense per student-athlete continues to increase, as a result of rising expenses.

Divisions II and III

Revenues and expense reports for Divisions II and III also have been compiled. Among the key findings:

For Division II football schools, the median negative net revenue, or the net subsidy for athletics programs, has increased from $2.36 million in 2004 to $4.23 million in 2011. The median subsidy for men’s programs in 2011 was about $1.9 million and about $1.17 for women’s programs. Both are only slight increases from 2010.
The largest generated net revenue reported for Division II football schools was $9.7 million, though the median was $618,000. The largest total expense reported was $18.6 million, while the median in that category was $972,200.
The net subsidy for athletics programs in Division II schools without football has increased from about $2 million in 2004 to $3.35 million in 2011.
For Division III football schools, the median total expense has increased from about $1.5 million in 2004 to about $2.86 in 2011 – an increase of almost 85 percent. The increase was 6.6 percent from 2010. Non-football schools have seen an increase of 109 percent, from $660,000 in 2004 to $1.38 million in 2011. The increase was 0.2 percent from 2010.
The percentage of student-athletes in the student body has remained consistent at about 24 percent for football schools and 12 percent for schools without football. Athletics expenditures as a percentage of the total institutional budget also have been steady at 4 percent for football schools and 3 percent for schools without football.