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The cost of losing | Athletics has survived football's decline so far. Can that continue?
By: Matt Gelb and Ethan Ramsey
Posted: 4/24/08
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Syracuse University's athletic department has nearly offset a decline in football earnings the last two years with an increase in fund raising, according to university documents and a series of interviews with top officials at the school.
The athletic department used its reserve funds to balance a $1.2 million deficit in 2006-07 and expects a "comparable" situation in 2007-08, senior associate athletic director Rob Edson said. The department's reserve funds totaled $5.9 million as of July 2007, according to the university-wide projected budget for 2007-08.
The football program lost $157,085 in 2006, the program's first deficit since the government started requiring data from all universities in 1995.
A 21-year low in average attendance, 35,009, in 2007 would indicate a further decline, though specific numbers are not available until October. The Orange went 2-10 last season to match 2005 for the most losses in the program's 119-year history.
Conversely, the athletic department raised $10.3 million in direct gifts in 2006, The Chronicle of Higher Education reported last year. That is more than double just three years prior, University Senate records indicate.
Athletics has raised $54 million out of $545 million for Syracuse's current $1 billion campaign as of March 31, said Brian Sischo, director of the three-year-old campaign and associate vice president of development. Campaign donations include pledges in addition to direct gifts.
Out of the 28 primary units on campus, only the Maxwell School of Citizenship and Public Affairs has raised more at $56 million, Sischo said. The S.I. Newhouse School of Public Communications is third at $53 million.
"Fund raising has been going really well, and that's great," Chancellor Nancy Cantor said. "Let's hope that continues because we're going to need it in Athletics."
The athletic department earned $42.5 million and spent $43.7 million in 2006-07, the university's Equity in Athletics Disclosure Act (EADA) report to the government stated. The department made an average profit of $5.7 million per year the previous three years, The Chronicle's EADA database states.
"(The reserve fund) bails us out," said Director of Athletics Daryl Gross, hired in December 2004. "We've built that up."
Cantor said her administration encourages units to dip into their reserve funds on occasion because the university considers those dollars part of a unit's available resources. However, she acknowledged using reserve funds each year isn't viable.
"That's why we watch (reserve funds) carefully, and Athletics has been very good about that," Cantor said. "They've really husbanded that reserve over the last few years, especially because we knew that with football revenues down, there was going to be more pressure.
"There's no getting around it. Football revenues are down. We hope that it turns around. We believe it will turn around."
The football program made an average profit of $3.6 million from 1995-2005, The Chronicle's database states. In 2006, the program earned $14.9 million and spent $15.0 million during a 4-8 season, SU's EADA report stated. In 2007, the team went 1-6 at home, losing by an average of 28 points.
In the 119-team Football Bowl Subdivision, 56 percent of schools showed a profit in 2006, according to the NCAA's latest financial report released last week.
"I think what it will do is put us in a position where we feel there's more stability from year to year," said Edson, speaking on how football will affect the athletic department overall, "where you aren't necessarily hinging on every game."
Head coach Greg Robinson is 7-28 (2-19 Big East) in three seasons at the helm of a program that has won the 14th-most games in NCAA history and the 1959 national championship.
"Football needs to win so they can sell more tickets," said Dan Fulks, the director of the accounting program at Transylvania University in Lexington, Ky. He authored the NCAA's report and agreed to look over Syracuse's data for The Daily Orange.
"Some schools, like the University of Kentucky, it doesn't matter if you win or not, they're going to sell tickets," Fulks said. "Part of that is climate-related because it's a three-day tailgating party. I don't think you have that benefit at Syracuse."
Edson said the only other sport that generates significant revenue, men's basketball, five years after winning its first national title, "is arguably doing as well as it probably could."
Box seats and courtside seating helped revenues increase, without any spike in attendance or expenses, almost 50 percent since 1997-98, when the first men's basketball numbers are available on The Chronicle's database.
Men's basketball turned a $7.0 million profit during a 24-11 season that culminated with an NIT appearance in 2006-07, SU's EADA report stated. The program earned $13.8 million and spent $6.8 million.
Attendance dropped slightly in 2007-08 to a six-year low of 20,345 as the Orange missed the NCAA Tournament in consecutive years for the first time since 1981-82.
That men's basketball's revenue increase has been offset, though, by a near-50 percent expense increase not related to football or men's basketball, The Chronicle's database indicates.
Some of those rising expenses come from ever-increasing utility costs, but others are a result of spending more on the Olympic sports. The operating budget for Olympic sports totaled $18.7 million in 2006-07, compared with $13.0 million in 1997-98, The Chronicle reports.
"We want all of our programs to be successful, and that's a change," Edson said. "Not that we didn't want that before, but in terms of supporting the other programs we've put forward a whole lot more resources to make those programs competitive."
With the increased non-football and men's basketball expense canceling out the increased men's basketball revenue, fund raising has been relied upon to compensate for football's slump.
And even if football starts profiting again, fund raising isn't off the hook. Expenses continue to grow at a faster rate than revenues at all levels of intercollegiate athletics, Fulks' NCAA report states.
"Do I think it's viable going forward?" Cantor asked of her athletic department. "Only if we keep raising money."
Athletics' two-year decline comes during the first two years of the university's entirely revamped campus-wide budget model, called Responsibility Center Management (RCM). For the first time, revenues and expenses from every unit of the university are intimately bound to each other.
RCM includes a revenue-sharing system that taxes revenues from all 28 units, called centers, and distributes that tax money back to the centers the university decides need it most. That return counts toward a center's yearly revenues.
Athletics received $10.2 million in revenue-sharing money, called subvention, the first two years of RCM and will get the same amount in 2008-09, chief financial officer Lou Marcoccia said. That number mirrored Athletics' subsidy from the university before RCM, Gross said.
The athletic department contributed $1.9 million in tax, called participation, to the pool of subvention money. That makes for a net subsidy of $8.3 million - the highest of any center at the university but less as a percentage of total revenue than the average private school that competes in major college sports.
Only 19 schools profited in athletics in 2006-07, Fulks' NCAA report states.
Hence, in the future, Syracuse's athletic department must earn enough additional revenue that offsets the accompanying increase in participation in order to balance its budget without tapping its reserve fund every year. It needs to do that without an increase in subvention, at least for now.
"What they've got to do is generate more revenues," Marcoccia said.
Which may be easier to accomplish than most centers on campus without raising expenses.
For example, an academic center could generate additional revenue by admitting more students, but that could require the salary of more professors in expenses. In Athletics, selling thousands of more tickets or securing more donations uses minimal expenses.
"We've been smart enough to balance (our budget) without us winning at the rate that we want to right now," said Gross, referring to football and men's basketball, "knowing that when (football) hits, it's going to help us out."
Gwenn Judge, director of Budget and Planning and one of only five ex-officio members on the RCM budgeting committee, said prior to RCM the university budget did not list the reserve funds for each center.
The new model is designed to give centers a better idea of all their assets, and in fact, urges centers to use their reserve funds some years, Judge said.
"I wouldn't call it a deficit," Judge said of Athletics using $1.2 million in reserves in 2006-07. "I would call it an all-funds approach."
She added: "Obviously, when you look at their balance, if they had to use $1.2 (million) per year, then it would only last six years. I don't think that's going to happen."
Athletics' reserve fund of $5.9 million is the fifth-highest of the 28 units on campus, behind Residence Services ($10.3 million), The College of Arts & Sciences ($8.9), The Carrier Dome ($7.3) and Maxwell ($6.1). The Carrier Dome is a separate unit from Athletics.
"I don't think they're in any dire straights," said Marcoccia, who played baseball at Syracuse in the 1960s and has donated money to the athletic department. "Now, could something happen in the future? Sure. But I think Syracuse University is smart enough to figure out how to adjust."
Matt Gelb, a junior newspaper journalism and history major, is serving as sports editor from May 2007-May 2008. Contact him at magelb@syr.edu.
Ethan Ramsey, a senior history major, is serving as editor in chief from January 2008-May 2008. He served as sports editor from January 2006-December 2006. Contact him at egramsey@syr.edu.
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