The Money Game

The U has a firm strategy for navigating the challenges
of big-time college sports.

This is the second in a two-part series on the University of Utah joining the Pac-12. Read part one  here.

The University of Utah is banking on the Penn State effect.

That’s the phenomenon U officials say occurred following Pennsylvania State University’s entry into the Big Ten more than 20 years ago. Once the Nittany Lions were running with the big dogs, PSU started racking up not only sports championships, but the kind of national acclaim, student and faculty quality, and donor money that put the institution on the collegiate map for both athletics and academics.

“They saw an across-the-board improvement in metrics, including in private giving,” says Fred Esplin MS’74, the University of Utah’s vice president for institutional advancement. “We anticipate, hope, and are planning for the same effect—to leverage the pride and excitement of being a part of the Pac-12.”

 “Like anybody out there competing, we need resources to be successful. We are not going to unilaterally disarm or back away, but we’ll pick what we need and where we need it, and be smart and deliberate about our growth and decision-making.”  — U Athletics Director Chris Hill

But even as U officials anticipate the possibilities of the University being the next Penn State, the tough realities of running a sports program in one of college athletics’ most competitive, most watched, and most moneyed leagues loom large.

Keeping up with the Joneses, when the Joneses have storied and well-endowed sports programs, like those at Stanford University and the University of Southern California, won’t be easy. And the laundry list of the pitfalls that even the most well-meaning institutions face when trying to keep up is long and gloomy. College sports, especially at the highest levels, has been rife with scandals of all varieties, from recruiting violations to academic cheating, and the behaviors of athletes and coaches have sometimes run the gamut from questionable to criminal. Recent problems at Ohio State University, the University of Miami, and USC have drawn stern warnings from the NCAA, and in the case of USC, severe penalties. Scandal even surfaced at Penn State in early November, with accusations the athletics director and other university officials had covered up child-sex abuse involving an individual in the athletics department.

Overall, plenty of college presidents and other academic leaders nationwide, including officials with the NCAA, wonder whether big-time sports is a too expensive and too often objectionable tail that wags the higher-education dog.

As for the University of Utah, few doubt that the University will maintain its integrity as it climbs the college-sports ladder. Instead, the lingering concerns about the Pac-12 move center around the U’s ability to raise the money the University needs to compete. Some worry that the U could easily get caught up in the mounting arms race among the nation’s top sports programs for bigger spending budgets, glitzier facilities, and pricier coaches’ salaries. And an athletics department with an insatiable appetite for cash, they say, becomes a drain on the school, drawing increasing institutional subsidies and hungering for an ever-expanding slice of the donor pie.

“We hope to continue to see the substantial growth in gifts to both academics and athletics that we’ve seen since the start of our current campaign,” Esplin says. “We’re definitely getting a healthy bump from the Pac-12 all around, and our instincts and observations say that we can continue to raise more money all around.”

That’s not been the case everywhere. Research cited by The Chronicle of Higher Education shows that at colleges with the biggest athletics programs, sports departments are garnering a larger and larger share of overall gifts and on some campuses are cutting into donations for academic purposes.

At the same time, according to a recent NCAA report, even those growing contributions aren’t helping most schools keep pace with spending on athletics. The report says that fewer than one out of five of the nation’s top 120 football-playing schools generate revenues in excess of expenses. That means that the vast majority of those sports programs—including even the ones that haul in millions of dollars from television contracts and ticket sales—operate in the red, getting their budget shortfalls filled with direct institutional support or indirect institutional subsidies, such as student fees.

Vice President Fred Esplin

Fred Esplin, University of Utah vice president for institutional advancement (Photo by August Miller)

A Deliberate Approach

The NCAA report also reveals a growing divide between that small crop of schools that bring in enough revenue to cover expenses and all the rest that don’t. Profits among the self-sufficient schools are growing at the same time deficits among all the rest are deepening. From 2009 to 2010, the report says, the gap between the median surplus and the median deficit grew by more than $3 million to $19 million.

And that widening disparity between the haves and the have-lesses doesn’t appear to be easing up any time soon. A report released last year by the Knight Commission on Intercollegiate Athletics, a group made up mainly of current and former college presidents seeking sports reform, says that if current spending patterns persist, the top programs will have athletics budgets exceeding $250 million by 2020.

In the Mountain West Conference, the U’s league before joining the Pac-12, Utah was one of the biggest spenders, with annual budgets surpassing $30 million. The University of Utah’s $35 million budget this year is near the bottom of the Pac-12 barrel. At the top is Stanford, which spends more than $80 million to run its athletics program each year.

And spending doesn’t stop at the annual budgets. Massive capital projects to build or improve facilities intended to appeal to recruits and impress ticket buyers are perennially in the works on campuses with the most-competitive teams. A sampling of such projects this year among Pac-12 members includes football-stadium renovations at the University of California-Berkeley and the University of Washington, costing $321 million and $250 million, respectively.

Such numbers are not daunting to University of Utah officials, and that kind of spending, they insist, is not aspirational, either.

“We’re definitely getting a healthy bump from the Pac-12 all around, and our instincts and observations say that we can continue to raise more money all around.”   — Fred Esplin, U  vice president for institutional advancement

“Like anybody out there competing, we need resources to be successful,” says University of Utah Athletics Director Chris Hill MEd’74 PhD’82. “We are not going to unilaterally disarm or back away, but we’ll pick what we need and where we need it and be smart and deliberate about our growth and decision-making.”

He says, for example, that even considering the upgrades in the works at competitor campuses, the U’s football stadium, strength room, and practice fields are solid facilities that get good marks from athletes, recruits, and fans. The same cannot be said for the rest of the football facilities, according to Hill, which is why the U plans to start construction in December on a new $30 million football center, housing a state-of-the-art sports medicine and training space, a team locker room, and a dining room.

“We knew what we had to target right away,” Hill says, adding that the program will spend an additional $4 million this year to build a new softball field and outdoor tennis courts. “We have a list that we will carefully consider and take care of as time and money allow.”

Aiming for Efficiency

Hill says that efficiency has long been a key driver of his department’s spending, and that value won’t be abandoned now that the Utes have moved into the pricier neighborhood of the Pac-12. Instead of quickly bulking up the Athletics Department, for example, his lean and relatively small administrative staff has added only a few new employees since the league move, including an additional trainer and an academic advisor.

But the easiest way to silence doubters who claim that the University might go on a spending spree, according to Hill, is simply to point to the program’s on-field records: “We’ve been able to compete against teams with bigger budgets already,” he says, “and there’s no reason that will change.”

In recent years, the U’s football team has won two BCS bowl games, scored victories over Pac-10 competitors, beaten national powerhouses, including Michigan, and been ranked in the top 25 in national polls, including as No. 2 in 2008.

That’s all not to say that Utah doesn’t have at least a little more pocket money to play with now that it has joined the big time.

The Utes, who used to draw about $1 million a year from the Mountain West’s television contract, are now sharing in the Pac-12’s 12-year, $3 billion TV deal. Utah’s take will grow over the life of the new contract from $3.4 million a year to $25 million annually.

Other sources of revenue are increasing, too, according to Doug Knuth, senior associate athletics director for external relations. Corporate sponsorships are growing and are soon expected to haul in about $2.5 million a year. A new business arrangement started last year to sell merchandise online kicked up sales of Ute sportswear and souvenirs by as much as 60 percent, bringing in $100,000 and counting. And licensing revenue is up—nearly doubling from a few years back to $500,000—and is expected to keep growing with the University of Utah in the Pac-12’s national spotlight.

Growing, too, is the fans’ appetite for U football. The University raised ticket prices by as much as 24 percent this year but still had sky-high season-ticket renewal rates and demand for home-game seats.

The University is also drawing more in student fees for athletics, which were up this year by 8 percent. A few more small bumps in fees—at least to cover cost-of-living increases—are expected in the coming years. But Hill says the sports program wants to decrease its reliance on student fees, and keep steady, if not shrink, the institution’s total sports subsidy. The Athletics Department gets about $2 million in direct support from the University each year and another $5 million in student fees.

The primary way the department intends to continue balancing its own budget? Fundraising.

“It’s a really simple formula,” says Knuth. “We have a passionate, excited, energized fan base, and we are going to ask them to help.”

Drawing on Donors

In fact, the U started that special ask when the University’s entry into the newly expanded Pac-12 was announced in June 2010. At the time, the U had just wrapped up a record fundraising year, bringing $5.2 million into the Athletics Department.

Knuth says that he and his colleagues were barely done patting each other on the back for that accomplishment when the Pac-12 announcement came.

“We congratulated ourselves for 20 seconds, then said… ‘We’ve got a lot of work to do,’ ” says Knuth, noting that the other 11 teams in the league raised an average of $11 million a year, not including the millions of additional dollars collected for capital projects.

David Rudd, dean of the College of Social and Behavioral Science, says he has studied what he calls Penn State’s “gradual, positive trajectory” after it joined the Big Ten, and he believes that the University of Utah is already on the right track with the Pac-12.

The University of Utah’s first move was to increase not only football ticket prices, but the size of the required donation that goes with some of them. Donors must contribute $2,750 per seat to the Crimson Club, for example, to earn the right to buy the most sought-after season tickets.

Those ticket-related gifts accounted for nearly 80 percent of the $8 million the U was able to raise for the year ending last summer. Now, the University’s goal is to keep up the seat-license revenue, while also increasing fundraising across the board, including major donations—those of at least $2,500—and Crimson Club membership at all levels. Cultivating supporters with the potential to give six- or even seven-figure gifts is on the radar, too.

“The idea is that we are going to ask everyone to help,” says Knuth. “We hope everyone says yes.”

Joining the Pac-12 has opened up the opportunity to engage thousands of new potential donors who live in the Pac-12 footprint—cities in and around the schools in the conference, according to Esplin, Hill, and Knuth. In fact, outside of Utah, the biggest clusters of alumni are in Los Angeles, California’s Bay Area, and Arizona. Competing regularly with the University of California-Los Angeles, USC, Stanford, Cal-Berkeley, the University of Arizona, and Arizona State University, the Utah officials say, will energize alumni up and down the coast and in areas where the Mountain West had no presence.

The U’s fundraisers were chomping at the bit for football season to start this year so they could bring their road show to places such as USC, where a University of Utah-sponsored tailgate party this fall attracted about 700 alumni. By contrast, a big tailgate event sponsored by the U at last year’s San Diego State University football game attracted fewer than 500 folks, and the school barely bothered to run events in Mountain West outposts such as Laramie, Wyo.

“Now we’re going to alumni hot spots,” Esplin says.

The new Pac-12 schedule is also expected to help draw in new donors interested in giving to the University outside the sports department.

Dean David Rudd

M. David Rudd, dean of the University of Utah’s College of Social and Behavioral Science (Photo by August Miller)

M. David Rudd, dean of the College of Social and Behavioral Science, says that a wealthy alumnus living in the San Francisco area contacted his office to inquire about meeting with college officials and attending a basketball game when the U visits Cal-Berkeley this season.

“We had attempted to connect with this person before, but we never got a positive return call,” Rudd says. “In this case, he called us and said, ‘How about if we spend some time together?’ ”

The U is also taking the opportunity to re-introduce itself to Salt Lake City-area alumni and fans. It has been working with groups in the city to run events in town during football weekends and is starting a campaign to brand Salt Lake as the “Home of the Utes” as part of what the U and city partners are calling the new “Red Movement” tradition.

Rudd says he has studied what he calls Penn State’s “gradual, positive trajectory” after it joined the Big Ten, and he believes that the University of Utah is already on the right track with the Pac-12.

Says Rudd: “We’ve seen the experiment work, and so we know what our task is.”

— Debra E. Blum is a former athletics editor and reporter for The Chronicle of Higher Education, in Washington, D.C. She went on to cover fundraising issues for The Chronicle of Philanthropy. Now a freelance writer based in Pennsylvania, she remains a contributor to both publications.