Athletics self-funding

Lora Pabst

TEDITOR’S NOTE: This is the second story in a three-part series on money and University athletics. The third part, focusing on the costs per student-athlete, will run Thursday.

The misconception that tuition pays for athletics programs is common among students. But the athletics department’s $50 million revenue stream flows from a different source.

The University’s athletics department spent $50.807,219 in fiscal 2006. It covered these costs by obtaining $50,828,752 in revenue from four different sources: the University’s central fund, money left over from the previous year, business revenue and fundraising.

University central fund

Money from the University’s central fund makes up 13 percent of the athletics department’s revenue.

Liz Eull, chief financial officer for athletics, said that even though these funds come from the University, they do not include any tuition money.

The money comes from state appropriations to the University.

University Chief Financial Officer Richard Pfutzenreuter said the state of Minnesota gives money to the University in two ways. One is a block grant and the other is state specials ” money allocated for certain University needs or projects.

“In the ’80s and early ’90s, the legislature did on occasion create new (state specials), things the University should spend money on,” he said. “(Now) that money is folded into our block grant money.”

The University then allocates this money to the athletics department, which can use it to cover any expenses they choose.

Eull said the athletics department chooses to use the central fund money for areas that don’t directly affect student-athletes and teams. Most of the money is directed toward facilities operations and management.

“We try to separate things that directly affect student-athletes and those things that have a broader, more central purpose,” Eull said.

The athletics department is responsible for operating and maintaining all of the athletics facilities, except the Bierman Field Athletic Building.

“We are the steward of those facilities,” Eull said. “Taking care of assets of (the University) seems to be an appropriate use of central money.”

Pfutzenreuter said athletics department officials can use the money however they choose.

“How they want to direct it is up to them,” he said. “They’re responsible for creating a balanced budget and paying their bills.”

Currently, the central money also pays for the athletics department’s branch of Academic Counseling and Student Services. This department is separate from the athletic department and directly related to the University’s Academic Counseling and Student Services.

The amount of money from the central fund will decrease until fiscal 2008 when it will stabilize at approximately $5.7 million. It currently is at about $6.8 million.

“(University) President (Bob) Bruininks wanted to reduce the overall amount of state support to athletics,” Pfutzenreuter said. “He led the effort… in order to free up money to be able to allocate that money for academic programs.”

This year, the athletics department carried forward $1.4 million from last year’s budget. The excess did not include money from the University’s central fund.

The business of athletics

A majority of the athletics department’s revenue comes from money generated by “the business of athletics,” Eull said.

This is divided into ticket sales, facility/event revenue, facility rental, Big Ten/NCAA distributions, apparel/licensing contracts and miscellaneous revenue, according to the athletics department’s revenue budget for fiscal 2006.

Ticket sales form the majority of business revenues for the athletics department.

Men’s hockey, men’s basketball and football are the only teams that make a profit. All three have ticket revenue that exceeds operating expense.

Men’s hockey makes the largest profit, at $3.6 million. Men’s basketball has the second largest profit, at $1.5 million. Football is the third largest, at $1.4 million. Money from ticket sales goes directly to support team budgets.

Facility and event revenues come from business conducted at athletics events. This includes concessions on campus and at the Metrodome, donor parking and corporate sponsorships.

The athletics department made almost $1 million last year by renting out athletics facilities for events. The tennis facility makes up a significant portion of facility rentals.

After ticket sales, the second largest area of business revenue is Big Ten and NCAA distributions.

This year, the athletics department will get $780,000 for attending the Music City Bowl in Nashville, Tenn., Eull said.

Eull said a couple of the bowls pay out more money than is necessary to participate in them. This excess money is then redistributed equally among the Big Ten schools. This year, the University will get $1.8 million from this excess, Eull said.

Eull said the Big Ten conference negotiates television contracts, bowl contracts and receives money from the NCAA for the men’s basketball tournament. This money is then distributed to all the Big Ten schools.

“There is a benefit of being part of a conference because you benefit from the activities of the Big Ten and the other institutions. We put that into the support of the overall program. We spend it on our teams,” Eull said.

Much of the business revenue goes to support the teams directly or through the administration of the athletics department. Other revenues include apparel and licensing contracts through Gold Country and other companies.

Fundraising

Mike Halloran, associate athletics director for development, said fundraising is important for funding scholarships and facility projects.

“Most of our annual fund money is directed to scholarships,” he said.

The department gives about $7 million annually in athletics scholarships. Endowments ” donations of $25,000 or more ” make up about $1 million of the scholarship money. The principal money from an endowment is never used. Instead, the interest from the endowments is the source of the money for scholarships, Halloran said.

The rest of the money for scholarships comes from other donations and business revenue, Halloran said.

Fundraising also contributes money to major capital projects, such as the on-campus football stadium, the rowing facility and locker-room renovations.

“Those capital projects are attractive to a lot of (donors),” Halloran said. “Their gifts aren’t going to build the structures, but it’s the overall impact they will have that’s important.”