Colleges face ‘arms race’ for funds

In the “arms race” for athletic supremacy, the University of Tennessee in Knoxville is rolling out its financial firepower.

Tennessee’s largest university is in the midst of the biggest capital campaign of any athletic program in the South and the third largest in the nation, with much of the funding coming from private donors. The university, which ranked fourth in the country last year in athletic spending, is attempting to raise $210 million to build and upgrade more than a half dozen athletic facilities across its 550-acre campus.

UT’s athletic capital campaign will comprise more than 20 percent of “The Campaign for Tennessee,” the university’s fundraising effort to raise $1 billion for all five of its campuses by the year 2011, according to the Chronicle of Higher Education. The University of Tennessee at Chattanooga is one of the schools in that system.

“The fact that we are paying for these facilities out of private gifts says a lot about not only Americans’ love of sports but also the zeal and passion for giving to an institution like the University of Tennessee,” UT men’s athletic director Mike Hamilton said.

UT is in an elite club of national athletic powerhouses able to pay sports bills with private donations, ticket sales and television and corporate contracts, rather than with tuition increases and taxpayer dollars.

At smaller schools such as UTC, student fees and tuition finance a majority of the athletics program. The Mocs’ football stadium and basketball arena required taxpayer help to build. Last week, Finley Stadium manager Frank Burke said he will need more assistance from government to continue to operate the facility. Mayor Ron Littlefield last week pledged $60,000 from the city to assist Finley.

University of Georgia President Michael Adams said an “arms race” exists in college-athletic fundraising.

“We are very fortunate at the University of Georgia to have a loyal fan base that allows us to remain on the plus side of the ledger and to actually have a surplus of funds (in the athletic program) even though we don’t use any taxpayer dollars,” he said.

However, Dr. Adams, a Chattanooga native and chairman of the NCAA Executive Committee, said he worries that athletics could become too commercialized as colleges look to raise more money to compete in a growing number of sports. He said he opposed putting the Nike swoosh on Bulldog football jerseys a decade ago but that the athletic director struck the Nike deal. Georgia now takes money from the Oregon-based athletic shoe and apparel maker to help support athletic programs.

ACADEMICS AND ATHLETICS

According to financial reports to the U.S. Department of Education and the NCAA, athletic spending since 1995 has grown nearly twice as much as spending on collegiate academic programs, Dr. Adams said.

“I do believe there are some (athletic) programs that are heading toward a cliff, and I’m not sure these kind of increases in spending can be sustained,” he said.

NCAA President Myles Brand said few colleges are like UT or UGA, whose sports programs do not need state funds or use tuition fees to support athletics. A recent study found a majority of Division I programs require subsidies from the university equal to more than 5 percent of their athletic budgets, he said.

“For these institutions, keeping up with the pace means ever-increasing subsidies as well as institutional investments for facilities that could have long-term financial impact,” Mr. Brand said in a recent speech. “The problem is not at a crisis stage, and it is unlikely it will reach that point, but clearly there are athletics programs facing economic stress.”

Smaller colleges such as UTC already are feeling that stress.

Nearly two-thirds of the Mocs’ $9.6 million athletic budget last year was paid for in higher student fees, tuition and other institutional support. The typical student paid the equivalent of $820 last year to help fund athletic programs because ticket sales, sponsorships and donations paid only about 35 percent of UTC’s athletic costs.

"ATHLETICS ARE "FRONT DOOR"

Dr. Jeffrey Stinson, an assistant professor of marketing at North Dakota State University, who has studied collegiate athletic spending, said most universities lose money on their athletic programs. But sports teams and facilities often are “the front door” for a university, he said.

“There are tremendous financial pressures to spend what it takes to compete with other schools,” he said.

The pressure for fundraising is especially acute in the Southeastern Conference, which led the nation last year in total athletic spending by its member schools. The SEC universities collectively spent more than $802 million on athletics in the 2006-07 school year, topping the 11 schools in the Big 10 that collectively spent $774.2 million.

At the current pace, SEC university spending on athletics collectively could top $1 billion in the next five years.

“It’s all about the money,” said Jerry Smith, a fundraising consultant for Auburn University, which is wrapping up a record $150 million capital campaign for its athletics program. “In the past you’d have a retired coach who might go out and raise some money from fans and supporters. But now you are seeing more professional development people out there cultivating relationships and working to raise private donations for athletics from a variety of donors.”

TAXING ISSUES

Like most universities, much of UT’s athletic fundraising growth has come from tax-deductible donations made for seating priority or for skybox seats. Donations from more than 10,000 season-ticket holders to the Volunteer Athletic Scholarship program totaled more than $22 million last year. Those gifts allowed only members of the Orange Nation to buy priority season tickets, which cost $296 for seven home football games last year.

Dennis Howard, a professor of business at the University of Oregon who studies collegiate athletic-spending trends, calls such donations for seats “a transactional relationship” between the donor and the university.

“You can’t really call that athletic-fundraising philanthropy,” he said. “And that is how a growing share of athletic budgets today are being raised.”

In response, leaders of the U.S. Senate Finance Committee have looked at limiting tax exemptions for gifts given for some skyboxes and priority seating needed to finance stadium construction. Contributions for priority seating are deductible up to 80 percent of their total, according to IRS rules.

UT officials note that ticket buyers at games in Knoxville already pay a 14.25 percent sales tax to state and local governments.

“We’re the most highly taxed collegiate sports program in the country, both in the rate and in gross dollars,” said Joan Cronan, the women’s athletic director at the UT.

Other comparable universities such as the University of Florida or the University of Texas do not pay any such sales taxes.

THE ATHLETIC SHARE

Last year, only Ohio State University, the University of Florida and the University of Texas reported bigger athletic revenues than the $95.4 million reported at Tennessee, according to filings with the U.S. Department of Education. But UT spent a bigger share of its campus budget on athletics. In fiscal 2006-07, 12.9 percent of all Knoxville campus spending was devoted to athletics — more than twice the share at athletic revenue-leader Ohio State.

Todd A. Diacon, a history professor who serves as NCAA faculty athletics representative at UT, said as a smaller university, Tennessee has to devote a bigger share of its budget to athletics to compete. Ohio State, Florida and Texas each have nearly twice the students as UT and nearly three times the budget. Ohio State played in January for the national football championship, losing to Louisiana State University. A month earlier, LSU defeated the Vols to win the SEC championship.

“The costs of succeeding in big-time athletics do not correspond to the size of an institution’s student body nor budget,” Dr. Diacon said.

UT supporters insist athletic fundraising is key to maintaining and improving Tennessee’s national rankings in top sports, which draw national attention and donor interest in other school programs.

Such investments are helping to diversify and boost UT’s athletic strength. While Tennessee is best known for its football success, six of the school’s spring sports teams are ranked among the top 15, including the No. 2-ranked men’s basketball team, the No. 3-ranked women’s basketball team and the No. 3-ranked men’s track team, Mr. Hamilton said.

Mr. Currie said 60 percent of the athletic contributions to UT come from people who did not graduate from the school.

“Many of those introduced to the university through athletic events later give to other programs,” he said.

At Tennessee, the university athletic program allocates seating priority for 16,000 football tickets and 4,000 basketball tickets to major donors to other programs at the university, Mr. Hamilton said. Last year, UT provided some form of academic aid or scholarship to 2,400 students. In addition to its athletic scholarships, UT contributed almost $1.4 million for academic scholarships.

“I don’t know of an institution that gives back more (to its academic programs) than the athletic program at Tennessee,” Ms. Cronan said.

Dr. Howard compliments universities such as Tennessee and Ohio State that jointly solicit donors for athletic and academic gifts and leverage athletic success to help the university’s main academic mission.

“But in many instances, our research suggests that there is often a ceiling on how much people will give to a university, and athletics can have an adverse impact on academic giving,” he said.

Chattanooga developer John “Thunder” Thornton, a former University of Tennessee trustee, insisted that athletic fundraising complements, rather than competes, with academic gifts to a university.

“There are many people that might not otherwise give to a university who contribute to athletics,” he said.

During a recent presentation on UT’s athletic programs at the Chattanooga Rotary Club, the club’s president and former UTC Chancellor Bill Stacy said Tennessee should be proud if its collegiate athletic success.

“But I also long for the day when Tennesseans are as eager to see a poetry reading or hear an academic lecture as they are to go to a football game,” he said.

Mr. Hamilton insists athletics and academics work together at UT.

Last year, 253 men and 230 women participated in some type of athletics, or nearly 3 percent of the school’s undergraduate enrollment. Other students also work in the athletic department, gain music experience in the band or earn journalism experience covering events.

“Part of the college experience is growth in all aspects of life, and athletics happens to be one of those facets,” Mr. Hamilton said. “It’s almost offensive to me that some people insinuate that intercollegiate athletics is not part of the overall education process.”