College sports debt soars as Power 5 programs stand up to scrutiny – Sportico.com
Today’s guest columnist is Michael H. LeRoy, professor in the Faculty of Labor and Employment Relations Law at the University of Illinois.
As a professor on the University of Illinois Athletics Council since 2014, I have watched sports debt explode on our campus. Our council, like others, has faculty, students and alumni. We are designed to be a sounding board – a âcheck and balance,â according to my school’s charter for us. In short, we have an advisory role, nothing more.
During all these years, we have been captive of the control of two sports directors over news and fixtures. Thus, we have not even been able to advise our sports department on debt matters.
Illinois isn’t alone in funding vanity sports facilities with massive borrowing.
The Knight Commission Database for Big Ten Schools shows that median annual interest paid on facility debt rose sharply from 2014 to 2019, the latest year for which reports are available: $ 10.7 million ( 2014) ; $ 10.1 million (2015); $ 10.0 million (2016); $ 10.1 million (2017); $ 11.8 million (2018); then grow to $ 14.8 million in 2019.
The median accumulated debt of Big Ten schools increased from $ 133.3 million in 2014 to $ 164.5 million in 2019.
Illinois’ debt problem is much worse. Our sports department paid interest on facility debt of $ 11.2 million (2014), $ 16.7 million (2015), $ 26.1 million (2016), $ 20.0 million (2017), $ 21.3 million (2018) and $ 22.7 million in 2019. report shows a total athletic debt of $ 315,822,286. The annual debt service for our sports facilities was $ 21,564,413.
Put simply, the Illinois sports program has been deeply in debt since 2014.
SporticoThe database fills other blanks for the 2019-2020 financial reports. Iowa led the country in “facility debt service” payment, at $ 32,599,749, followed by Ohio State ($ 29,748,769), Alabama (23,822,661 $), Texas A&M ($ 23,454,394), State of Michigan ($ 21,484,385), Texas ($ 20,765,071), Illinois ($ 19,007,456), Oregon (18,720 $ 155) and Michigan ($ 17,358,525).
Sportico reports that my school’s sports income totaled $ 122,566,259 in 2020-2021. Illinois paid more than 15% of its income in interest. Meanwhile, the school’s NCAA report shows the outstanding principal has declined slightly from the previous year.
What is the view from inside the athletics board room? Pink. Always.
Josh Whitman and Mike Thomas, sports directors during this period, never expressed their concern over this growing debt problem. Rather, they briefed the board on improving income from the Big Ten and other sources. All of this is true but deeply misleading.
When members of our finance subcommittee urged AD Whitman to get details on building a $ 79.2 million football training ground in 2018, we were politely but firmly hijacked.
It’s only Sportico published an article in November 2020 in which we learned that the University of Illinois system had loaned our sports department the funds for the football training center and $ 32.5 million for the Ubben basketball.
Why is college sports debt a serious problem?
First, the University of Illinois is a taxpayer-funded public institution. The school should publicize these internal loans for the responsibility of the taxpayers.
Cal-Berkeley’s huge sports debt further sheds light on the problem of taxpayer liability. the Mercury News reports that Cal’s central campus has “shifted about half of the annual debt service ($ 18 million) for the Memorial Stadium renovation project off the books of the sports department: it is now the responsibility of the central campus. “
If Cal’s central campus pays $ 18 million on behalf of the athletic program, shouldn’t the legislature split its funding into separate academic and athletic expense bills? Through their elected representatives, taxpayers should hold Cal to account for lending massive sums of money to athletics while putting budget constraints on college programs. Let lawmakers make these funding decisions, not campus officials who have arbitrary, non-reviewable budgetary powers.
Second, if the loans are not made public, there is no practical way to ensure that the terms of the loans are met.
Fiscal risks at Rutgers justify this concern. The Rutgers student newspaper recently reported how Rutgers loaned out the “track and field program $ 84 million over the past six years of its internal bank. The Sports Department reported these loans as income, which not only violated NCAA University policies and guidelines, but also incorrectly displayed the department’s income and budget deficit. Budget transparency is essential to hold sports departments accountable for their debts.
Third, sports debt is a problem as COVID-19 widens the gap between athletics and academics.
My campus sent this mass email on June 2, 2020: âWe are slowing or postponing capital projects to preserve cash reserves and financial flexibility. â¦ We asked units to prepare financial projections based on 5-10% reductions in state allocation / tuition for all units on campus. â¦ We expect that many vacant positions will remain open for an extended period.
Yet in August 2020, the UI System quietly entered into a loan deal with the sports department to provide $ 32.5 million for a basketball center upgrade.
Sportico found out about the loan and it was only then that our athletic council got their financial questions answered.
As athletic departments bet home with loaned money during COVID-19, their debts may be more difficult to pay off, even on service, as football and men’s basketball limit attendance and cancel matches.
Fourth, the cost of doing business as a Power 5 school is skyrocketing. The 2021 football season ended with golden contracts of $ 95 million for the coaches (Mel Tucker, Brian Kelly, among others). These contracts make the Illinois football coach seem underpaid at around $ 4.2 million a year. As the salary scale for coaches climbs, it will be more difficult to pay off debts.
Additionally, sports departments have not set aside funds to pay market wages to their income-generating football and basketball players. Congress and states are actively considering legislation to impose an employment model on schools. If this happens, schools will be responsible for new and expensive payrolls.
J. Paul Getty said, âIf you owe the bank $ 100, that’s your problem. If you owe the bank $ 100 million, that’s the bank’s problem. In 2022 and beyond, the Illinois Sports Department – and likely others – will test that maxim with the school it acts as its bank.
LeRoy has published several law journal articles on varsity sport, as well as the book, Collective bargaining in sport and entertainment: professional skills and business strategies.