Athletics arms race: Programs’ successes tied to money

In the big-business world of college athletics, money is both a cause and an effect.

Want to win games? Raise money.

For the first time at Kansas University, the athletic director is paid more than the chancellor.What has happened to make the person who oversees sports at any major university — let alone KU — more valuable than the person who oversees the state’s flagship of higher learning?Since the hiring of Lew Perkins this year as athletic director, there has been much discussion about how much is being spent on athletic salaries, facilities and programs. And moves to put a premium on seating at Allen Fieldhouse have pushed the discussion off campus, to include fans and other university supporters.It’s a discussion being heard across the nation as more people wonder about the proper balance between academics and athletics.These stories attempt to shed light on the discussion of what some have called an athletics “arms race.”

Need to raise money? Win games.

Those who work in college athletics know it simply as the “arms race.” The programs that win the most games tend to have the most money. The programs that have the most money tend to win the most games.

If that’s the game, Kansas University appears poised to compete.

“College athletics is a big business — like or not, or whether you think it should be or shouldn’t be,” said Mike Maddox, a former KU basketball player who leads the KU Athletics Corp. finance committee. “To be competitive at a Division I level, it takes money, and it takes a lot of money. I don’t think KU has recognized that until recently.”

Evidence of that recognition has been piling up since the hiring in June of athletic director Lew Perkins:

  • First is Perkins’ salary, and the salaries of the assistants he has hired.

    • The recently renovated Memorial Stadium is one of the crown jewels of Kansas University's athletic facilities. KU spent 6 million on the stadium in 1999. KU athletic director Lew Perkins estimates KU has 0 million to 0 million in athletic equipment and facilities needs.

Perkins is paid $400,000 a year, the highest salary at KU. It’s $145,000 more than former athletic director Al Bohl was making — and more than $125,000 higher than Chancellor Robert Hemenway’s salary. Perkins then hired four new staff members and gave them salaries of more than $100,000; a fifth is making $95,000.

  • Second is a plan being developed for establishing a priority-seating plan at Allen Fieldhouse. Under such a plan, the amount of money donated to athletics would be a key factor in deciding where season-ticket holders sit. It could raise an estimated $3 million a year.
  • Third, Perkins has alluded several times to a private fund-raising campaign to increase KU’s competitiveness in all sports.

Despite repeated requests, Perkins declined to be interviewed for this story. But he has said KU’s athletics department had equipment and facilities needs totaling $70 million to $80 million. An athletics department staffer said Perkins would like to boost the department’s $27 million annual budget closer to $40 million.

“It’s a business,” Perkins told the Athletic Corp. this fall. “If you don’t think that way, we belong in (NCAA) Division III.”

KU is a Division I school, meaning it is held to higher standards for competition, number of sports offered and attendance than Division II or Division III universities.

Arms race?

Across the nation, observers say, university athletics departments typically have free rein, big budgets and less accountability than their academic counterparts for a couple of main reasons:

  • Athletics departments are looked at as revenue generators, particularly at state schools where legislatures have cut budgets.
  • They are looked at as marketing tools. Many athletic directors tout what big-money sports like football and basketball can do to help the “brand name” of the university. They talk about what a bowl or NCAA Tournament appearance can do for applications and admissions.

text Athletics arms race: Programs’ successes tied to moneytext High stakes at KU begin with new ADtext Changes at the top abound in departmenttext Perkins’ new hires making big bucks (9-8-03)text Perkins: No money, no titles (8-30-03)text Perkins ranks funding top priority (8-16-03)

And because they are accountable mainly to big donors and television schedules, escalation comes almost naturally.

The numbers seem to support the idea of an arms race.

In the Big 12 Conference, the universities with the largest athletics operating budgets tend to be the ones with highest standings in the Directors’ Cup, an annual analysis of overall athletics standings. It’s compiled by the National Association of Collegiate Directors of Athletics.

In the 2002-2003 school year, for example, the University of Texas spent $49.4 million, according to an analysis compiled recently by Iowa State University. And Texas ranked second nationally in the Directors’ Cup. In fact, the top six universities by funding were the top six in the Big 12 Directors’ Cup standings, with one exception: Oklahoma State University ranked sixth in the Directors’ Cup and 10th in funding.

According to the study, KU’s athletics department operating budget ranked eighth in the Big 12 at $25.7 million, nearly 15 percent less than the conference average of $29.5 million. And KU ranked last in the Directors’ Cup standings.

Neither the Iowa State analysis nor a recent NCAA study of athletics spending found statistical information to support the idea that spending at one university leads to increased spending at another. But the studies shared this limitation: Neither included capital expenditures.

For that reason, Bob Frederick, former KU athletic director, called the reports incomplete. Universities often build better facilities to lure better recruits, he said. At KU, such capital expenses include the $8 million Anderson Family Strength and Conditioning Center and improvements to Memorial Stadium since the late 1990s.

“That’s where the real arms race is,” Frederick said.

And comparing budgets is difficult. The ways universities compile budget data varies so much that the Big 12 quit collecting budget information two years ago.

“They don’t always tell the whole story,” said Tim Allen, a conference associate commissioner. “For instance, some schools pay for their electricity and others don’t. Some collect parking fees and at others that money goes to the university. So it’s never apples to apples.”

‘Monstrous task’

To some observers, the athletic arms race looks like a marathon with no finish line.”The athletic department has an insatiable appetite for money, and it doesn’t look like it’ll ever end,” said Bill Tuttle, a KU professor and member of the Athletics Corp. board of directors. “I think it’s a bottomless pit. We could raise millions and it would take more millions.”Indeed, as KU works to increase its athletics budget, other universities are doing the same thing.”There’s never enough money,” Tuttle said.At least one organized effort is under way to limit athletic spending. The Commission on Intercollegiate Athletics, formed in 2002, is a group of faculty members from universities across the nation urging restrictions in several areas:¢ Broadened revenue sharing among universities.¢ Limits on budgets and capital expenses.¢ Cutting the number of scholarships, team sizes and season lengths.The faculty senates in the Pacific 10 and the Big 10 conferences have approved a resolution endorsing the plan.Don Green, a KU engineering professor who has served as the university’s representative to the Big 12 Conference for eight years, said faculty from the conference would meet in January to discuss endorsing the coalition’s philosophies. He said he was not sure what specific steps could be taken to curb spending — and the rich schools aren’t likely to sign on to any limits, he said.”It’s not clear to me how you limit people spending when it can lead to wins,” he said. “I think it’s getting out of control. But I don’t know what you can do to stop it.”And at Vanderbilt University, a complete elimination of the athletic department announced in September is aimed at curbing the ills of big-time collegiate athletics.Vanderbilt will continue playing intercollegiate sports, but the reorganization merges the departments that control varsity and intramural athletics, putting sports under the central university administration. The position of athletic director was eliminated.”For too long, college athletics has been segregated from the core mission of the university,” Chancellor Gordon Gee said in September. “As a result, we have created a culture, both on this campus and nationally, that is disconnected from our students, faculty and other constituents, where responsibility is diffused, the potential for abuse considerable and the costs — both financial and academic — unsustainable.”— Terry Rombeck

When the Big 8 expanded to become the Big 12 in 1996, it raised the bar for KU keeping up with conference budgets, Frederick said. Athletics budgets at Texas and Texas A&M, two of the new schools, are among the top four in the Big 12.

And if KU is going to raise money for its athletics department, it will have to come from sources other than the state. About $1.5 million from the state goes to pay for utilities and a few salaries, but the rest of the department’s budget comes from private gifts, merchandise, ticket sales and similar avenues.

“We’re not going to supplement athletics with money from our academic budget,” Chancellor Hemenway said. “(Perkins) knows he’ll have to raise funds to be successful.”

Frederick said athletics departments continued to find new ways to make money.

“Hopefully we’ll never be the ‘Sprint Jayhawks,'” he said, recalling how fund raising has changed. “I remember when we first put signage in Allen Fieldhouse. A lot of people complained about that.”

Maddox, a Lawrence banker, said he was convinced KU supporters would be willing to donate more to athletics — but they have to see a plan for improvements. He said possible projects include a new football office complex near Memorial Stadium, new soccer stadium, new softball field, indoor tennis facility, rowing house, improved golf facilities and study areas.

“I think there are more opportunities out there,” he said. “The KU family is very generous. There are a lot of people who haven’t been asked. You just need to present a plan.”

Maddox and Hemenway both said there hadn’t been specific goals for where KU’s budget should be in comparison with its Big 12 competitors. Perkins is expected to present a strategic budget plan in the next year.

Downsides to money

While fund raising could lead to victories, it may have some negative side effects. Some basketball and football season-ticket holders already have felt the sting of the push for more cash.

Mandatory donations to the Williams Fund, which provides athletic scholarships, is part of a plan Perkins is formulating to institute a points system, where seat location will be determined, in part, by amount of donation to the athletics department. Perkins hasn’t yet announced the ticket policy.

The idea has forced several longtime ticket holders, including Mick Allen — grandson of legendary coach Phog Allen — to consider dropping their coveted men’s basketball tickets. Such policies have caused hard feelings toward KU.

“It is a risk,” Maddox said. “There’s no question. There’s no perfect answer. You don’t want to alienate people who have supported your program. At the same time, you have to generate revenue that helps our programs be able to achieve success.”

Hemenway said the ticket plan was simple economics.

“There is a supply, and there is a demand,” he said. “If we ignore the supply-and-demand equation, we give up on the economic value of the seats. That would be contrary to all economic principles, and our athletic department would be accused of poor stewardship.”

Another potential downside: If wealthy alumni are required or asked to give more to the athletics department, they’ll be less likely to give to KU academics.

Sense of pride

Hemenway, who serves as chairman of the NCAA Division I board of directors, said he didn’t subscribe to the arms race theory and didn’t see the increasing spending as a problem.

As an example, he cites $26 million in improvements at Memorial Stadium in 1999.

“The east side of the stadium was like the catacombs,” he said. “It was not a very attractive situation. It wasn’t a situation anyone could feel proud about. Are we engaged in an arms race when we have a desire for clean restrooms and concession facilities, where you don’t have to worry about bugs falling into your hot dogs?”

He also said if athletics success was all about money, Texas — which spends $5 million more per year than any other Big 12 school — would win every conference title.

Hemenway said he was confident more money for the athletics department would lead to more success. And, he said, that success will carry over into other sectors of the university.

“At an American university, there are certain signals as to whether or not you’re in a first-rate educational institution,” he said. “That’s what we want to achieve, whether you’re a student, a parents, a fan or a student-athlete — to feel like you’re attending a first-rate institution.”