The Rising Price Tag for Tar Heel Athletics
As the costs of college athletics continue to rise, perhaps the only thing keeping pace is the anxiety about being able to cover them.
It’s a burden that North Carolina officials meet head-on.
“We feel that strain every year,” said Martina Ballen, UNC’s chief financial officer. “We’ve been feeling some of that pressure for a while now. … It’s never where we can breathe a sigh of relief. Because when we think we might have a little cushion, there are more things that we have to do on the expense side.”
The total operating expenses for UNC’s athletic department rose again in 2016-17, reaching $96.5 million, according to the revenues and expenses report that the school submitted to the NCAA in January. UNC’s total operating expenses were about $83.5 million three years ago.
Mirroring national trends, cost of attendance at UNC has increased. So have costs associated with coach salaries and facilities, where UNC currently has about $100 million worth of construction ongoing for new facilities for football, field hockey, lacrosse, soccer, and track and field. With seven-figure severance payments becoming commonplace nationally, UNC is a step ahead of many of its competitors because it isn’t paying any coaches not to coach. Still, finding enough funds for 28 sports isn’t easy.
“The costs are very concerning as we go forward,” UNC athletic director Bubba Cunningham said. “Our scholarship costs have risen significantly in the last couple of years with the cost of attendance. We used to get an out-of-state tuition waiver for student-athletes. We don’t get that anymore. …
“The challenge for us is that we have many more teams than most of our peers, more student-athletes. So, many of those costs are somewhat exacerbated for us.”
UNC’s expenses for athletic scholarships, which were $10.6 million in fiscal year 2011-12, have been increasing by about $1 million per year and were over $15.6 million in 2016-17. That trend and the task of raising funds for the new facilities have kept the Rams Club, UNC’s athletic booster group, busy. The organization, which had about 14,000 members last year, has a goal of 22,000 members by 2022 as it tries to raise more money.
“It’s aggressive,” Rams Club executive director John Montgomery said of the goal. “We’re really going to call on our current members to help us out. It will be a huge staff initiative as well.”
Thus far, UNC has managed to keep pace with the increasing costs. UNC reported slight surpluses – more total operating revenue than expenses – to the NCAA in five of the last six fiscal years. The school posted a tiny surplus of $10,803 in 2016-17 after having identical revenue and expense figures of just under $95.2 million in 2015-16. Surpluses for the four prior years averaged about $229,000.
“The goal starts out to have enough revenue to break even,” Ballen said. “But that’s the initial goal. We also, if we can, want to have some surplus at the end of the year so that it goes in the reserve.”
That reserve is for instances in which UNC can’t generate enough revenue to cover expenses. Unplanned expenses, such as major coaching changes, might cause UNC to dip into its reserve.
UNC receives no direct state funding for its sports programs, so it must cover its athletics-related expenses. The school collects student fees – a total that held steady for several years before dropping over $300,000 to $6.97 million last year – to augment the athletic department’s revenue.
The athletic department has taken additional steps to try to generate more revenue. It has partnered with IMG Learfield to form a ticket sales force and has started an initiative with business intelligence data analytics to take a targeted approach in identifying potential donors and ticket purchasers. A forthcoming new apparel contract with Nike should help, along with the launch of the ACC Network in 2019 as part of an agreement with ESPN through the 2035-36 school year.
On the expense side, Ballen said the athletic department cut its administrative and support budgets by 10 percent in 2016. UNC also has a cost-containment group that evaluates how teams are spending money and identifies ways for the athletic department to spend in a more efficient manner.
Still, costs continue to rise. The industry of big-time college athletics has become a beast that feeds on cash. Schools need money to attract and keep accomplished coaches, build and maintain top-notch facilities, and provide adequate support staff so that they can recruit top athletes and win enough games to generate enough fan interest and revenue to keep the cycle going.
The task of doing all that while balancing the books is only getting more difficult.
“It’s not going to be easy; it’s never easy,” Ballen said. “The minute you think you’ve got some breathing room, something else comes up that you have to address that you hadn’t planned on. But I feel really good about it. I feel good about where we are and all the things that we’ve done and continue to do.”