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A look at changes in NC State’s athletics budget

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Athletic Department Financial Status

There was a recent comment here on BTP postulating that Debbie Yow was getting the NC State Athletics Department into a great deal of debt. Given the narrative that Debbie Yow left Maryland in financial shambles, this appeared to be a concern with merit. This spurred me to do a deep dive on NC State’s Athletic Department financials. I did this mostly through the data from the Equity in Athletics (EIA) Data Analysis (EADA) tool. I also looked at the strategic plan updates for NC State Athletics.

Debbie Yow’s Fiduciary Performance Pre-NC State

After Debbie Yow left Maryland, seven varsity sports were cut as part of a cost savings effort. The post-Yow athletics budgets were considered untenable. Much of the blame for the finances of Maryland were left at the feet of Debbie Yow. The ongoing financial situation within the Maryland Athletic Department was also cited as a large factor in Maryland exiting the ACC for the Big Ten.

This SI article is a fairly balanced description of what actually happened at Maryland. Many of the coaches whose programs were cut blamed Yow for the spending on several projects. She also reportedly alienated some of the largest donors for Maryland Athletics, through both direct interactions as well as her known contentious relationship with Gary Williams. This, along with donor fatigue due to the many facilities upgrades under her watch, was blamed for the lack of income from donors which led to deficits being run in the years after she left.

The article shows that the key strategic reserve that Yow was deemed responsible for draining, wasn’t drained until the year after she left. Also noted was that the debt she inherited from the Athletic Department was $50 million, and by the time she left, the debt was down to $5 million. While I’m not saying that Debbie Yow shouldn’t shoulder some of the blame for the state of the athletics department after she left, the pervasive narrative that she was primarily responsible for the dire finances at Maryland should be revisited.

Overall Budget

The fact that the Total Revenues is greater than the Total Expenses by a slight amount every year is not a coincidence. It’s due to the fact that as an Auxiliary Unit to NC State, the Athletics Department has to be completely self-sufficient. This balancing of budgets is done through a couple of different mechanisms.

First is the Operational Reserves, which is a fund that is kept to finance ongoing concerns within the Athletics Department. In years where there is a surplus, one of the recipients of the excess money is the Operational Reserves, and in years where there is a shortfall, such as this past year, money is taken from the Operational Reserves. Prior to the buyout of Mark Gottfried, the Operational Reserves had increased to 4.5 million from 1 million when Debbie Yow started as the AD in 2010. In case you’re wondering, the current Operational Reserves is around $2.7 million.

Second are the debt payments for capital projects. With excess revenue, there will often be excess debt payments. While many projects are funded by the Wolfpack Club, as noted below, some of them are taken on through the form of bonds issued by the University, for which the Athletics Department is responsible. As noted here, there are several projects that were taken on by the Athletics Department, for which there is still outstanding debt. Specifically, the most recent renovations paid for through bonds and are outstanding for the Athletic Department are:

2003

  • Doak Field Renovations
  • Isenhour Tennis Facility Construction

2008

  • Paul Derr Track Facility Expansions
  • Carter-Finley Stadium Renovations

2010

  • Paul Derr Track Expansions
  • Isenhour Tennis Complex Expansions
  • Reynolds Coliseum Updates
  • Carter-Finley Stadium Updates
  • Doak Baseball Stadium Updates

Per the 2015-16 Athletics Strategic Plan updates, stated that the debt for the Athletic Department was $41 million as of 06/30/2016. The Debt payments over the past few years are as follows.

FY09: $4.5M

FY10: $4.6M

FY11: $5.4M

FY12: $5.2M

FY13: $5.2M

FY14: $5.7M

FY15: $5.9M

FY16: $4.3M

FY17: $5.6M

Wolfpack Club

Many of the larger capital projects for NC State are funded by the Wolfpack Club, and once completely paid for, they are given to NC State as a gift without any outstanding debt. This means that the projects stay completely off of the NC State Athletics Department’s books. This was done for the Murphy Center, Vaughn Towers, and a portion of the recently completed Reynolds Renovations (for which the debt has not yet been completely paid off). Also off the books of the Athletic Department are supplemental portions of the Doeren’s and Keatts’ contracts, partially funded through the Wolfpack Club.

The major thing that the Wolfpack Club does on the books, is to give to the Athletic Department annually enough to cover the costs of scholarships for all of the players, as well as funding for maintenance and other activities. A small percentage of the athletic scholarships are fully endowed, the rest has to come from the annual giving of Wolfpack Club members. In 2017, the amount donated was $24.3 million, up from 2016’s $21.1 million.

Revenues

The revenue numbers are probably what you’d expect, with the exception of Other Revenues (referred to as “Not Allocated by Sport” in the EADA). The other revenues, I believe are mostly due to the Student Fees, Wolfpack Club donations, merchandise licensing, the Adidas apparel deal, and other revenue that couldn’t be attributed to a specific sport. From my examination of the data, it appears that the ACC media rights deal is likely pro-rated across the sports, though I could be wrong on that front.

Expenses

Similarly, the expense numbers are probably what you’d expect, with the exception of Other Expenses (also referred to as “Not Allocated by Sport” in the EADA). I believe those numbers are so variable and high due to payments into capital debt, but a close reading of the EADA form instructions and the Athletic Department’s own footnotes on those form show that these numbers are to be excluded from the report. A large portion of the Other Expenses is the overhead of the Athletic Department itself, both in the form of salaries, but also ancillary costs of running a staff of 200+ employees. Still, the large fluctuations in the Other Expenses category are hard to decipher.

When breaking out the numbers that are attributable by costs related to the sports themselves, you can see the rising costs of coaches salary, which will escalate in the coming years, as Doeren’s contract goes from one that is only half funded by the university, to one that is completely funded by the university.

The other major rising expense is the cost of scholarships, which are tied to the cost of tuition. I don’t expect this trend to change anytime soon given the skyrocketing costs of higher education.

The operations budget appears to be all over the place, and it's not immediately clear why its fluctuations are so high, other than the fact that some of the maintenance costs may be higher for major repairs in specific years.

It's interesting to note that the recruiting budget has had a relatively flat, linear growth over the past 15 years or so. I would have expected the increase to be more dramatic than what it appears we have spent. That could be a function that the costs directly attributable to recruiting is actually a fairly small relative to the money spent on facilities, which are large recruiting tools in and of themselves.

Conclusion

While the EADA is an imperfect tool for analysis, particularly trying to sort out the “Not Allocated by Sport” expenses and revenues, between that data set and the information contained in the Strategic Plan updates, a reasonable picture can be inferred.

From my research, there have been no new large capital debt issuances outside the first year of Debbie Yow’s tenure. Since taking over in 2010, Debbie Yow appears to have been a good steward of the Athletic Department’s funds. This appears to be the case both through her increasing in the Operations Reserves, and the lack of new debt taken on by the Athletic Department over the bulk of her tenure. I would also comment that her incentive-based contracts for Gottfried, Keatts, and Doeren have ensured that NC State was not on the hook for large sums of money without similar successes by the teams. This has largely tied increases in coaching expenses with increases in revenue in those sports.