Universities using endowments as athletic department revenue generators
Four courtside season tickets for basketball games at the University of North Carolina cost $1,800. Here's the kicker: Newcomers first need to pay the university's endowment fund $200,000. That and this report from Bloomberg News
The tactic arises from a financial imperative in U.S. college sports, where athletic departments spend as much as $12 million a year for scholarships alone. The cost of fielding college teams and paying athletes' expenses is rising so rapidly that endowments are now seen as the best guarantee for a sports program's survival.
Athletic directors and booster-club presidents at some of the biggest U.S. schools, including Ohio State University and the University of Michigan, are tapping wealthy donors, loyal fans and ex-athletes to beef up their funds. They say athletic programs with the biggest endowments will eventually gain a competitive advantage on the field.
``It's easier to raise money for football fields and basketball arenas, because people show up Saturday and the band is playing and fans are pouring in and it's exciting,'' said John Montgomery, the president of the private booster club that raises money to support UNC sports. ``But in the future, endowments are going to become a priority for everyone. It's the only way to stem the rising costs.''
Bloomberg News surveyed 35 of the biggest U.S. collegiate sports programs and obtained data from 30. Of those, Stanford University had the largest sports endowment, with $270 million, followed by the University of Notre Dame, $130 million; North Carolina's $106 million; the University of Southern California, $100 million; and Duke University, $63 million.
<span style='color:Red'>Stanford's overall endowment of $7.6 billion</span>, which includes the school's sports funds, was the fifth largest in the U.S. last year, according to the National Association of College and University Business Officers. The endowment is managed internally by the Stanford Management Co. The fund returned 8.8 percent for the year ended June 30, according to the university, while the Standard & Poor's 500 Index fell 1.5 percent.
Typically, sports funds are part of the university's overall endowment, and the athletic department, like a mutual-fund investor, earns the same percentage return as the overall fund. That makes college fund managers like North Carolina's Mark Yusko, president of UNC Management Co., among the most influential people in college athletics.
Yusko's decision to include real estate, hedge funds and venture capital in UNC's investments for its $1.1 billion university-wide endowment helped North Carolina's sports fund remain little-changed the past three years, while the S&P 500 fell 25 percent.
As the fund grows, UNC says it eventually will rely on its investments to pay for everything from scholarships to assistant coaches' salaries. That and this report from Bloomberg News
An exception to the combined-endowment fund is Florida State University. It invests $18.2 million for Seminole Boosters Inc., the fund-raising organization supporting Florida State sports, separately from the university's endowment. Sports-investment decisions are made by Bill Johnson, consulting director for CapTrust Financial Advisors in West Palm Beach, Florida. The fund had an 8 percent return for the year ended June 30, Johnson said.
Not all universities place the same importance on athletics as schools such as North Carolina. The Ivy League, including Harvard, Yale and Princeton, offers no athletic scholarships.
In September, Vanderbilt University Chancellor Gordon Gee ended the autonomy of the Nashville, Tennessee, school's athletic department, complaining that colleges ``are in danger of being torn apart by the win-at-all-costs culture.''
Vanderbilt's sports marketing, stadium maintenance and athletics public-relations functions will be combined with university-wide departments, said Michael Schoenfeld, vice chancellor for public affairs.
Schools with the biggest sports funds have an advantage, because income from investments allows them to field more teams, offer more athletic scholarships, buy more equipment and survive bad times without eliminating programs, say athletic directors such as Michigan's Bill Martin.
``I can't tell you how envious I am of the Stanfords and Notre Dames,'' said Martin, whose school has $31.7 million in its sports portfolio. ``With scholarship costs rising so steeply, the endowments really put those schools in the driver's seat.''
The average cost of tuition and fees at a U.S. public university rose 9.6 percent during the last academic year to $4,081 for in-state students, according to a survey by the Chronicle of Higher Education. The Consumer Price Index rose 1.5 percent in roughly the same period.
At the same time, state university systems have had to cut budgets because tax revenue has declined in recent years. Florida's system sustained $166.4 million in cuts the past three years. To help absorb the decrease, Florida State University this year increased tuition and fees for in-state students by 6.5 percent to $2,859, and out-of-state tuition and fees rose 14 percent to $13,887.
``Where are we supposed to keep coming up with all this money?'' said Andy Miller, president of Seminole Boosters. ``It seems we're always behind and sprinting to catch up.''
Many colleges raise money for their endowment funds through donations from alumni and fans, or through season ticket programs similar to UNC's that reward donors with prime seats and parking. North Carolina's basketball program, with consistently high national rankings and loyal fans, can command premium ticket prices. That and this report from Bloomberg News
<span style='color:blue'>When UNC built the 22,800-seat Dean E. Smith Center in 1986, the athletic department decided to use points to determine seat location for basketball games. Because seat assignments change from year to year depending on cumulative points, season ticket holders need to continue donating to maintain good seats. That's why a fan with no points would be required to make a donation of $200,000 to the endowment to get courtside seats. </span>
Since 1992, at least $2 million a year has been donated to the UNC endowment through the basketball season-ticket program, according to the school.
``Our focus is scholarship endowment -- that's our top priority,'' Montgomery said. ``We have great facilities. Now, our mission is to provide opportunities for student athletes, and we'll do that through the endowment.''
UNC is starting a $175 million fund-raising campaign that will run through 2007 to endow its entire sports program. The university also has started encouraging former athletes -- particularly in minor sports like wrestling, soccer and volleyball -- to endow ``extra needs'' such as the salary of an additional assistant coach.
Officials at Stanford and Notre Dame declined to discuss their sports endowments. Among those schools with the largest sports endowments, the others in the top-10 are Texas A&M with $45 million, the University of Virginia, $35 million; Michigan, $31.7 million; the University of Florida, $24.1 million; and Pennsylvania State University, $21.3 million.
Of the schools surveyed, Ohio State had the largest sports operating budget, at $79 million a year. Like Michigan, Ohio State sells out its football stadium, with more than 100,000 seats, and says it makes enough from ticket sales, sponsorships, licensing, and television and radio contracts to pay for scholarships out of revenue from operations.
Ohio State's overall endowment, which is overseen by the university treasurer's office, was $1.2 billion as of June 30. The fund gained 2.5 percent last year, according to the university.
Still, officials at Michigan and Ohio State say they'll eventually have to increase ticket prices and booster club fees that normally run from $100 to $150 annually. That and this report from Bloomberg News
``In the past, we only fundraised when we needed to build something, and then we'd pass the hat around to a small group of faithful,'' said Michigan's Martin. ``But those days are about over. Once you understand how fast and how high these scholarship expenses are rising, you get a new appreciation for endowments.''
Ohio State's athletic director, Andy Geiger, is an endowment pioneer. He is credited with building Stanford's sports endowment from $4 million in 1979 to $50 million in 1990, when he left Stanford for the University of Maryland.
In 1994, he moved to Ohio State. The school had $3 million in athletic endowment funds. Today, it has $17 million.
``We've got great facilities and one of the most comprehensive programs in the country, but we still haven't solidified our future,'' Geiger said. ``What if we have a few tough years? Would we have to eliminate programs? This is why endowment is so important for us and every school in the country.''
Ohio State and Michigan are among the colleges feeling the scholarship pinch more because they recruit so many out-of-state athletes. At Michigan, tuition and fees for an in-state freshman are $7,975 this year. The bill jumps to $24,777 for out-of-state students. Seventy percent of Michigan's student-athletes are recruited from outside the state.
The result: the Wolverines have one of the largest scholarship bills in the nation -- $12 million a year.
``We tell our coaches to recruit the best athletes wherever they can find them, without budgetary limitations on scholarships,'' Martin said. ``That's the price of being competitive.''
While North Carolina, with a $40 million annual sports budget, has invested heavily in scholarship endowment, other large programs have spent millions to renovate football stadiums, basketball arenas and golf courses.
The University of Texas has spent $90 million renovating its football stadium and $60 million on the basketball arena, mostly through capital campaigns and operating revenue. The university plans to spend $15 million on its baseball stadium, Athletic Director DeLoss Dodds said.
``The facilities had to come first,'' Dodds said. ``Now that we have the means to take care of our fans, endowment is next, and our goal is to eventually endow the entire program and be competitive with the Stanfords and Notre Dames.''
Sports Endowments, <span style='color:blue'>2002-2003 Academic Year</span>
1. Stanford $270 million
2. Notre Dame $130 million
3. North Carolina $106 million
4. USC $100 million
5. Duke $63 million
6. Texas A&M $45 million
7. Virginia $35 million
8. Michigan $31.7 million
9. Florida $24.1 million
10. Penn State $21.3 million
11. Virginia Tech $20.3 million
12. Texas $18.5 million
13. Florida State $18.2 million
14. Georgia $18 million
15. Iowa $18 million
16. Ohio State $17 million
17. Oklahoma $15 million
<span style='color:blue'>18. West Virginia $14.9 million</span>
19. Tennessee $14 million
20. Oregon $13.9 million
21. Clemson $12 million
22. N.C. State $12 million
23. Maryland $9 million
24. Kansas State $9 million
25. Boise State $7.3 million
<span style='color:blue'>26. Pittsburgh $6 million</span>
27. Louisiana State $6 million
28. Auburn $5.6 million
29. Colorado $5.5 million
29. Marshall $3.2 million
30. Texas Tech $3.1 million
Source: Bloomberg News survey. Note: Data unavailable from
Washington State, UCLA, Miami, Nebraska. Texas Christian has no
sports-specific endowment. That and this report from Bloomberg News
<a href='http://www.sportsbusinessnews.com/index.asp?story_id=30700' target='_blank'>To compete, you need large endowment. </a>
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To compete, you need large endowment.
