Maryland suffers from money woes

July, 22, 2011
7/22/11
4:43
PM ET
Last week, we learned new Maryland assistant Dalonte Hill -- one of the highest-paid assistants in the country during his tenure at Kansas State -- was taking about a 25 percent pay cut in his new role. At first glance, it seemed like a hefty salary slash. But Hill will still be making around $300,000 a year, and that's hardly chump change for an assistant coach. That goes double at Maryland, which often boasted some of the lowest staff salaries in the ACC during Gary Williams' tenure.

The conclusion, then, was that Maryland -- perhaps optimistic about its hoops program's new era and flush with sparkling new facilities -- was finally willing to open up the coffers to pay the price for a top-flight, elite basketball program. Hey, the money is there, right? Might as well spend it.

As it turns out, the money isn't there after all. According to a story in the Washington Post this week, Maryland's athletic department has long balanced its budget at the end of each fiscal year by "utilizing fundraising revenue kept in independent foundation accounts to pay for expenses." Lately, however, the money in those foundation accounts has failed to keep pace with expenses. Maryland, it seems, is in the red. (No Maryland flag puns intended.)

That situation prompted university president Wallace D. Loh to announce the formation of a 17-member commission designed to help the athletic department solve its financial issues. And there are myriad issues at work. WaPo has a bevy of dire-sounding statistics:
Revenues for both [men's basketball and football] has either stagnated or declined over the past six years, according to financial documents the athletic department filed to the NCAA. Season ticket sales have declined in both sports, department officials have said. At the same time, the athletic department over the past decade made several improvements to facilities used by revenue and non-revenue generating sports. Two of those projects — a new basketball arena and major renovations to the football stadium — largely contribute to the department’s debt, which currently exceeds $83 million.

Additionally, according to financial reports, the athletic department lost more than $64 million from 2005 to 2010 on the 24 sports other than football and men’s and women’s basketball. The athletic department lost more than $13 million in the fiscal year 2009-10 — the most recent report available — on those 24 sports.

In April, Maryland Athletic Director Kevin Anderson said in the past two to three years, the school’s athletic department has lost between 2,000 and 3,000 donors, adding to the department’s financial problems.

If all of that sounds really bad, well, it is. When you rely heavily on foundation donors to balance your budget and cover your debt -- debt which now exceeds $83 million (!) -- and you've lost between 2,000 and 3,000 donors in a matter of three years, well, yeah, money's going to be tight.

The question is what the Terrapins will have to do to reduce their expenses. The most likely outcome is cutting some portion of the university's 27 varsity sports, 24 of which, as you can read in the blockquote above, actively lose money for the university. This is the case at most high-major schools. Basketball and football -- especially football -- make the money for the entire athletic department. Most of the time, that money is enough to sustain the Olympic sports that don't. Maryland's public stance is that cutting sports isn't the answer, but a board of regents member who spoke to the Post on condition of anonymity said that such cuts are "inevitable." Ouch.

It's something to watch for Maryland fans, of course, but it's also interesting for more general reasons. The past few weeks of collegiate sports discussion have revolved around the possibilities of pay-for-play and full cost of attendance scholarships. Big Ten commissioner Jim Delany and SEC commissioner Mike Slive are just two of the many now arguing for increases in student athletes' scholarship funds. When yours truly looked at Kentucky's books to see if the school could afford to increase scholarships to include an extra $2,500 or so for cost of attendance, the answer was an unequivocal yes. It's taken as a matter of faith that most power-six conference schools are able to do the same.

Maryland's situation proves that's not always the case. At the very least, it's a reminder that some major programs are still feeling the two-pronged financial burden of a) the national facilities arms race and b) the post-financial-collapse austerity movement. Cost of attendance always looked unfair to the mid-majors. But some of the big boys might not be able to hack it, either.

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