GCU's for-profit predicament

The new WAC program's business model is causing a stir in college hoops

Updated: August 6, 2013, 1:21 PM ET
By Myron Medcalf | ESPN.com

Dan MajerleBarry Gossage/NBAE/Getty ImagesDan Majerle brings NBA playing and assistant coaching experience to Grand Canyon.

Dan Majerle was an assistant in the pros for nearly six years.

But he always craved more responsibility with the Phoenix Suns organization that he'd helped -- as MVP Charles Barkley's sidekick -- advance to the 1993 NBA Finals. The three-time All-Star's dream of becoming the franchise's head coach, however, was delayed when the team fired coach Alvin Gentry in January, and it was expected that a new coach would hire a new staff.

Majerle never lost his desire to lead, though. Grand Canyon gave the former sharpshooter that chance when it hired him in March.

Majerle now commands a program that recently joined a restructured Western Athletic Conference. The former Division II school is unique because it's currently the only for-profit institution at the Division I level.

The latter has created controversy, but that's a minor disturbance for Majerle. He's focused on the challenge of recruiting prospects to a program that won't be eligible to compete in the NCAA tournament until the 2017-18 season because of a four-year reclassification process. Majerle still expects to build a prestigious and competitive squad on the Phoenix-based campus in the coming years.

[+] EnlargeDanny Ainge, Dan Majerle
AP Photo/Fred JewellMajerle (right) has the experience of 14 NBA seasons to offer his players.

"I just came in and got a great staff around me," Majerle told ESPN.com. "We're just going about it like we're Division I and we're going to be in the WAC. We want to become a major player in college as far as a very competitive team. We want to be like the Gonzagas, the Butlers and those kinds of teams. That's our mindset as a staff: to go out and build this as quickly as possible."

In 2004, Grand Canyon athletic director Keith Baker was unaware that the financial infrastructure of the university that has employed him for 30 years was crumbling. The president at the time told Baker and other staffers only that they would see a group of people touring the campus. Baker thought they were consultants.

They were actually investors who'd agreed to salvage a university -- that narrowly avoided bankruptcy and recovered from a $20 million hole -- by converting the private Christian school into a for-profit institution, expanding its online enrollment and attracting additional on-campus students.

"We really were struggling immensely from a financial standpoint more so than we knew as employees at the time," Baker said. "We didn't know we were 10 days away from closing the doors and going home and not even having a school when some folks came in and started this new model or this new plan."

The plan worked so well that the university went public in 2008.

Shares of Grand Canyon Education Inc. (LOPE) have tripled in value ($35.74 as of Sunday night) on the NASDAQ since the initial public offering. Last year, Grand Canyon was second on Forbes' Best Small Companies in America list following its annual haul of $458 million in revenue.

The school's athletic department has certainly benefited from the windfall. A $200 million expansion continues to enhance the athletic facilities on campus. The Grand Canyon University Arena, the 5,000-seat home of the men's basketball squad, is the jewel of the project.

When the university encountered its money problems nearly a decade ago, its athletic budget was $3 million, Baker said. Today, it's close to $10 million.

"The biggest change is I'm not out beating the bushes trying to find donors for our athletic program," he said. "Our funding for athletics has gone up, and that in some parts has provided us the opportunity to grow our programs."

But the move and model have attracted critics. Grand Canyon has more than 44,000 students, but only 9,000 live on campus. The majority of them attend school online. And that's at the center of the controversy.

For-profit institutions have faced naysayers for their high dropout rates and overall approach to academics.

A 2012 study by the U.S. Senate, Health, Education, Labor and Pensions (HELP) committee, the result of a two-year investigation, revealed that Americans provide for-profit institutions more than $30 billion in tax dollars every year. The study also showed that half the students who'd enrolled at for-profit institutions during the 2008-09 school year had withdrawn from their respective colleges by the middle of 2010. Also, the report stated that the for-profit schools had assigned a higher percentage of their revenue to marketing and recruiting than student instruction.

Last week, CBSSports.com reported that the Pac-12 had asked the NCAA to review the admission of for-profit institutions in Division I athletics. That account was confirmed through a statement -- attributed to the league -- that was recently submitted to ESPN.com via conference spokesman Dave Hirsch:

"As a Conference -- together with our Presidents -- we believe that a broader level of discussion is needed before the final decision on whether to grant for-profit institutions membership in NCAA Division I," the league's statement read. "We have asked the NCAA Executive Committee to include it on the agenda of their August meeting. Our major concern is how athletics fit within the academic missions of for-profit universities."

CBSSports.com also reported that Grand Canyon president and CEO Brian Mueller had blamed Arizona State president Michael Crow for fueling the dispute.

[+] EnlargeMichael Crow
AP Photo/Paul SakumaASU president Michael Crow voiced displeasure over Grand Canyon's business model.

In a separate statement submitted to ESPN.com by Arizona State athletics media relations director Doug Tammaro, on behalf of the university, the school's administration says that for-profit institutions' "primary responsibility is to their stockholders."

"We do not believe for-profit schools provide a good foundation to support student-athletes, who work so hard to balance significant time commitments to sports and their academic work," the school's statement read. "We cannot play teams that exist for profit and have them use their games against us to advance their stock prices, as was discussed by Grand Canyon University during a recent telephone call with investors."

Baker tied the drama to misperceptions about his university and similar institutions.

"I really believe if people would look at it with a little bit more of an open mind, they'd see that we are serving students," he said.

Majerle, however, blamed Arizona State for the wrangling. He said the school's main issue is that another Division I program will reside in the Phoenix area that Arizona State also calls home.

"We've already been accepted into the WAC, we've already got a schedule," he said. "The NCAA has already said we're going to be a Division I school. They've accepted our stuff. I don't worry about that. I think that's more Arizona State and President Crow. They've been used to having the Phoenix area all to themselves. And now we're a Division I school that's on the rise. I think Arizona State sees us as a little bit of a threat, which is fine. And that's good, because we are going to be a threat I know academically, basketball and sportswise."

That's the desire of the WAC, too. After realignment forced the conference to morph into a non-football league, it sought programs that fit its new profile.

Jeff Hurd, WAC commissioner, said Grand Canyon's expansion and previous success in athletics were appealing. The Antelopes athletic programs earned their second consecutive Division II Learfield Sports Directors' Cup for overall excellence last month. He also said he didn't have any concerns about Grand Canyon's for-profit status when he extended the invitation.

"The growth the university has shown over the last five years alone, not just in terms of enrollment but in terms of its physical plant and what it's done to raise its profile with its on-campus enrollment and on-campus capital improvements it's made, was certainly very attractive to us," he said.

Baker wants recruits to feel the same attraction when they think about Grand Canyon men's basketball, a program that received votes in the final NABC Division II coaches' poll after amassing a 23-8 record during the 2012-13 season, and the school's other programs.

Even with Majerle's pedigree, however, it's not an easy sale because of the four-year ban from the NCAA tournament. Baker said the quarrel about the university's for-profit status hasn't eased that mission.

"I do believe there are misconceptions out there about who we are," he said, "but I don't know that I have the power to change that."

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