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In the Pacific 12, profit-and-loss is eclipsing wins and losses

Most Pac-12 athletic departments need money diverted from university coffers to make ends meet, sparking criticism in a time of shrinking budgets and cutbacks. A new $3-billion TV deal and increased revenue sharing should help.

October 15, 2011|By David Wharton and Baxter Holmes

"Maybe 20 years ago, spending was at 1.5%," said David Ridpath, an assistant professor of sports administration at Ohio University. "What if it gets to 10%? When do we say no mas?"

At Cal, critics insist that general funds should go to education or even a recreational sports program that serves thousands of students, not just elite athletes. Ridpath, a former wrestling coach, agrees that spending policies should change.

"It all started for the sound mind and body, but we've lost our way," he said. "Now it's this commercialized, para-professional enterprise."

In doing research for his book "Big-Time Sports in American Universities," Charles Clotfelter examined mission statements from 52 major universities and found only five that mentioned athletics. Still, the Duke professor sees another side to the debate.

"These are very smart institutions," Clotfelter said. "They wouldn't be doing something so consistently if it didn't make sense to the university."

Supporters of the current system point to intangibles — a sense of community when students and alumni gather for games, the way a winning team can help publicize a university and attract more applicants. They suggest that comparing costs from school to school can be tricky.

Each campus charges a different tuition, so each athletic department must pay different amounts for scholarships. The size of the department also matters — Cal offers 29 men's and women's teams, Oregon only 19.

Oregon State President Edward Ray calls athletics "a tremendous dividend to the university." Sports programs represent 7.8% of his total budget.

"As an economist, I like free better than anything," said Ray, who serves as chairman of the NCAA executive committee. "But if I'm talking about six or seven cents on the dollar, that doesn't strike me as a terrible place to be."

Equal footing

It was the summer of 2010 when Pac-12 athletic directors gathered with Commissioner Larry Scott to discuss organizing the new conference into divisions. But first, the smaller schools wanted to talk revenue sharing.

Under the old television contract, universities in large media markets earned millions more each year.

"A group of us raised a stink," Moos recalled. "It made no sense to determine how we were going to divide the conference until we determined how we were going to divide the money."

Before taking over at Washington State, Moos spent more than a decade turning Oregon into a juggernaut, in large part by cultivating a relationship with Nike Chairman Phil Knight, an alumnus. In recent years, Knight has given tens of millions to the Ducks.

Other small-market schools have no such benefactor. So, by the time Scott persuaded Fox and ESPN to join forces on the new TV deal, Moos and his colleagues had already won an important concession: Equal revenue sharing.

Beginning next fall, each school will receive about $15 million annually, according to numerous sources. The payout will increase to $21 million after a few years and eventually climb into the upper 20s.

(Utah won't start collecting until 2012-13, and then will receive a partial share for two years under terms negotiated when it joined the conference.)

Schools such as Arizona and UCLA, which generated $5 million to $7 million from television last year, will see an initial $8-million to $10-million increase. Other schools — Washington State made only $2.7 million from broadcast rights last year — will receive a much larger bump.

As Steve Smith, the director of accounting for Utah's athletic department, put it: "That money will help them put out some fires."

Save or spend

Looking ahead, some administrators see their athletic departments remaining frugal, using new revenue to settle old debts. If everyone in the Pac-12 follows suit, Ray says, "virtually all of our programs will move toward financial self-sufficiency over the next five or six years."

But not everyone has the same vision.

John Perrin, senior financial officer at Arizona, predicts a shopping spree, with schools building new facilities and spending more on top-name coaches.

UCLA must pay off its ongoing $136-million Pauley Pavilion renovation. USC, which declined to give financial details, is building the $70-million John McKay Center — with football offices and training areas — as well as adding teams in women's lacrosse and sand volleyball.

Washington State, which worries about competing against richer opponents, has big plans, too. Though some debts will be repaid, plans are underway to upgrade the aging football stadium, build an operations facility and add teams.

"We're looking at getting all of our programs healthy," Moos said. "So we've got some catching up to do."

No one interviewed for this story predicted that any of the impending television windfall will funnel back into university general funds, at least not in the near future.

That leads Fulks to believe the debate over big-time college sports will persist, even as increasing television money potentially allows 50% or more of the largest athletic departments nationwide to break even. He sees the issue in terms of revenue and expense, a simple equation.

"People should know the true cost," he said. "At that point, they can decide if athletics are worth it."

david.wharton@latimes.com; twitter.com/LATimesWharton

baxter.holmes@latimes.com; twitter.com/baxterholmes

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