Two months after a Rutgers athletics financial report showed a $38.6 million shortfall in its $84 million operating budget, the university’s top faculty group offered a public rebuke for the program’s spending.
The Rutgers New Brunswick Faculty Council unanimously voted to pass a resolution deploring the deficit and calling on the athletics program to retain an outside consultant to review the department’s financials problems and prepare a “realistic” financial plan “that will eliminate the program’s deficits as quickly as possible.”
Rutgers Athletics Director Pat Hobbs wasn’t available for comment on the Faculty Council’s resolution, but, in an interview with NJ Advance Media earlier this week, said he understood the public scrutiny of his program’s finances.
“I understand as well as anyone how precious university resources are,” Hobbs said. “I consider myself an academic, someone who managed a law school budget for 16 years. I understand the academic enterprise, I’m a big believer that we have to use our resources wisely. … We’re continue to try to manage those resources as best as we can while we’re continuing to become competitive because once we become competitive it’s not just the Big Ten revenues that help us. It’s the rest of the revenues — the ticket sales, sponsorships, fundraising support, all of those things will go up as we win. I think there’s a very bright future for Rutgers athletics, which means we will be a net contributor for the academic enterprise.”
An attempt to reach university President Robert Barchi, but spokesperson Karen Ayres Smith said in a statement: “President Robert Barchi remains committed to ensuring the Athletics department becomes self sufficient as soon as possible. Rutgers Athletics will be in a position to generate a positive cash flow for the university after we receive our full share of Big Ten revenues in 2021. Membership in the Big Ten brings numerous benefits for Rutgers students, faculty and researchers, including shared academic resources and research collaborations with our peer institutions in the Big Ten.”
The resolution, obtained by NJ Advance Media shortly after the New Brunswick Faculty Council closed its Friday afternoon meeting at the Busch Student Center, serves as a strongly worded censure against the athletic program’s spending at a time when the university is about about four years shy of becoming a full-share financial partner with the Big Ten.
When that happens in 2021, the Big Ten is expected to distribute between $40 and $50 million to Rutgers and its conference brethren. In the meantime, Rutgers officials say university support is necessary for the Scarlet Knights to spend on rising coaching salaries, increased scholarship costs and other expenditures.
In July 2015, in response to a rebuke from the University Senate of athletics spending, Barchi wrote a letter that said Rutgers’ “first decade of fully vested membership in the Big Ten … will exceed $200 million.”
“While league confidentiality agreements preclude me from providing projected revenues, the national press has reported projected annual league revenues for each of the Big Ten schools for 2021 in excess of $40 million,” Barchi wrote on July 30, 2015. “Without commenting specifically on these public reports, I can say that we feel this is a conservative figure that can be used for internal planning purposes. These reported revenue projections clearly support our prior statements that indicate that we will achieve cost neutrality in athletics by 2021.”
According the Fiscal Year 2016 report filed to the NCAA, Rutgers spent a record $83.974 million and produced $45.392 in revenue. The $38.582 million shortfall — which was partly attributed to the cost of transitioning to the Big Ten and severance deals with deposed coaches and officials — was made up by $27.16 million in support from the university’s operating budget and $11.422 million in student fees.
In addition, NJ Advance Media revealed earlier this week the athletics department took out a $6.1 million loan from the university’s internal bank, according to the athletics department’s transition costs report. The document shows the Rutgers athletics department is projected to take out an $18.4 million loan and spend $5.3 million in interest by the time entrance in the Big Ten pays dividends.
The in-house loan to athletics is essentially an advance on future Big Ten revenues, according to Hobbs, who said university officials “recognize that we can’t simply wait until 2021” in order “to gain competitiveness now.”
“With an expectation and some certainty around future stream of payments (from the Big Ten), you can model that financially where it allows us to make investments today that we’ll pay off in the future,” said Hobbs, who has helped secure $71.1 million — including $46.1 million in donations — toward an ambitious facilities plan called the “R B1G Build” since January 2016.
Prior to the Faculty Council vote, Mark Killingsworth, a Rutgers economics professor and a critic of athletics spending through the years, presented his own study, which showed the athletics department’s deficit to b $351.9 million since 2003-04 and $145.8 million since Barchi took office in 2012.
Copies of the resolution were sent to Barchi, New Brunswick Chancellor Richard Edwards and the faculty representatives of the university’s Board of Governors and Board of Trustees.
Here is the resolution in full:
Resolution on the financial situation of the Rutgers athletics program
As members of the faculty of the New Brunswick campus of Rutgers University, we wish the Rutgers intercollegiate athletics program every possible success. The great majority of student-athletes who participate in the program perform to a high standard, not only in athletic contests but also in the classroom, and learn valuable life lessons about teamwork and good sportsmanship. For students, faculty, staff, alumni, and residents of New Jersey, intercollegiate athletics can foster a sense of belonging to the Rutgers community. Athletics can also help increase awareness of what Rutgers has to offer in terms of academics as well as athletics.
For a number of years, however, the finances of the Rutgers athletics program have been a matter of very serious concern for the New Brunswick Faculty Council, the University Senate, and many other members of the University community. The program has consistently had sizeable operating deficits, which the University administration has covered by taking money from student fees and general University funds – money that could have been used to support the University’s academic programs. In May 2013, President Barchi himself noted the adverse impacts of these athletics deficits and declared that the athletics program is “siphoning dollars from the academic mission.” This is still the case today.
The University administration has long maintained that it has a “sound business plan” that will eventually eliminate the athletics program’s deficits, thanks in large part to anticipated (but as yet unrealized) revenues from the move to the Big Ten conference. However, the athletics program’s financial report to the NCAA for 2015-16, released in late January 2017, shows that, far from getting better, the athletics program’s financial situation has actually gotten worse:
- The athletics deficit in 2015-16 was over $38 million, the second-highest deficit in the history of the program, surpassed only by the $46 million deficit of 2013-14. To pay for this deficit, the University took $11.4 million from student fees and $17.1 million from general University funds, and also provided a loan to the athletics program of approximately $10 million.
- The 2015-16 deficit was $15.4 million greater than the amount provided for in the University’s athletics financial plan of February 2014.
- Expenditures in 2015-16 were $13.8 million greater than the amount provided for in the University’s athletics financial plan of February 2014.
- Revenues in 2015-16 (exclusive of sums derived from student fees, general University funds and the loan) actually fell by $1.88 million, relative to 2014-15.
To make matters worse, the athletics program and the University administration have yet to offer any substantive plan to remedy athletics’ failing financial situation. The University’s financial plan for athletics, released in February 2014, has, as far as we know, never been updated. We realize that eliminating the athletics deficit will be a complex task. Given the University’s failure to make progress toward this goal, however, we believe it is time to bring in an outside group to review the athletics program’s finances and help the central administration develop an effective financial plan for athletics.
The athletics program has had some success in raising funds for its “Big Ten Build” project, and construction for this project has now started. However, after more than a year of fundraising, donations are still almost $30 million short of the target. This shortfall inevitably raises the question of how the project will be financed if fundraising fails to hit its goal.
Finally, the Rutgers athletics program has also been beset by a series of well-publicized scandals so serious that high-level employees had to resign or were terminated. Buyouts of the contracts of some of those employees added several million dollars to the program’s deficits – both past and future – and the University has been compelled to hire outside investigators and law firms in connection with the scandals. The resulting fallout from the scandals has likely also had an adverse effect on donations to the program. Most of these scandals could have been avoided by better oversight of the athletics program and better hiring decisions by the University’s central administration and governing boards.
In sum, the athletics program’s financial situation remains a matter of very serious concern: clearly, the program has failed to meet its financial targets for expenditures, revenues, and deficit reduction; and there is a substantial likelihood that athletics will continue to drain large amounts of resources away from the academic mission of the University.
Now therefore be it resolved that:
(1) The New Brunswick Faculty Council deplores the University administration’s continuing failure to eliminate or even reduce the athletics program’s chronic deficit spending and its continuing reliance on millions of dollars in student fees and general University funds to pay for the program’s deficits – all of which harms the University’s academic mission.
(2) The Faculty Council calls on the University administration to commission a fully independent external review of the athletics program that will (a) evaluate the program’s current and future finances, expenditures and revenues and (b) assist the University in developing a realistic and up-to-date financial plan for athletics that will eliminate the program’s deficits as quickly as possible.
(3) The Faculty Council calls on the University administration to make the new financial plan available as quickly as possible, and to discuss this plan with the Council and the general University community.