Proposed Athletic Department budget shows $880,000 surplus; 1998–99 deficit covered by reserves

Newman

The recent public trials and tribulations of the Athletic Department and its $2 million deficit for the year that ended June 30 will result in a “paradigm shift” at the department, Tom Goss told the Regents July 15.

The $2 million deficit will be covered by reserve funds in the proposed 1999–00 budget Goss brought before the Board. That budget projects an $880,000 surplus.

“We thought we were immune to escalating expenses,” said Goss, the Donald R. Shepherd Director of Intercollegiate Athletics, “but there were no windfalls this past year.” Windfalls in the recent past included increased royalty income—the most volatile piece of the budget—as a result of highly visible national championships. That income this past year is projected to be $3.7 million against a budgeted $5 million. Corporate sponsorship income also is projected to be lower than anticipated.

Deitch

The proposed 1999-00 budget shows revenues of $47.6 million against expenses of $46.6 million. Goss said revenues are expected to increase 8.2 percent, while expenses will increase only 2.1 percent, “a paradigm shift to cost-control” for the department.

Goss noted that in spring 1997, when he took a look at a strategic plan that emphasized revenue, “we were a prime candidate for optimism. It would have been better if we had focused on cost controls. I take full responsibility for those decisions.”

Goss’s goals for this year and the future include better communication about the department’s activities and financial status, more efficient and effective operations, contingency funding that will allow for mid-year adjustments—previously, any mid-year adjustments resulted in decreased funding of spring activities—and establishment of a capital replacement fund, a line item in the budget for the first time.

White

Goss indicated that any surplus over the anticipated surplus of $880,000, as well as surpluses in future years, will go to the capital fund. The initial investment will be $200,000. “It is modest, but a beginning,” Goss said.

Goss’s balanced budget with a surplus didn’t insulate him from a request by Regent S. Martin Taylor to seriously consider allocating more money to the capital fund and sharp questions from Andrea Fischer Newman. These comments were tempered by comments on the business of budget-making and impact of choices by Regent Laurence B. Deitch, and the costs of gender equity by Regent Katherine White.

Taylor

In a prepared statement, Newman posed a series of questions to Goss about growth of expenses and what she termed “misinformation” provided by the media, especially about football ticket price increases.

The trends of rapidly increasing expenses and practice of spending more than is made are “disturbing,” she said. When she tried to find out more about the football ticket increase, “it took me a long time to get answers and they were no good.”

“The issue is that we need to review decisions,” she said.

“The questions I want answered,” she said, “are ‘Why will tomorrow be different?’ ‘What controls are in place to monitor the budget?’ ‘What is the long term plan?’”

Athletic Director Tom Goss (left) and President Lee C. Bollinger at the July 15 Regents’ meeting. Photos this page by Bob Kalmbach

Goss said budgets will be reviewed quarterly, at the unit level on up to the senior level, and that the budget review process will be linked to evaluation and compensation. A process that will provide realistic and consistent long-term budget planning already has been started, he said.

Goss noted in his opening remarks that the U-M is within 1 percent of gender equity compared with the student population, a major change from 1992’s 32.5 percent. The NCAA’s strictest requirement with respect to gender equity is that the proportion of male and female student-athletes be within 1 percent of the overall student population.

White commended Goss on the department’s commitment to gender equity and the progress made. She noted, however, that since women’s sports for the most part do not generate significant revenues that “we may be seeing the result [of these expenses] in the budget.”

Responding to a question by Regent Olivia P. Maynard, Goss said that—contrary to a Detroit News article—coaches for men’s soccer and water polo will be on board in January 2000 and the sports will begin in fall 2000 and January 2001, respectively.

Returning to the issue of revenues, Deitch noted that over the past decade, decisions were made that were designed to uphold the University’s values. There were a number of projects that Athletic Department could have undertaken to reduce its exposure to volatile revenues, and it chose not to.

“These were good decisions,” Deitch said, but they had [financial] consequences.” They include: