Maryland athletic department’s revenue can’t keep pace with spending

The University of Maryland athletic department has been able to balance its finances at the end of each fiscal year using a unique arrangement, utilizing fundraising revenue kept in independent foundation accounts to pay for expenses.

But the revenue in the accounts — which surged after a number of successful seasons from the revenue-producing football and basketball teams in the early 2000s — could not keep pace with the department’s expenses. When the department withdrew roughly $1 million at the end of the fiscal year that ended June 30 to help balance its most recent budget, the reserve funds were exhausted.

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On Tuesday, university President Wallace D. Loh announced the formation of a commission to examine the athletic department’s financial troubles. The 17-member group was charged with making recommendations that could create long-term financial stability.

The challenge for the athletic department in solving its financial puzzle is multifaceted. One of the most significant obstacles has been the recent struggles of Maryland’s two most profitable sports: football and men’s basketball.

Revenues for both of those teams 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.

The department’s annual debt service payments are expected to increase significantly in the next seven years, according to documents obtained via a public records request.

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.

The commission appointed by Loh this week could conclude that 27 varsity sports are too many to maintain under Maryland’s current financial conditions. Although Anderson said in a telephone interview July 9 that cutting sports is “not something that we’re looking at,” a member of the university’s Board of Regents, speaking on condition of anonymity, described such a move as “inevitable.”

While the direction the athletic department will take in regard to how it manages its finances in the future remains uncertain, the path that led the department to its current, unsettled state is more clear.

“You can have quality in two different ways,” said Debbie Yow, who served as Maryland’s athletic director for 16 years before leaving in June 2010 to take the same position at North Carolina State. “You can cut 10 sports and have quality and just relax, pretty much. Or you can keep all the sports in place and push hard on the staff to continue to generate new revenue. And I will admit to you, that is a burden, that second thing. That’s tough. It wears on you. But that was the model I chose.”