Rutgers Football Fails Profit Test as Students Pay $1,000

Like most of Rutgers University’s almost 30,000 undergraduates, Matt Cordeiro has never put on shoulder pads and played football on a Saturday before a sea of scarlet-clad fans.

Yet Rutgers athletic teams cost him almost $1,000 this year, the most among schools competing in the top category of college football. The total includes mandatory student fees and university funding of the money-losing sports program, both of which rose more than 40 percent in five years. That’s enough to buy meals for more than a month, or books for a semester, or student health insurance for almost a year.

“They are in a tight spot, but I feel like they could be doing more,” said Cordeiro, a 22-year-old senior from North Arlington, New Jersey, who was this year’s president of the Rutgers Student Assembly. While he isn’t angry about the cost of athletics, he says, he wonders whether money from students and the university really fund nonrevenue sports as intended.

Rutgers funneled $28.5 million from the university budget and student fees into sports, the most among 54 U.S. public universities in the biggest football conferences, based on data compiled by Bloomberg for the fiscal year ended last June. It was at least the second straight year at the top of the list for the state university of New Jersey, despite cost-cutting after lawmakers and faculty protested that academics were losing out.

(To see Bloomberg’s data on sports spending at Rutgers and 53 other schools, click here.)

“Rutgers puts too much money into athletics at the cost of basically every other department,” said Stephen Sweeney, the Democratic president of the New Jersey Senate, in an e-mail. He applauded efforts by Athletic Director Tim Pernetti to increase revenue. At the same time, he said, “the faculty, student body and the families of students who are supporting them through school simply pay too much.”

Faculty Council’s Demands

Pernetti reduced spending by $4 million, or 6.3 percent, in fiscal 2011. Bloomberg filed open-records requests and obtained financial reports on athletics from taxpayer-supported universities in the six largest football conferences.

The Rutgers belt-tightening wasn’t enough to make up for a drop in revenue from a losing football season. The school’s faculty council voted March 30 to demand $5 million of cuts in university funding of athletics by fiscal 2016 and a referendum on sports fees required of students. The group called college athletics a financial “arms race.”

The vote was “unusual and commendable” in demanding transparency, reduced funding and a student referendum, said John Nichols, co-chairman of the Coalition on Intercollegiate Athletics, who is a retired journalism professor at Pennsylvania State University. The organization, representing faculty senates of 59 universities including Rutgers, advocates financing, safety and governance changes in college football.

Academics Versus Athletics

College athletic directors like Pernetti are at the center of a struggle between sports and academics at state-sponsored universities. Strapped legislatures have slashed taxpayer funding, fueling record tuition increases. U.S. student-loan debt reached $1 trillion this year.

At 48 of the colleges with the biggest football programs, sports cost more than they made in fiscal 2011, according to financial reports filed with the National Collegiate Athletic Association. Rutgers, whose main campus is in New Brunswick, was one of 33 money-losers that increased university financial support from the previous year.

Rutgers President Richard McCormick articulates the rationale for taxpayer-supported schools funding sports. Of the 34 public research universities in the prestigious Association of American Universities, Rutgers is one of 28 with football programs in the NCAA’s top division, he said.

Rationale for Sports

“Rutgers’ investment in athletics, which continues to be less than 1 percent of the overall university budget, returns dividends through increased revenue, positive branding, exposure and visibility for our university and the State of New Jersey,” said McCormick, who is stepping down in June to resume teaching. “A revenue-generating athletics program with a commitment to stabilize and reduce university support clearly benefits the entire university.”

Robert Barchi, named to succeed McCormick, won’t assume the presidency until Sept. 1 and “is not available to speak at this time” on Rutgers matters, said E.J. Miranda, a university spokesman. Barchi, a neurologist, has been president of Thomas Jefferson University in Philadelphia since 2004.

After three years as athletic director, the 41-year-old Pernetti hasn’t succeeded in generating enough income to reduce funding from the university. Almost all American college sports programs rely on money from football tickets, licensing and television to help pay for their nonrevenue-producing teams.

Football Money Machine

Few sports departments fully succeed, based on the data compiled by Bloomberg. The financial reports were for public universities in the six main conferences that compete in football’s Bowl Championship Series: Atlantic Coast, Big East (including Rutgers), Big 12, Big 10, Pac-12 and Southeastern.

Among the 54 public institutions in those conferences, six reported no financial support for athletics from the university or student fees. They were led by powerhouses in football, the highest-revenue college sport. In fiscal 2011, the University of Texas at Austin had the richest athletic budget, at $150.3 million, and Ohio State University in Columbus was second, with $131.8 million.

By contrast, Pernetti’s operating budget at Rutgers was $60.2 million, below the average of $76.9 million for the 54 schools. Football accounted for 32 percent of the total, and the $28.5 million in financial support from the university and student athletic fees made up 47 percent.

Fiscal 2011 included the first losing football season in six years. Ticket sales for all sports, led by football, plunged by $3.1 million; contributions fell $1.5 million; and income from royalties and licensing declined $477,558. The lost revenue more than offset the spending reductions Pernetti was making.

Revenue Shortfall

Pernetti squeezed athletic administration salaries 12 percent by negotiating lower pay for new employees and shifting responsibilities of people who left or retired to remaining workers. He reduced travel costs 21 percent. And he lowered fundraising, marketing and promotion expenses 24 percent by using more e-mail.

Pernetti still needed $9 million from student athletics fees and $19.4 million from the Rutgers general budget, according to the school’s report. The total worked out to $969 a student, more than three times the average among the 54 universities.

Students paid $319 in athletic fees in the 2010-2011 school year. That was part of the $27,677 that attending Rutgers cost New Jersey residents last year, including tuition, fees, books, supplies, room, board and other items, according to the school. The expense of attending has jumped as state appropriations fell from covering two-thirds of the Rutgers budget in 1990 to one- third this year.

Student Fees Rise

The $19.4 million that Rutgers allocated to athletics from its general budget would have been enough to hire about 256 assistant professors or 132 full professors, based on salary figures provided by Rutgers.

In the current fiscal year, ending June 30, the faculty persuaded the university’s board to reduce general-fund support by $1 million, or 5.1 percent. Sports fees paid by students nonetheless rose 3 percent to $9.3 million.

In return for their athletic fee of $328.50 this year, Rutgers students can sign up for free tickets to football and other games, which are distributed on a first-come basis.

Pernetti argues that student fees shouldn’t be counted as part of the university’s support for athletics because they offset the cost of some students attending athletic events.

No Student Vote

The university’s Board of Governors sets student sports fees. Kristen Clarke was the nonvoting student representative to the board last year and served on the student fees advisory committee, which can make nonbinding recommendations.

“We think it’s odd that students don’t get a vote,” Clarke said. The fee also supports nonrevenue Olympic sports such as track and swimming, she said.

“Ninety-nine percent of students don’t know” that they pay some of the highest college athletic fees, Clarke said.

Cordeiro, the president of the student assembly, who is majoring in planning and public policy, says students think athletic fees are too high, without transparency on where the money is spent.

“We love our student-athletes, but we also notice how other athletes don’t get treated as well as the football players,” Cordeiro said.

Academic Focus Blurred

He and 35 other students were arrested and charged with blocking the entrance to the student lender Sallie Mae in Washington during a March 26 protest by an association of college leaders against rising student debt, according to the Rutgers campus newspaper, the Daily Targum. Washington police declined to confirm the arrest. Bloomberg filed a request under the Freedom of Information Act, to which police haven’t responded. Cordeiro didn’t reply to phone calls and e-mails.

The academic focus of Rutgers is being blurred, said Spencer Klein, 20, a third-year philosophy major from Livingston, New Jersey. He is a member of the University Senate, a voting body including students, faculty and staff from New Brunswick as well as from Rutgers campuses in Newark and Camden.

“A winning football season is great,” Klein said. “But we developed one of the first vaccines for tuberculosis here. We’re going to walk farther with a cure for autism, a cure for cancer, not only in terms of its benefits for the world at large, but improving the Rutgers name.”

The university, chartered in 1766 as Queen’s College, has a rich academic and athletic history. It calls itself “the birthplace of college football” after winning the sport’s first game in 1869 against the school now known as Princeton University. Graduates include the economist Milton Friedman and the actor Paul Robeson.

Not Enough Faculty

In the U.S. News and World Report ranking of U.S. colleges, Rutgers was No. 68 this year, down from 57 in 2003. According to the Shanghai Jiao Tong University worldwide academic rankings, Rutgers was 59th in 2011, compared with 38th in 2003.

Spending on sports is wasteful because it detracts from the academic mission, says Mark Killingsworth, a professor of economics at Rutgers since 1978. He backed the faculty resolution to slash athletic funding.

“We don’t have enough money to hire faculty to teach,” said Killingsworth, a Rhodes Scholar. “Mr. and Mrs. New Jersey think their kids are getting taught by real professors. At least in economics, two-thirds of the time, they’re not,” as graduate students, lecturers and part-time professors lead classes.

Lost-Coach Windfall

Pernetti has an incentive for shrinking student and university funding: a potential $10,000 bonus on his $410,000 annual salary. He has never earned it. The athletic director can collect as much as $20,000 in bonuses related to winning football and basketball seasons. His department got a financial boost this year when the football team went 9-4, including a victory in the New Era Pinstripe Bowl at Yankee Stadium, and revenue rebounded.

“The hardest part in football was trying to establish a winning culture,” Pernetti said in an interview. “That culture has been established with six bowl games in the past seven years.”

The departure of football Coach Greg Schiano to the National Football League’s Tampa Bay Buccaneers will help balance the budget. Pernetti inherited a contract paying Schiano more than $2 million a year before bonuses. To fill the vacancy, the athletic director promoted Kyle Flood from assistant to head football coach, paying him $765,000 annually plus bonuses.

Hot Dogs, Pizza

Pernetti may save $500,000 to $650,000 a year by negotiating a comprehensive apparel and equipment deal for all 24 of the school’s teams. Nike Inc. (NKE) had contracts that expired this year which paid fees to the football and the men’s and women’s basketball coaches for the right to outfit their teams. It was a longstanding practice around the country. As coaches’ contracts expire and new coaches are hired, schools like Rutgers are claiming the funds for the athletic department.

Rutgers can make more money selling hot dogs, pizza and soft drinks to football and men’s and women’s basketball fans, Pernetti says. He put the food concessions at the football and basketball venues up for bid and expects an increase of at least $100,000 in revenue from $1.4 million for concessions and parking this year, he said.

New TV Contract

Those changes match practices that financially successful athletic departments instituted years ago. It has taken time for Pernetti to get out of coaches’ contracts and other business arrangements he inherited, while moving to increase revenue from advertising and sponsorships.

The biggest potential increase in revenue may come late this year when the Big East Conference negotiates a new television deal. Under the expiring accord, Rutgers collected about $6.5 million from the conference’s television and bowl distribution funds this fiscal year. A new agreement will at least double the school’s income, Pernetti says.

While Pernetti declines to make budget projections, the savings from lower football coaching salaries and reduced costs for uniforms and gear, and increased income on concessions and more conference television revenue may total more than $8 million. Some of that could be used to drive down university funding and student athletic fees.

Next: Basketball Revenue

Pernetti says his plans don’t stop there. In a fundraising program announced in September 2010, athletics collected $66.6 million by the end of February, the athletic director says. The department raised its goal to $100 million in private donations unrelated to funds from students and the university.

Pernetti is making plans to spend $30 million to $50 million to increase revenue from games at the basketball arena. He has long maintained that Rutgers athletics doesn’t spend too much money; it doesn’t generate enough revenue. Some of the renovations to the basketball structure would add high-priced club seats, dining areas and retail shops.

“We took some significant steps to move the expense side in the right direction, and we’re still spending 90 percent of our time to infuse the budget with new revenue,” Pernetti said. “The goal from Day One was to reduce the university support to athletics at every opportunity.”

To contact the reporter on this story: Curtis Eichelberger in Washington at cechelberge@bloomberg.net; Elise Young in Trenton, New Jersey, at eyoung30@bloomberg.net.

To contact the editor responsible for this story: Michael Sillup at msillup@bloomberg.net

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