April 6 (Bloomberg) -- The University of Iowa will pay $600,000 to fired basketball coach Todd Lickliter and at least $1.1 million to successor Fran McCaffery next season, part of a trend in which severance costs for some of the nation’s biggest college sports programs more than doubled in three years.
An analysis of 51 public universities in the six largest athletic conferences found that schools paid $38.6 million in severance costs for the fiscal year ending June 30, 2009, compared with $18 million in the fiscal year ending June 30, 2007. In those three years, schools have paid more than $79.5 million to fire their coaches and sports administrators.
“Institutions are in search of the Holy Grail and they are making changes more quickly and frequently than in the past,” Stanford University Athletic Director Bob Bowlsby, 58, said in an interview. “The only thing worse than being in the arms race is not being in the arms race, because then you won’t have the best people coaching for you.”
There have been 31 men’s basketball coaches fired this season, including Auburn’s Jeff Lebo, Houston’s Tom Penders, DePaul’s Jerry Wainwright, Pennsylvania’s Glen Miller and St. John’s Norm Roberts.
Bloomberg News filed open-records requests with public universities in the Atlantic Coast, Big East, Big Ten, Big 12, Southeastern and Pacific 10 conferences seeking financial statements for the fiscal years ending in 2007, 2008 and 2009.
The reports show the largest severance expenses were at the University of Tennessee in Knoxville ($7.0 million), Auburn University in Alabama ($6.8 million) and the University of Nebraska in Lincoln ($6.6 million) during the three-year period, with most of it going to coaches and top athletic administrators.
Who’s Owed What?
Former Tennessee football coach Phillip Fulmer was due to get $6 million; former Nebraska football coach Bill Callahan, $3.9 million; former Nebraska Athletic Director Steve Pederson, $2.7 million; and former Auburn football coach Tommy Tuberville, $5.1 million, according to the schools.
Jim Isch, interim president and chief financial officer of the Indianapolis-based National Collegiate Athletic Association, said the U.S. economy might force many athletic directors and school presidents to re-think how they negotiate coaches’ contracts and severance in the future.
The Standard and Poor’s 500 index is down 23 percent and more than 8.1 million jobs have been lost since July 2, 2007, according to Bloomberg data.
“There are institutions with the wherewithal to make coaching changes and weather the storm,” Isch said in a telephone interview. “But there are others who just can’t, and they are going to have to decide when they hire their coaches how much they want to put their budget at risk. It’s individualized, but we are concerned.”
Iowa Athletic Director Gary Barta declined an interview request to speak about Lickliter’s firing and his severance package.
Lickliter, 54, was hired in 2007 from Butler University in Indianapolis, where he had a 131-61 record, took the Bulldogs to a second consecutive appearance in the NCAA men’s basketball tournament’s regional semifinals and was named Division I Coach of the Year by the National Association of Basketball Coaches.
At the Iowa City, Iowa, school, he went 10-22 this season and 38-58 overall.
Butler, under Lickliter’s successor, Brad Stevens, played Duke University last night in Indianapolis for the NCAA basketball championship.
Lickliter’s severance agreement calls for the school to pay $600,000 for each of the four years remaining on his contract, even if he gets another job. He was paid $1.2 million for the 2009-10 season, according to his contract.
Cost of Hiring
Severance is only half the story.
While the cost of firing coaches has increased, so has the cost of hiring them. The expense for coaches’ salaries, benefits and bonuses increased 22 percent the past three years, while athletic department operating revenue rose an average 11 percent, according to school records.
McCaffery, 50, was introduced as Iowa’s coach on March 29 after taking Siena College to the NCAA tournament this season. He has agreed in principle on a six-year contract guaranteeing $1.1 million the first year and $1.35 million in the last, according to a report in the Des Moines Register that was confirmed by the school.
“There is a great premium placed on winning now that sports have become so professionalized,” said Andrew Zimbalist, a sports economist at Smith College in Northampton, Massachusetts, who says the growth in severance expenses might slow as schools struggle to find money for large buyouts.
Turn to Boosters
In some cases, athletic departments are asking boosters to subsidize part of the cost of hiring new coaches.
Between 2007 and 2009, donors paid $49.1 million toward coaches’ salaries, or about three percent of the $1.53 billion total, according to university records.
“Is it more expensive to fire the coach and get on a path that provides hope to the players and faithful, or is it more expensive to hang on and have continued diminishment of the program?” asked Stanford’s Bowlsby. “It is a lot of money, but usually there is a lot of money at risk by maintaining the status quo.”
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