Inside College Sports' Biggest Money Machine - WSJ.com - Sent Using Google Toolbar

Inside College Sports' Biggest Money Machine - WSJ.com

Inside College Sports' Biggest Money Machine

What do you get for $109 million a year? Jon Weinbach on Ohio State's record-breaking budget.

By JON WEINBACH
October 19, 2007; Page W1

At $109,382,222 for the current year, Ohio State's athletic budget is the largest in the nation and the biggest in the history of college sports. It allows the school to field 36 varsity teams in everything from baseball and soccer to riflery and synchronized swimming. The school spends about $110,000 on each of its 980 athletes, which is triple the amount the university spends per undergraduate on education.

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The budget for this academic year allots $65,000 in private jet time, or roughly 11 hours, to men's basketball coach Thad Matta for recruiting trips over 200 miles -- and a further 15 hours of jet time for the coach's personal travel. A just-completed $19.5 million renovation of the football team's practice facility, funded with a large donation from Limited Brands Chief Executive Leslie Wexner, added a players-only entrance, a lounge that has six flat-panel TVs, three videogame systems and a juice bar. "There's always a race to get up there after practice," says Jake Ballard, a sophomore tight end for the football team that enters this weekend ranked No. 1 in the country.

The men's and women's ice-hockey teams train on a $75,000 hockey treadmill that features a lubricated, ice-like surface that tilts at sharp angles and goes as fast as 16 miles per hour. Men's hockey coach John Markell solicited a donor to buy the equipment, which he says has become a key part of players' workouts. It's a machine most college teams -- and even many National Hockey League clubs -- haven't purchased. "We don't have the space or resources for that," says a spokesman for the Anaheim Ducks, last season's Stanley Cup champions.

Here in Columbus, the OSU athletic department is a gold-plated island in a region getting roiled by harsh economic forces. The lavish program is the most vivid example of how college sports have turned into a humongous business and created a parallel universe of high-living in the world of academia. OSU's athletic budget, which has grown 46% in five years, has expanded despite a prolonged downturn in the Ohio economy and several rounds of public-funding cuts to higher education. The state's median household income fell 9.3% between 2000 and 2005, one of the worst declines for any state during that span.

Foreclosures and Poverty

Buckeyes head coach Jim Tressel with Tyler Whaley

Ohio has the nation's highest rates for foreclosures and delinquent mortgages, and during the second quarter of 2007, 22.9% of Ohio homeowners with subprime loans were over 90 days late -- almost twice the national average, according to the Mortgage Bankers Association in Washington, D.C. The state is home to two of the five poorest cities in America -- Cleveland and Cincinnati, both of which had more than 25% of residents living below the poverty line in 2006, according to the U.S. Census Bureau. Ohio has been ravaged by the struggling U.S. auto industry and the forces of globalization. From 2000 to 2006, the state lost about 200,000 manufacturing jobs and added just 40,000 new positions to offset the decline. Companies such as Mr. Coffee, Rubbermaid and Hoover closed plants and shifted production abroad.

From 2002 to 2005, the Ohio Legislature decreased annual support for the state's universities. In response, OSU instituted its highest annual tuition increases in nearly 40 years, boosting rates nearly 60% from 2002 to 2006.

Ohio State was one of just 19 schools to turn a profit on athletics in 2006, according to data collected by the NCAA. OSU says its athletic department is self-sufficient -- it uses sports revenues to pay for its teams and operations. It doesn't draw from the same budget that's used to fund academic departments. How much the athletic department spends is determined by how much it brings in, not by how much the university decides to give it. A 2005 economic-impact study, commissioned by OSU, estimated that the school's sports program pumps over $100 million a year into the local economy, with more than a third coming from Buckeyes fans' spending on hotels, food, parking and shopping.

At right, Ohio State cheerleading

In a sports-mad country, why Columbus? The alma mater of track star Jesse Owens, golfer Jack Nicklaus and basketball Hall of Famer John Havlicek, Ohio State has a long history of passionately supporting its athletes. OSU's teams are the premier sports attraction in Columbus, Ohio's state capital and biggest city, and the school has the largest enrollment in the country, with more than 52,000 students. TV broadcasts of OSU games routinely attract 60% of all local viewers, and in Columbus, the OSU football coach's Sunday-morning chat show gets better ratings than "Meet the Press."

Supporting the program is seen as a civic virtue. Over the past five years, giving to the Buckeye Club has increased an average of 12%. The booster club's membership of nearly 3,700 is up 32% from 2003. In addition to Mr. Wexner, a 1959 OSU graduate, prominent donors include Robert Schottenstein, CEO of M/I Homes Inc., one of the country's largest home builders.

The enormous financial rewards for successful programs have fueled an arms race among schools to build larger, more lavish venues that can ring up millions from luxury suites and sponsors. Over the past five years, schools in the NCAA's top six sports conferences raised more than $3.9 billion for new sports facilities, according to the Chronicle of Higher Education.

At Oklahoma State, oil and hedge-fund mogul T. Boone Pickens gave $30 million to renovate the football stadium, and put his name on it. He has also committed $165 million more to build an "athletics village" on campus. Nike founder Phil Knight recently donated $100 million to Oregon's athletic department, which plans to use the money as a safety net to cover potential operating losses. The department still plans to ask for public funds to build a $200 million basketball arena.

Other big spenders include the University of Texas-Austin, which has the nation's second largest sports budget at $107.6 million, although it fields 16 fewer teams than Ohio State. Last year, the Longhorns' athletic department paid $152,585 for nutritional supplements like Gatorade and PowerBars.

Preserving 'Opportunities'

The football and men's basketball programs at OSU are the only sports there that turn a profit -- and their revenues support teams other universities have eliminated for lack of funding. "We never want to get into the business of taking opportunities away from students," says Gene Smith, OSU's athletic director.

Ohio State's synchronized swimming team

Ohio State's varsity synchronized swimming team competes in a two-year-old, $20 million facility, nicknamed the "Taj Mahal," that features seven bodies of water and two whirlpools for athletes to relax in during competitions. A multimillion-dollar renovation of the school's "Scarlet" golf course, completed last year and overseen by Mr. Nicklaus, added a short-game practice area and enlarged the course to over 7,400 yards.

OSU's pistol team maintains a supply of about 30 firearms for the team's 11 members, and all shooters receive an array of free Nike gear, including polo shirts, a jacket and shoes. "We're a good-looking team," says James Sweeney, OSU's pistol coach since 1999. This year, for the first time ever, OSU's rifle and pistol teams received scholarship money to recruit top competitors.

At other schools, there is a more Darwinian approach to smaller sports. Last year, Rutgers cited budget shortfalls for its decision to cancel six sports, including swimming, men's tennis and fencing. But the athletic department still gave assistant football coaches a sizable raise, completed a $12.5 million renovation of football's training complex, and is in the midst of a stadium renovation that will add nearly 10,000 seats.

At Ohio State, "nonrevenue" sports such as men's lacrosse and women's track don't have to worry about earning their funding. Excluding football and basketball, OSU's other 34 teams generate about $1.5 million in revenue. Last year, for example, expenses for the women's hockey team totaled a little over $1.2 million while the sport brought in just $1,642, all of it from arena concessions. Many sports, including rifle, pistol, and women's fencing, don't contribute any revenue at all. "I'm sure my scholarship is possible because of the football team," says Lindsay Quintiliani, a sophomore goalie on the field hockey team.

Hockey-team winger John Dingle trains on a specialized treadmill

Last season, Ohio State's football program generated about $57 million in revenue. The sum included a $4.75 million payment from the NCAA for advancing to the national championship game and $31.65 million in ticket sales from home games at Ohio State's 105,000-seat stadium. Team expenses, which include nearly $2 million for meals and travel, as well as debt payments to cover stadium renovations, subtracted about $21 million. Still, football supplied nearly $36 million in profit to the athletic department's coffers. The University of Florida, which beat OSU for the national championship in January, made about $34 million on football last year.)

OSU's men's basketball team, which moved into a new, 19,500-seat arena in 1998, advanced to last year's national championship game and turned a record $9 million profit.

A significant chunk of the athletic department's budget is spent in ways that benefit the school's general fund. This year, the athletic department will spend $12 million on scholarships or "Grant-in-Aid" to pay for athletes' tuitions. A few years ago, the department contributed $5 million to help fund renovations to the campus's main library. OSU's sports program is also among the few that pays for all maintenance, security and operating costs at its facilities. (The utilities bill at the football stadium last year: $731,309.) In addition, the athletic department transfers about $1.7 million to the school's academic-support center to pay for tutors and "life skills" workshops for athletes. "I think we're paying somebody $25 an hour to tutor physics," says Mr. Smith.

Last year, the issue of swelling athletic-department budgets was taken up in Washington by the House Ways and Means Committee and the Senate Finance Committee. In a strongly worded letter to NCAA President Myles Brand, former Ways and Means Committee Chairman Bill Thomas criticized "highly paid coaches with no academic duties," and wrote that Division I football and men's basketball "more closely resemble professional sports than amateur sports."

Judy Bunting oversees OSU's 46 cheerleaders and four student mascots. Her team gets about $169,000 from the athletic department, and supplements it with interest income from a special endowment established by a donor a few years go. "We probably have more scholarship money than most," says Ms. Bunting. In contrast to the spirit squads at Notre Dame and UCLA, OSU's cheerleaders get seats on the football's team's chartered jets. "That's a big plus," she says. "We used to drive vans and fly commercial."

Write to Jon Weinbach at jonathan.weinbach@wsj.com