Article: AAC ratifies plan to split realignment funds

[UPitt]

Upstarter, I was looking for the conference payouts to each school because a few things don't seem to add up to me. This is not the first time I have seen bylaw 11.02 (C) mentioned and I continue to have the following questions:

1) Why no discussion about financial windfall Uconn, Cincy, and USF for a couple years? (Only exit fees have been discussed)
2) Why would Pitt and Cuse not pay the $20 million that WVU paid to leave 1 year earlier. Pitt and Cuse saved $12.5 million for staying in the Big East for an extra year. Without receiving Big East conference revenue this past year, Pitt and Cuse would have been better off paying the extra $12.5 million and leaving for the ACC to collect its conference share of money.
3) Question 2 goes for Louisville, Rutgers, and Maryland as well, although this would have taken some coordination.
4) I did not hear any mention of athletic budgets being tight at Pitt this past year, and did not hear anyone else mention tight athletic budgets from other schools such as Cuse.

5) Honestly, how important should athletic revenue be to universities? I know that schools are in business to bring in revenue and this includes athletics, but Pitt brings in over $7 billion of revenue a year. I would think a few million either way would not have the impact that it is having on realignment.

 

[upstater]

I'm not questioning your knowledge of the bylaw, but if this is true then Uconn, Cincy, and USF should have received a huge windfall of money from the conference last year. Probably in excess of $20 million each.

What I am questioning is this: The media continues to discuss the importance of Uconn receiving ~$20 million in exit fees and how this will help them compete with the BCS conferences for a few years while awaiting acceptance to a major conference. If this ~$20 million is so important, then why has the additional revenue earned this past season not been discussed as being equally important?

The league has accumulated $110 million in money that should have been paid out over the last few years (minus the NCAA deferred money, which may be $25m-$35m or so. There is a heap of money there. The TV money was paid out to all but 2 members (Pitt & Cuse). That's still 15 teams! The TV money this year will be paid out to all but Ville & Rutgers (that's still 13 teams!). In other words, the Catholics were still getting paid, as per the bylaws. They were in a whole other class than the football schools, according to the bylaws.

So, I don't see what the discrepancy is here.

 

[UPitt]

The league has accumulated $110 million in money that should have been paid out over the last few years (minus the NCAA deferred money, which may be $25m-$35m or so. There is a heap of money there. The TV money was paid out to all but 2 members (Pitt & Cuse). That's still 15 teams! The TV money this year will be paid out to all but Ville & Rutgers (that's still 13 teams!). In other words, the Catholics were still getting paid, as per the bylaws. They were in a whole other class than the football schools, according to the bylaws.

So, I don't see what the discrepancy is here.

Makes more sense now. The league actually held all of Pitt and Cuse earnings and will distribute after they leave. I thought the league was distributing the TV revenue each year, and thus Uconn would have received an extra few million or so each of the past few years

 

[upstater]

Upstarter, I was looking for the conference payouts to each school because a few things don't seem to add up to me. This is not the first time I have seen bylaw 11.02 (C) mentioned and I continue to have the following questions:

1) Why no discussion about financial windfall Uconn, Cincy, and USF for a couple years? (Only exit fees have been discussed)

I'm not sure at all what you're saying here. On this board, almost everyone here realizes that the $110m is not only exit fees. We are talking about a total of 5 schools that were subject to fees, after all. And two of them haven't even settled with the AAC yet (one, Rutgers, sued the AAC).

2) Why would Pitt and Cuse not pay the $20 million that WVU paid to leave 1 year earlier. Pitt and Cuse saved $12.5 million for staying in the Big East for an extra year. Without receiving Big East conference revenue this past year, Pitt and Cuse would have been better off paying the extra $12.5 million and leaving for the ACC to collect its conference share of money.

Because the ACC was not ready to bring them in! Same reason Louisville has to stay an extra year.

3) Question 2 goes for Louisville, Rutgers, and Maryland as well, although this would have taken some coordination.

The schools that announce they're going to leave don't get paid. I can't be any clearer than that. If UConn announced it was leaving tomorrow, and didn't make say the B1G for another 2 years, it wouldn't see a red cent of that $20-25m.

4) I did not hear any mention of athletic budgets being tight at Pitt this past year, and did not hear anyone else mention tight athletic budgets from other schools such as Cuse.

No one ever hears of these things. It's policy though.

5) Honestly, how important should athletic revenue be to universities? I know that schools are in business to bring in revenue and this includes athletics, but Pitt brings in over $7 billion of revenue a year. I would think a few million either way would not have the impact that it is having on realignment.

Athletic revenue is very important. Schools can't afford to spend money subsidizing sports in this environment, and yet every school does. You can have billions in budget money, but very little of that is fungible. When a research grant comes in, you can't spread that money around. You're not allowed to. Since PA is notoriously known as one of the cheapest states when it comes to funding Higher Ed., I'm going to assume that the only fungible money Pitt has is the tuition money (I know PSU, for instance, is down to 2% of state support0.

So, when you're running operations on a budget of $200 million for a big school like Pitt, because the other money is all dedicated and tied up, a $10 million cut to the budget will hammer you hard. I've seen it where I work. A $10 million cut means a lot of people will be fired. If you're going to fork over an extra $10 million to sports in a single year or two, this is different than a cut, since cuts tend to be permanent. Maybe you ask the athletic department to pay back the subsidy slowly--but in the real world, that money is lost since even schools like Michigan and Texas lose money. Schools never tend to get that money back. For administrators, the goal is to bleed less.

 

[upstater]

Makes more sense now. The league actually held all of Pitt and Cuse earnings and will distribute after they leave. I thought the league was distributing the TV revenue each year, and thus Uconn would have received an extra few million or so each of the past few years

Remember, the BE payout was very low. Multiplied by 8 or 9 football teams, we are talking pigeon feed compared to the other conference. It's like $40m a year.

 

[UPitt]

Athletic revenue is very important. Schools can't afford to spend money subsidizing sports in this environment, and yet every school does. You can have billions in budget money, but very little of that is fungible. When a research grant comes in, you can't spread that money around. You're not allowed to. Since PA is notoriously known as one of the cheapest states when it comes to funding Higher Ed., I'm going to assume that the only fungible money Pitt has is the tuition money (I know PSU, for instance, is down to 2% of state support0.

So, when you're running operations on a budget of $200 million for a big school like Pitt, because the other money is all dedicated and tied up, a $10 million cut to the budget will hammer you hard. I've seen it where I work. A $10 million cut means a lot of people will be fired. If you're going to fork over an extra $10 million to sports in a single year or two, this is different than a cut, since cuts tend to be permanent. Maybe you ask the athletic department to pay back the subsidy slowly--but in the real world, that money is lost since even schools like Michigan and Texas lose money. Schools never tend to get that money back. For administrators, the goal is to bleed less.

Thanks for the good insight. I agree the state of PA provides little support to Pitt and PSU. I know you understand this, but for anyone not familiar with PA, Pitt and PSU are state affiliated schools as opposed to state schools. PA has a state school system that consists of several smaller universities that compete in division III. Pitt and PSU both tooks cuts in state funding the past few years and saw additional tuition increase because of it.

 

[upstater]

Thanks for the good insight. I agree the state of PA provides little support to Pitt and PSU. I know you understand this, but for anyone not familiar with PA, Pitt and PSU are state affiliated schools as opposed to state schools. PA has a state school system that consists of several smaller universities that compete in division III. Pitt and PSU both tooks cuts in state funding the past few years and saw additional tuition increase because of it.

And that's why the tuition at these schools is so high. When the state only funds a tiny fraction of your budget, you wonder how public the school really is.

 

[UPitt]

And that's why the tuition at these schools is so high. When the state only funds a tiny fraction of your budget, you wonder how public the school really is.

Both Pitt and PSU have discussed the advantages of going private or remaining public.

As for Uconn, is the money just as tight or do they receive better support from the state?

 

[upstater]

Both Pitt and PSU have discussed the advantages of going private or remaining public.

As for Uconn, is the money just as tight or do they receive better support from the state?

I haven't ever looked at it. I saw that UConn went from being in the lowest quintile for state support (low 40s) to the 2nd highest quintile (mid to late 20s) in the span of a decade or so.

But like most states, Conn. is cutting funds to UConn and the school itself is ready to go on a massive expansion largely funded by a steep rise in tuition.