A deeper look at the K-State Sports Budget

A deeper look at the K-State Sports Budget

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K-State Athletic Director John Curie (left) and Big12 Commissioner Bob Bowlsby discuss Big12 revenues during K-State football's media day Aug. 5. Curie has taken K-State's athletics department, which was operating under a budget deficit, and in his four years has not only changed that deficit to a budget surplus, but also turned the department into the most profitable athletic department in the country according to ESPN.

When John Currie took his position as K-State’s athletic director in 2009, he walked into an athletic department facing a $2 million projected budget deficit. Facilities across campus paled in comparison to other schools in the Big 12, and the school was dealing with the fallout from the firing of former head football coach Ron Prince.

Despite the obstacles facing the department in Currie’s first year, he turned that projected deficit into a $5 million surplus. Then in 2012, ESPN named K-State the most profitable athletic department in the country in Fiscal Year 2011 with a $20.1 million surplus. That beat out traditional Big 12 powers Texas and Oklahoma, which profited $16.6 million and $9.9 million respectively.

What’s been even more impressive about the financial successes of the K-State athletic department since Currie arrived is that he has been able to operate in a surplus while eliminating direct state and university funds. The only money that the university now gives to the athletic department is $500,000, which comes from student fees and is used to pay student employees.

“We’ve had a budget surplus four years in a row,” Currie said. “And
that’s an expectation. That’s not a goal. We’ll have it balanced and have a
surplus again in the 2014 fiscal year.”

Currie and his department faced $5.4 million in inherited debt back in 2009. That included the controversial settlement with Prince, who was paid $1.65 million after his firing. K-State had sued the former coach after it was revealed that former athletic director Bob Krause and Prince had made a secret deal to pay Prince $3.2 million over 10 years.

“We had an inherited commitment to Coach [Ron]
Prince and inherited commitment to a couple other people and then a debt for a
university airplane that we’ve covered,” Currie said.

Currie said that getting those debts covered is one of his core values when it comes to running the athletic department.

“An important part of value to university, community and state is that K-State students, and the Kansas State community, and the Manhattan community, can enjoy the benefits of a high profile intercollegiate athletics program … without having to subsidize a program with millions and millions of dollars like other schools do around the country and even around our conference,” Currie said.

Now in Fiscal Year 2014, the athletic department has a $60,010,572 operating budget, a nearly $2 million increase from a year before.

Revenues

The biggest source of income for the athletic department are combined payouts from the Big 12 and NCAA. The projected income for those payouts in Fiscal Year 2014 is $21 million, which represents 34.99 percent of the overall operating budget.

Most of the income from the Big 12, according to Currie, comes from television contracts.

“The Big 12 streams are primarily media contracts with Fox and ESPN,” Currie said. “Then our NCAA basketball collective units, that are earned by the teams that have made the tournament over the last six years. It’s a rolling average of units.”

Other income from the NCAA includes payouts based on the number of student-athletes the department has.

“You get a little bit based upon the number of scholarships you offer and sports you offer,” Currie said “You also get student assistance fund money from the NCAA, which is also formula based deal. Which is money that can be used to provide extra cost of living needs for student athletes.”

Currie said that K-State is able to use money from the NCAA to take care of student athletes who have to deal with various tragedies in their lives.

“If a student athlete has a loved one that dies and we need to fly them home for a funeral, we pay for that,” Currie said. “We can pay for that for the athlete out of the student assistance fund.”

The associate athletic director for business administration, Bruce Shubert, said that planning out the incomes from the Big 12 and NCAA is a huge part of the budgeting process, a year-round process that picks up around March prior to each fiscal year.

“We always try to look out ahead several years and at least are trying to understanding what the NCAA and conference revenue streams are going to look like,” Shubert said. “What ticket sales are looking like, what fundraising is looking like. We’re looking two to three years out ahead.”

The second biggest contributor to the Fiscal Year 2014 operating budget is donor gifts from the Ahearn Fund, which stands at $16 million and represents 26.66 percent of projected revenues.

Drumming up donor support has been one of Currie’s biggest goals since taking over for Krause.

“We’ve increased our annual giving significantly, and annual giving would be gifts to the Ahearn Fund,” Currie said. “Our national leadership circle has been a big part of our success. We now have 399 people that give more than $10,000 a year to K-State Athletics. Those people come from 19 different states.”

The year prior to Currie’s arrival, there were around 5,400 annual contributors to K-State Athletics. Last year, with efforts being made by Currie and his staff, that number has grown to 9,531.

“It is truly a grassroots deal,” Currie said. “We had gifts this last year from $50 to $5,000,000. We only had one $5,000,000 gift, but we had a bunch of $50 gifts. And all the support from the Ahearn Fund really assists K-State Athletics.”

Currie said he credits his staff, which includes senior associate athletic director for development Chad Weiberg and executive associate athletic director Laird Veatch, for securing the annual contributions.

“From our development staff standpoint, our staff really hustles,” Currie said. “The entire staff, those guys really hustle and make thousands of personal calls and build personal relationships with all of our Ahearn Fund members across the state and around the country.”

Ticket sales are also a huge revenue stream for the department, making up 24.47 percent of the operating budget. A projected $10.8 million alone comes from football ticket sales. Men’s basketball is budgeted for $3.5 million while every other sport will likely bring in less than half a million combined.

The $3.5 million that comes from ticket sales for men’s basketball is the same from the previous fiscal year. According to Currie, that’s because Bramlage Coliseum has been sold out for those events and ticket prices are remaining the same.

“Our ticket prices are the same, and we’ve been sold out for the last couple years,” Currie said. “So we kind of hit a ceiling there on where we can grow. We’ve really kind of tapped out the ticket thing.”

Maintaining affordable prices for season tickets is one of Currie’s biggest concerns.

“We’ve got to be very careful with our price points in all of our sports,” Currie said.

He added, “We also have intentionally, from day one, tried to provide a variety of access points. We are the state university of Kansas, and we do serve the entire state. So we have people coming into our stadiums who make minimum wage, and we’ve got people coming in who are millionaires. And we want all of them to have an opportunity and an access point to be part of the K-State family.”

Probably one of the biggest reasons that the athletic department has kept ticket prices stable while still increasing its operating budget annually is because other revenue streams have grown dramatically.

“if you look at percentage increase in ticketing over the last five years,” Currie said. “Versus Ahearn fund, versus conference revenue, versus media revenue, ticketing revenue has grown. But it hasn’t grown as exponentially as donor gifts or conference revenue. But we’ve had great fan support all along.”

Last year was the final year that K-State Athletics took any direct state or university funds. After taking $750,000 in Fiscal Year 2013, the operating budget card lists direct state and university funding at zero for Fiscal Year 2014.

“Our state elected officials appreciate the model which we operate,” Currie said. “Which is one of fiscal responsibility. We don’t spend more than we generate. We run a balanced budget.”

Currently, the only money that K-State Athletics receive from the university is that half-million dollars from student privilege fees.

K-State Athletics has a three-year renewable agreement with the Student Governing Association which provides that money to the athletic department.

“That’s a process we go through with student government; we appreciate the support that students provide us,” Currie said.

SGA president Eli Schooley, senior in political science, said that the relationship between the SGA and K-State Athletics has been nothing but positive since he took office last spring.

“I’ve had nothing but positive experiences in working with Currie and Shubert and their staff so far,” Schooley said. “We have a unique relationship in that we not only give them student privilege fee, but that they get students good seats for basketball and football games. We are able to have those great seats that is a great recruitment tool for students.”

Schooley said that comparable ticket packages for non-students are far more expensive than what students pay.

“The value of the ticket package they’re getting is $1,200 to $1,300 cheaper than seats comparable to that of a non-student,” Schooley said.

In Fiscal Year 2013, according to a K-State Athletics summary of student payrolls which is submitted to the SGA, $485,695 was paid by student privilege fees into the salaries of student employees, which include maintenance workers and parking lot attendants, among other positions.

“We pay much more than that for student employees,” Shubert said.

K-State Athletics paid out another $634,721.76 to bring the total payroll to student employees of K-State Athletics to over $1.1 million.

“Some of the folks come and go, but its hundreds of students that are involved in various parts of athletics,” Shubert said.

Expenses

Looking at the expense portion of the Fiscal Year 2014 operating budget, the biggest expenditure the department has is its sports operating and recruiting expenses. For this year, that number is budgeted out to nearly $23 million, which is 38 percent of the expense budget.

That expense covers coaches salaries for all sports and also pays for travel and recruiting expenses racked up by the program.

The second largest expense for K-State Athletics this year will be scholarships, projected to be $7.2 million and 12.13 percent of the operating budget. That number is also up over $200,000 from Fiscal Year 2013.

Then comes the department’s debt service, which the operating budget lists as $5,480,282 and 9.13 percent of all expenses.

According to Currie, most of the debt service the department serves relates to facilities improvements.

“When the east stadium was built in the late ’90s and early 2000s, that’s part of our debt service,” Currie said. “We also have a debt service responsibility associated with the construction of the baseball stadium and some other facilities’ improvements in the early 2000s.”

The construction of the Basketball Training Facility, which opened prior to last season, is also part of the department’s debt service. Currie said that as donor pledges to the facility are paid off, K-State Athletics can pay off the bonds in just a few years.

“We have short-term bonds for the Basketball Training Facility that we will retire in the next couple years as pledges for that facility are paid.” Currie said. “That facility was fully funded with Ahearn fund gifts and capital gifts, but in order to go ahead and build it, we took a short-term bond.”

Bonds that were taken out to build the West Stadium Center at Bill Snyder Family Stadium are also part of the debt service. But those will be paid off with revenue generated by the center itself.

“The difference between the West Stadium Center and the basketball facility is that the West Stadium Center has revenue streams, and the basketball facility doesn’t,” Currie said. “Because the West Stadium Center has club seats, and suites, and stuff like that, so there are revenue streams associated with it.”

According to Shubert, the bonds for the West Stadium Center are 20-year bonds, but that the bonds are callable after 10 years.

“In other words, if things are going great we can retire them early,” Shubert said. “We got pretty good interest rates, so we’ll have to look and see what makes the most financial sense at that point in time.”

Another interesting expense that K-State Athletics has to deal with annually are game guarantees, which is money paid to schools to come and play K-State.

North Dakota State, the FCS team that beat K-State in Week 1, was paid $350,000 to appear. UMass, who K-State beat 37-7 in Week 3, was paid $750,000.

“$1.2 million of [game guarantee] expense is football,” Currie said. “More of it’s football. But it’s $600,000 for men’s and women’s basketball, and there’s some for baseball too.”

Currie also added that game guarantees, particularly in basketball, are a way that higher profile schools help out less notable ones.

“So game guarantees in basketball is another way big conferences are supporting the smaller conferences,” Currie said. “The bigger schools are supporting the lower schools.”

Preparing the Budget

The process of making each fiscal year’s budget is an ongoing one that starts years in advance. But March, prior to each fiscal year, is when Shubert sits down with all 33 units within the athletic department to lay down that unit’s budget.

“What we do is in March or so,” Shubert said. “We set up meetings with each individual unit within athletics and basically what we do is provide some historical information about what their budget has been for the past couple of years and where they’re at today.”

After Shubert has the meetings in March, he begins to finalize the budget in April. He said that each meeting lasts around an hour, and that the budget is finalized around May. Then the fiscal year operating budget is released around June or July.

Of the 33 units within the department, each sport makes up one. But there are also other units that require their own budget.

“We have a number of different units,” Shubert said. “Each sport is obviously a budget unit, but we have development, administration which is primarily the director’s office, sports information, sports medicine, strength and conditioning, etc.”

Shubert also said that what separates K-State Athletics from the rest of the university is its stand-alone nature.

“We’re a little bit different than other departments or colleges on campus in that we need to manage our cash flow because we’re pretty much standalone here,” Shubert said. “For example, conference revenue doesn’t come in 12 equal installments, it’s weighted more towards the end of the fiscal year. There’s different times of the year when cash actually comes in, so you have to plan for your cash flow.”

Preparing and maintaining finances within the K-State athletic department is obviously no easy task. And the regime prior to Currie’s wasn’t exactly successful at doing so.

But if you ask Currie, he says that its the K-State constituents’ desire to see the Wildcats win on and off the field that drives him to run one of the most financially successful athletic departments in the nation.

“What we’ve found over the last four years is developing a vision together with our contributors and outlining that vision is what our fans and our contributors have responded to that,” Currie said. “They want to be part of success, and they’re so proud of K-State and the relationships they’ve had because of K-State that they want it to continue to be successful.”