Today, Maryland and Rutgers officially join the Big Ten. It would have looked like a April Fool's Day headline just a few years ago, but today it's reality, and it's time to take a look at the financial reality behind this decision.
Financially, it was a no-brainer. According to the American Athletic Conference's latest Form 990 (filed in May 2013), Rutgers received $10.4 million from its share of the conference's annual distribution. Meanwhile, the Big Ten recently announced it would distribute approximately $27 million to each of its members for its most recently completed fiscal year. Future projections for 2017-2018 have each member receiving $44.5 million after a new television deal is realized.
Maryland will also see a pay bump by joining the Big Ten. Maryland's previous conference, the ACC, recently announced an annual distribution of $20.8 million for each of its full members.
However, don't expect to see the bank accounts of Rutgers and Maryland athletics to fill overnight. Neither will receive a full share from the conference until the 2020-2021 school year. That's because the Big Ten has structured six-year integration plans for all new members. Nebraska, which joined the conference in 2011, will receive no more than $16.9 million from the Big Ten this year and won't receive a full share until 2017-2018.
Reports indicate that Maryland negotiated a front-loaded deal and will receive $32 million following its first year in the conference. Considering the ACC has been withholding its conference distributions over a disputed $52 million exit fee, it's money Maryland could use right away. A report conducted by Maryland and released in August 2013 showed Maryland athletics had a deficit of $21 million the previous year, and the department was forced to cut seven sports in 2012.
The hole Rutgers has been digging is even larger. From 2004-2005, Rutgers accumulated a $190 million deficit, and an array of one-time expenses added another $47 million on in 2012-2013. Another $183 million in deficit is expected by 2022, but thereafter the department is projected to be "budget neutral."
Is TV the savior?
A healthy athletics budget doesn't begin and end with television deals, despite it being the revenue generator most often discussed. In fact, most athletic departments that top the list for revenue generation bring in more from donor contributions than television, although television is quickly catching up with the advent of conference television networks.
Still, there is a direct correlation between athletic departments that are self-sustaining and those that generate the most from donors. As you can see, Maryland and Rutgers fall at the bottom of the list when compared to Big Ten conference members last year.
Rutgers athletic direct Julie Hermann emailed a video to supporters this morning outlining the fundraising support the athletic department will need as it transitions to the Big Ten.
Hermann said there are three main fundraising initiaives:
- Scholarship Fund: this fund will assist Rutgers in recruiting both in-state and nationally. The goal is to fully fund scholarships to the maximum limits allowed by the NCAA. This is something Rutgers has been working on since it cut sports following the 2006-2007 school year (and which I recently wrote about for SportsBusiness Journal).
- Champions Fund: will support urgent financial needs in the athletic department that directly impact student athletes.
- Build Fund: there are some major remodeling and construction projects the athletic department deems necessary for its programs to compete in the Big Ten.
The key to donations for any athletic department is demand for tickets, which allows the department to attach higher donation requirements to season tickets. Rutgers has already sold 7,000 more season tickets than in 2012, no doubt thanks in large part to the Big Ten opponents coming into town this season. There's also been an increase of more than 1,000 for mini plans.
Maryland and Rutgers have a long way to go before they right their financial ships, but joining the Big Ten will certainly get them there faster. It's important, however, they're not left to depend on the increase in television revenue alone.
Take advantage of this little-known tax "loophole"
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.