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The University of Hawaii Board of Regents agreed to give the Athletic Department a fresh start, zeroing out millions in debt after sports lost money for years.
But KHON2 found that will not be a one-time cost to the campus because sports will continue to rely on operational subsidies.
The head of UH Manoa has made it clear — athletics needs to stop bleeding losses.
“There are some hard facts and hard truths,” UH Chancellor Tom Apple recently told KHON2 Sports. “I can’t pay for athletics that’s at the expense of academics.”
At least not anymore. We tracked down the books and found while UH instructional spending per student has grown over the past several years (from $12,310 in 2006 to $15,336 in 2011, or a 24.6 percent increase), athletics spending has zoomed ahead much faster ($28.3 million in expenses in 2006 vs. $40 million last year, or a 42.2 percent jump). On top of that, the Athletic Department has ended nine out of the past 10 years in the red.
“We need to get healthy fast if we have any hope of being part of the ‘haves’ and not the ‘have nots’,” Athletics Director Ben Jay told KHON2.
Jay’s boss, Chancellor Apple, caused a firestorm earlier this month when quoted in the student paper that UH could leave Division 1 if the losses didn’t stop. The chancellor clarified to KHON2 Sports: “Not at all a threat, but I want a stronger program. I need your help, I need your help,” he said, appealing to fans and donors.
UH wouldn’t be alone if drawing the line — other universities have.
“What other industry would continue commitment to a project or a course of action that had exhibited many years of failure, where it wasn’t generating profitability?” said. Dr. Michael Hutchinson, a sports commerce professor from the University of Memphis. Hutchinson studied other schools that have done what they call “de-escalate” — come down from Division 1 to Division 2 or 3.
“Their institutions kept on operating, in fact they got rid of a lot of headaches,” Hutchinson said. “Granted they weren’t a big time schools, they weren’t Hawaii or Penn State, but they were Division 1, and life still went on.”
“If there is not a willingness by the community to support this program, and it has to come from all levels, I think the university has to make a serious decision about where its athletic program belongs,” Jay said of the Division 1 debate. “But I’m not even thinking of that. I’m looking ahead to doing everything we can to position ourselves to be in one of those ‘have’ conferences.”
Other schools who de-escalated managed to do so within Division 1, saving money by dumping a sport.
“How much are we spending to maintain football?” Hutchinson said. “What if you maintained Division 1 status in all your sports but what if you removed the football program? Now that sounds insane…”
And not part of Jay’s outlook.
“No. No,” Jay told KHON2. “You can’t dump football here. Football is the lifeblood of the islands here. It is the sport here that everybody has a relationship with, and they live and die with UH football.”
As for what will be done: Upper campus granted a clean slate. Regents on Thursday approved waving a magic wand over nearly $14 million in losses that had piled up over the years, when the accumulated deficit is counted all the way through projections as of the end of this fiscal year.
“I’m going to invest and assume that debt at the campus level, and we’ll find ways with non-academic sources and non-student-tuition sources to remove that debt over time,” Apple said.
“How specifically is the retirement of the debt not going to come on the backs of students?” KHON2 asked.
“The pot he plans to pull that from is basically from the interest that’s been generated off the money UH is holding,” Jay explained. “It’s not going to affect current programming or current funding of any of the programs. We’ve been very adamant about that.”
“That’s a promise?” KHON2 asked.
“That’s a promise,” Jay said, “and I shared that with Tom because I’m very concerned. I don’t want to do that on the backs of students and the backs of our faculty.”
After the fresh start comes cutting expenses, renegotiating, getting more wins on the scoreboards, and most of all: “We need to do a better job with big gifts,” Jay said.
Athletics takes in $4 million to $5 million in contributions now.
“I think our goal is to double it. Double it, why not?” Jay said. “Gina, the one thing I’ve said to our staff is we have to think big. We have to think differently and think big.”
A big job for those coordinating all sports fundraising
“Koa Anuenue is going to review and also develop its own strategic plan,” said Vince Baldemor of Ahahui Koa Anuenue, the organization that coordinates sports fundraising for the university. “We’re always looking for the large donor, the major gift the planned gift that’s really going to create a transformational gift to support athletics.”
They’ll still look to the sport-specific booster clubs to keep doing what they’re doing. At last count men’s basketball was their strongest performer in this regard, football came in quite far behind, and women’s volleyball funds held their own ahead of many other men’s teams.
We went over the finances with the A.D. just before he announced he’d changed his mind on team naming after some blowback, putting the word “Rainbow” back into men’s sports.
KHON2 asked: “To what degree does the decision about Rainbow Warriors have to do with money?”
“It’s always a money decision,” Jay said. “It won’t stop what we are doing from our branding efforts. I got the arguments, I heard what the public was saying, I heard what our constituency was saying. In the end we always have in our plans in the branding effort that we are honoring the history tradition of our program.”
“Had you ever felt money at stake from those who disagreed with the decision?” KHON2 asked the fundraising coordinators.
“I think money is always at stake with any major decision in athletics, because sports is very passionate and emotional, and that’s how people connect,” Baldemor said. “They’ll either connect with their money or they’ll sit back and watch. And time will tell.”
As for making money off the brand, the A.D. has his eye on some expenses that could turn into revenues, like trying to get merchandising under their control, not upper campus. Case in point: the Rainbowtiques.
“They’ve lost money last 4 years in a row, probably the last five years in a row, and what I’m saying to the chancellor is Tom, I think I can do better,” Jay said. “It means less stores, less hard costs. We can sell the stuff, we don’t need the retail operation. You just need a different way of distributing your product.”
They’re stuck for now with some big costs, like travel subsidies of up to $175,000 pledged to the other teams in the Mountain West, and $500 a head in the Big West – that’s on top of UH’s own cost to travel.
“I think we could always go back and renegotiate with our fellow members in the room, but in the near term we’re going to live by the agreements,” Jay said.
The pressure for profitability comes with one big reality check: Few Division 1 universities stand entirely on their own — places like LSU, Penn State, and Ohio State where Jay came from.
The rest still rely on help from the university, though UH is actually relatively low on that list, with upper campus covering 32 percent of their budget as essentially a campus subsidy — about $12 million a year. That includes direct institutional support, indirect costs allocated to athletics, some system-related payroll, share of utilities, campus security, and others.
Cutting that purse-string is not part of Athletics’ break-even-or-better equation.
“Now it’s a matter of how much is the right amount, and how much of that is borne by the athletic department to generate more funds,” Jay said. “I never say profitable. I just want to make sure we pay for ourselves.”