Nebraska Athletics Funding Academic Scholarships for Non-Athletes

Nebraska

While most collegiate athletic departments are financial drains on their Universities, the athletic department at the University of Nebraska is one of “about two dozen public D-1” schools that operate without assistance. It’s commonplace for “institutional funding, state appropriations or student activity fees” to prop up those operating at a loss, but at Nebraska not only is the athletic department self-sufficient, it contributes to the school’s academic mission by funding scholarships for non-student-athletes; 20% of the 20,000 students enrolled on NU’s Lincoln campus received Husker scholarship money within the last 12 months. In addition to funding $5 million dollars’ worth of academic scholarships, Nebraska athletics gave $5 million to the University’s chancellor to help cover university operational expenses (think: support for rec center, academic support).

Howie Long-Short: “It’s not unusual for athletic departments to fund academic scholarships” or to give back to the University, but “it’s a bit of a shell game” at most institutions; “if the athletic department wasn’t receiving out-of-state tuition waivers, they wouldn’t be operating at a profit.” At Nebraska, athletics are self-funded – so the gifts given are legitimate.

Nebraska’s athletic department is unique in that it’s one of just a few schools to have consistently generated a net surplus over the last 20 years (reported $6.6 million in operating profit in ’18). NU’s standing as the only school in the state with a D-1 football program and its ability to sell tickets “in significant quantities to both volleyball and wrestling” (in addition to football, basketball, baseball & softball) enables its athletic department to generate more revenue than most.

NU athletics’ ability to “cash flow improvements” over the last 2 decades (along with some assistance from the city) allowed it to build sporting venues without taking on long-term capital facilities debt; that’s noteworthy because “there’s a lot of schools out there with $15 million or $20 million of annual debt service choking them.” While athletic departments at those schools are tapping into their respective University’s budgets (think: UConn, USF), Nebraska athletics maintains a “beautiful balance sheet” that allows for the consistent transfer of funds to academics.

A significant portion of the money being given back to the University comes from NU’s stake in the Big Ten Network – now more than $50 million/year. That figure will continue to rise, so the University should be able to fulfill their “long-term commitment” to the scholarship program.

The P5 A.D. referenced cited three developments over the past 2 decades that have increased revenues, which set off a costly facilities arms race and ultimately drove schools to take on 30-year debt issuances on buildings that are now too large (with ticket demand down); “the development and aggregation of media rights and multimedia rights at the campus level (and remember, Nebraska’s would have been particularly valuable with football winning multiple championships in the mid-90s), the peak demand for season tickets and priority seating, and of course the media rights explosion at the conference level with the cable bundle growing in value.” A “renewed emphasis on equality” – which spurred the spending of “millions of dollars on new opportunities for women” – and a coaching salary structure that has outpaced revenues – the result of a trickle-down from pro sports flush with media rights cash – also help to explain why athletic departments making more money than ever are unable to operate at a profit; “it’s embarrassing, but it’s the truth; they’ve spent every dollar.” 

Fan Marino: It is possible for schools to cut back on spending, but the A.D. we spoke to cautioned “beware of taking money that needs to be reinvested in coaching salaries, in facilities or to keep the debt service low; you run the risk of turning athletics back into a cost center [as it was prior to the media rights explosion]. It would be nice if there were institutional policies that coaches couldn’t earn more than the school president and everyone would adhere by them, but at most places that’s not a realistic goal.” Of course, that doesn’t mean schools should be doling out $500K/year contracts to defensive backs coaches. “Those are sunken costs.”

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Author: John Wall Street

At the intersection of sports & finance.

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