It is concerning that expenses for athletic programs at the University of Kansas are increasing at a pace that is significantly faster than revenues.
The finances may explain why KU hasnt walked away from a $191 million contract with Adidas, despite the fact that an FBI indictment alleges that an Adidas executive victimized KU by paying the families of two top basketball players more than $100,000 total to get those players to commit to Kansas. The financial reports indicate KU may need that Adidas money more than ever.
From 2006 to 2017, revenues for the nonprofit corporation Kansas Athletics Inc. increased by 68 percent. But during the same period, expenses increased an alarming 93 percent. This trend appears to be worsening. From 2016 to 2017, revenues increased by just 1.2 percent while expenses rose more than 7 percent.
According to an annual audit, KU Athletics lost $1.4 million in 2017.
Athletic Director Sheahon Zenger said he believes strongly in the overall health of Kansas Athletics. But he also noted that KU is under considerable pressure to keep up with the Joneses, particularly its brethren in the Big 12.
This is the rate at which Power 5 schools are growing their athletic departments, Zenger said. My job is to be mindful and to be competitive. But Id be lying if I said it doesnt tear at your gut at times. It really does.
In fiscal year 2006, Kansas Athletics received $7.1 million in revenue from the Big 12 Conference and the NCAA, according to its annual audit. In fiscal year 2017, conference and NCAA revenue had grown to $32.3 million. Despite all the new money, donors had to kick in $19 million to cover operating expenses in 2017.
And then there is the debt. In 2006, KU had 17 cents in debt and long-term leases for every $1 in assets it owned. In 2017, that number had grown to 52 cents in debt/leases for every $1 worth of assets. And now the university wants to raise $350 million for facility improvements, most notably the thorough renovation of Memorial Stadium.
KU leaders dismiss the financial audits as painting a picture that is not entirely accurate. They point to other financial statements, most notably those produced for the NCAA, that show positive cash flow.
But a few things are clear. First, football is incredibly important to the financial health of college athletic departments. If football isnt pulling its weight, its hard to balance the bottom line. And KUs moribund football program isnt pulling its weight. Coach David Beaty, 3-33 in three seasons, must start producing wins or KU has to make a change.
Second, KU has to evaluate its spending on athletic administration. Any other organization facing similar fiscal challenges would consider restructuring personnel to ensure profitability.
And finally, and perhaps most importantly, it is clear from the increasing reliance on donors to fund operations that KU has maximized what it can generate from fans without improving performance, especially in football.
KU Athletics expenses are increasing, and its debt may soon increase. Football attendance and ticket sales are declining. How much longer are the big money donors KU Athletics is counting on going to keep putting money into an increasingly bad investment?
