The opulent Schwartz-Butters Athletic Center, home to Coach K’s office and nestled in the heart of Duke’s athletic complex, serves as a testament to the Department of Athletics’ successes in the last 75 years.
First, there’s the building itself, encased in glass and constructed as part of a $75 million construction blitz in the late 1990s. Then, there’s the Sports Hall of Fame housed in Schwartz-Butters’ lobby, celebrating accolades ranging from Danny Farrar’s 1936 NCAA boxing championship to Duke basketball’s national titles in 1991, 1992 and 2001.
But down the athletics department’s administrative hallway, senior officials don’t have time to rest on their laurels. They are confronting perhaps their biggest challenge yet—one that has little to do with the next NCAA title; namely, how to stay afloat in the choppy financial waters that have threatened to knock over athletic programs across the country.
The Executive Budget Committee for Duke Athletics, created by Director of Athletics Kevin White in August 2008, has prepared a five-phase plan to slash costs wherever possible. The plan aims to prepare for the worst, in case the smaller measures of early phases fail to do the job.
“We’re pulling weeds in phase two as we speak,” White said. “We’re hoping that the economy will recover, that we’ll find new sources of revenue, but we do have a plan in place should the economy worsen wherein we know exactly what we should do if we find ourselves in a real financial predicament.”
While phase one and phase two involve working to trim fat—things like printing costs, the cable bill, media luncheons and unused phone jacks—from the budget, phase five would evaluate whether the athletics department can sustain all of its 26 teams.
“If you’re talking about cutting sports—which we’re not right now, but just in theory—you’ve got to cut sports that are successful, ones that have scholarships. So you’re going to [have to] cut baseball, soccer and lacrosse,” said Chris Kennedy, senior associate athletics director. “That’s the very last resort.”
Although athletics administrators said the program is still far from considering that option, they acknowledged the severity of the situation.
“I’ve been in athletics for 18 years and I can’t remember a time when we didn’t face some sort of financial challenge—whether we’re trying to raise money to fund scholarships, whether we’re implementing a gender equity plan to comply with Title IX, or we’re trying to raise money for facilities,” said Mitch Moser, associate athletic director for business operations. “But I think this is the biggest financial challenge that I’ve ever seen.”
While the University tries to close its own $125 million deficit, athletics is attempting to balance a $60.3 million budget this fiscal year, Moser said. So far, the department has been able to cut 5 percent in expenses.
In 2008-2009, expenses exceeded revenue by $969,000, Kennedy said. The deficit was covered by the athletics department’s dwindling reserve funding.
Revenues from all sources are currently down 7.5 to 8 percent. In addition, annual giving—which traditionally contributes about a quarter of athletics’ total revenue—is $1 million below where it was last November.
“Everybody uses a different form of financing to support college athletics. Every school does it a little bit differently,” White said. “But the uniform position is the fact that everyone’s kind of hemorrhaging.”
Reigning in “Unrivaled Ambition”
Officials in athletics recognized the need to become fiscally responsible and revamp the financial model for Athletics long before the crash.
“We were on a collision course financially,” White said. “We’ve endeavored to reshape ourselves and find ways to stretch our resources and be better stewards of our resources.”
The first strategic plan for Athletics, “Unrivaled Ambition,”—approved by the Board of Trustees in May 2008, months before White officially came on board—has a section devoted to overhauling athletics’ finances.
“The current financial reality of the Duke Department of Athletics is quite simple. Our expenses exceed our income, and have for several years,” the document states. “To cover that difference we have consumed our reserves, which are now depleted…. As a result, the department will run a substantial deficit in [fiscal year] 2008, which needs to be covered from University funds.”
Recognizing that athletics was being stretched thin, the University approved increasing the athletics subsidy from $7.2 million to $15 million in May 2008. The move brought Duke’s institutional support of athletics in line with other universities, including universities like Boston College, Northwestern, Rice and Wake Forest. The Trustees also approved changing the source of the money from the Arts & Sciences budget to the University’s central fund.
Administrators recognized, however, that this solution was a temporary one. Indeed, in response to Duke’s budgetary constraints, the subsidy has been reduced to $14.5 million this year, with further reductions planned for next fiscal year, Moser said.
Depending on the 2011 and 2012 budgets, the athletics subsidy could see another $750,000 cut, Executive Vice President Tallman Trask said
To alleviate athletics’ financial woes in the long term, the plan proposed creating a $300 million endowment that would permanently sustain the program. It also called for investing more money in the basketball and football programs and improving facilities, in hopes that the moves would yield returns in the long run.
“You’ve got to be able to generate a lot of resources from basketball and football or you’re on a financial crash course,” White said. “As football and basketball goes, everything goes. That’s where most of your philanthropic activity is tied to.”
To that end, “Unrivaled Ambition” presented a bold proposal for a $325 million fundraising campaign that would generate about $150 million for the endowment and $100 million for capital projects.
Then, the recession hit full-force.
“Throw the strategic plan out of the window—it was an expensive plan,” Kennedy said. “A lot of the things we wanted to be doing right now—capital improvement and personnel things—we’re not doing. If someone leaves, we’re not replacing them.”
White too said the strategic plan has to be put on hold. Proposed renovations to Cameron Indoor Stadium, Jack Coombs Field, Wallace Wade Stadium and the William D. Murray building will have to wait for more prosperous times.
“An enviable position"
For now, it’s back to simply trying to make ends meet for the department. Officials said they have prioritized preserving the student-athlete experience while cutting overhead expenses and seeking new sources of revenue.
“In a way, this is like a small business,” Kennedy said. “But if that’s really the model we’re operating on, we’re doing a really bad job of it. We have 26 sports and only two of them [football and basketball] make money. If our job were to actually turn profit, we’d all have been fired a long time ago.”
It’s a predicament athletic departments nationwide are grappling with. The athletic department at Stanford University—another Division I school that prides itself on superior academics and athletics—is considering cutting one or more of its 35 teams after severe losses to its endowment, formerly worth $500 million. Meanwhile, after several years of reporting losses, the program at the University of New Orleans is thinking about switching from Division I to Division III.
Duke Athletics is in comparatively good shape, administrators said.
“We’re in as good of a position as we can be in given the economic conditions,” White said. “Even an enviable position.”
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