Sandusky Scandal Takes Financial Toll on Penn State

 

An analysis of the Penn State athletic department’s latest report to the NCAA reveals that overall operating revenue for the athletic program declined by $7.9 million from the 2010-2011 academic years to the 2011-2012 academic years.

The latest report, which is posted on one of the school’s websites, is the first report since the scandal involving former assistant coach Jerry Sandusky broke in November 2011.

It is interesting to note that contributions earmarked for football actually increased from $2.1 million in 2010-11 to $9.7 million in 2011-12. Contributions not earmarked for any one team fell drastically, from $26.7 million to $10.1 million. Overall contributions fell from $34.2 to $25.6 million.

The school’s athletic department was still self-sufficient in the latest reporting period. It reported total revenues of $108.3 million and total expenditures of $107.4 million. This came without the athletic department receiving any support from other sources within the university.

In 2010-11, Penn State was one of only 22 of 227 Division I schools who operated at a profit without any outside support from the institution. It should be noted, however, that in 2010-11 the school reported an operating surplus of $14.8 million. This past year that figure shrunk to slightly less than $1 million.

On top of that, the school announced in December that in the first half of 2013 it would make the first $12 million payment on its $60 million fine imposed by the NCAA in sanctions against the school. The last two budget reporting periods did not include any monies paid out to the NCAA. It also remains unclear at this time how much of the overall costs associated with this scandal are being paid out of athletic department funds.

The next benchmark for the football program will be attendance at home football games. This past season, first-year head coach Tom O’Brien led the Nittany Lions to an 8-4 record and attendance continued to average around 107,000 at Beaver Stadium. Severe scholarship reductions are taking effect with the 2013 football season. If the team’s record falls off over the next couple of seasons, people will be watching to see if attendance also falls off.

The average ticket price for non-student tickets at Penn State is about $60 per ticket. This does not include seat license fees for premium seating or the rental cost for luxury suites. If attendance were to drop by even 7,000 fans per game, that would result in a direct revenue loss of some $2.9 for a seven-game home season. Add in the loss of revenues from concessions, program sales and memorabilia and the loss of revenue would approach $4 million.

On top of all of that, while the school is on probation it will lose part of the revenues it would normally receive from the Big 10 Conference for media contracts, bowl revenues, etc. It is hard to imagine that all of this won’t have some kind of impact on the program over the next few years.

The Southern Methodist football program has never really recovered from the death penalty administered by the NCAA in 1987. Back then its football team played in Cowboys Stadium and averaged well over 50,000 fans per game. Last season it played at its campus stadium that seats 33,000 and averaged about 30,000 fans per game. It took the Alabama football program six years to fully recover following its near death experience with the NCAA in 2001.

Schools with big-time athletic programs need to take a hard look at the negative publicity being generated by the NCAA enforcement staff in recent months. If selective enforcement is a fact, and if investigators routinely break their own internal rules in trying to make cases against schools, this creates a tremendous potential financial loss for schools that come before the NCAA.

It’s funny how everything always seems to come back around to money. This at a time when the NCAA tries very hard to portray itself as the friend and benefactor of “student-athletes” and as its member schools try to extol the benefits of “amateur” competition. At some point, it all gives fans and others outside of these programs a giant headache.

Greg Tyler is the Library Director at the United States Sports Academy. He has also taught courses at the Academy in sports law. He worked for years in youth sports as a coach, league administrator and as a soccer referee. He has a law degree and practiced law for a number of years. You can reach him at gtyler@ussa.edu.

 

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