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Mizzou athletics works to keep pace with SEC’s big spenders

February 27, 2018 GMT

COLUMBIA, MO. • When Jim Sterk interviewed for the University of Missouri’s athletics director’s job two years ago, school officials warned him the department probably faced a budget deficit — even with revenue pouring in from the Southeastern Conference.

Hank Foley, MU’s interim chancellor at the time, tried to ease Sterk’s reservations.

“Hank said,” Sterk recalled recently, “‘Hey, they budget conservatively and they’ll work it out.’”

Two years later, Sterk’s department is in the red and could stay there indefinitely as revenue continues to climb but lag behind MU’s growing expenses.

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“I was concerned,” Sterk said this month. “And it didn’t go away.”

Such is life in the SEC, in which programs such as Mizzou’s arm themselves with a double-edged sword: Sterk’s department enjoys the largesse that comes with SEC membership but on the fields of play must spend like never before to compete with the richest programs in the country.

For the 2017 fiscal year, Sterk’s first year on campus, Mizzou athletics revenue increased by less than 1 percent, to $97.8 million. But spending surged nearly 9 percent, to $102.4 million, marking MU’s first operating deficit since 2012. That’s when the Big 12 Conference withheld league revenue during Mizzou’s conference change.

In 2016, Mizzou’s revenue total ranked No. 30 nationally but just No. 12 among the SEC’s 13 public institutions, ahead of only Mississippi State, according to USA Today’s annual survey. MU athletics spending ranked No. 32 nationally and, again, No. 12 in the SEC.

Ten of the country’s top-17 revenue producers came from the SEC. Seven SEC schools hauled in at least $130 million, topped by Texas A&M at $194.4 million.

To close that financial gap within the league, Mizzou must “invest strategically,” Sterk said, while also working to balance its budget.

“You build revenues, and we’ve been able to do that some, but not at the rate to get rid of (the deficit),” he said. “We’ve got to do some things differently, and what they are I’m not sure yet.”

• MIZZOU TALK: Sound off about the 2017 season

• EYE ON THE TIGERS: Dave Matter’s Mizzou blog

“We have opportunity,” he added. “But we have to manage our budgets a little more carefully right now.”

The SEC recently announced that member schools will receive $40.9 million in league-generated revenue this year, much of which comes from the SEC’s media rights contracts. That outside revenue stream, though, isn’t enough to offset MU’s plunge in ticket sales. In 2017, MU athletics brought in its lowest ticket-sales revenue figure ($17.9 million) since 2007. Next year’s figures will see an uptick after MU sold out of men’s basketball season tickets for the current season, though football attendance again dropped last fall. That reflects a trend seen around the nation.

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According to a recent CBSSports.com report, attendance across the 129 Football Bowl Subdivision teams in 2017 fell 3.2 percent, the second-sharpest drop since the NCAA began tracking attendance in 1948.

DONOR SHORTAGE

At Mizzou, part of the challenge comes with expanding the donor base. MU athletics currently has about 7,900 donors, Sterk said. The SEC average is 12,000. Under Sterk, Mizzou has pushed ticket sales through an outbound sales staff and worked more closely with the university’s extension program to reach more fans around the state.

“It’s not something that’s going to solve (the shortage) overnight,” he said. “But it can help grow it over time.”

On the other side of the ledger, Mizzou’s spending has soared since joining the SEC, up nearly from 53 percent from its last year in the Big 12, when the budget was close to $67 million. Since 2008, salaries for coaches, staff and administration have more than doubled, from $18.8 million to $41.9 million this past year, despite having the SEC’s lowest paid football coach in Barry Odom.

Sterk extended Odom’s original five-year contract after the 2017 season but didn’t add dollars to a contract that pays him $2.35 million per year. Odom’s buyout — his base salary ($450,000) for every year left on his deal — also remains the cheapest in the SEC and would have ranked second-lowest among all “Power 5” conference coaches last year.

Odom’s modest figures don’t necessarily reflect an overall frugal approach by the administration — men’s basketball coach Cuonzo Martin has a seven-year deal with an average $3 million salary and a coach-friendly buyout — but why an extension for Odom without a raise?

“I wanted to make sure people knew externally and from a recruiting standpoint that he’s a guy we believe in and want to move forward with,” Sterk said. “As we can build back revenues and he has more success — (former coach) Gary Pinkel was making $4 million when he (retired) but he had a couple championships in there — so there’s opportunity to do that, but we need to build it together. And I think Barry’s really doing a good job.”

LIKE OLE MISS

Around the SEC, Ole Miss is Mizzou’s closest peer when it comes to finances. Under AD Ross Bjork, the Rebels have increased their budget from $57 million in 2012 to around $113 million but still rank just ahead of Mizzou in the SEC’s financial rankings.

“Are we going to pay what the Alabama program pays their football coach?” Probably not,” Bjork said in a phone interview. “You have to be creative and find your niche. But you also say, ‘We can do what everyone else can do and offer the same things but with a few less zeroes.’ With a $100 million-plus budget, to me, in a place like Oxford and Columbia, you can do a lot with those resources.”

For Sterk, Bjork and other ADs around the country, two parts of the new federal tax law could further impact their bottom line.

First, boosters no longer can take a tax deduction on the donation required to buy season tickets. In the past, boosters could deduct 80 percent of the donation. Some schools fear the new law could discourage fans from buying season tickets. For now, Mizzou plans to keep in place last year’s pricing structure for football.

“We want to see where it all falls out,” Sterk said.

The law also includes a 21 percent excise tax on universities for employee salaries that exceed $1 million. That tax will affect negotiations when ADs search the job market for their next high-dollar coach.

“Maybe I could have paid a coach at $5 million,” Bjork said. “But now four (million) is my number when you add in the tax.”

The particulars still are uncertain but figure to pose more challenges for programs already waging an uphill battle to stay competitive and turn a profit.