After years of relative fiscal prosperity, Division III is faced with a hard truth: Difficult decisions need to be made to circumvent a looming budget crisis.
The core of the problem is the simplest in economics: Expenses are outpacing revenues, a trend that chips away at the division’s cash reserve balance and is forecasted to continue indefinitely. The reserve is intended to keep the division afloat for a year should financial catastrophe strike (for example, if the Division I Men’s Basketball Tournament is cancelled).
Identifying the cause for the budget imbalance is simple, too. The division has run a deficit in each of the past two years because year-to-year revenue growth has slowed from nearly 7 percent to 2.4 percent under the NCAA’s current contract with Turner/CBS. Meanwhile, championship travel costs are rising and are forecasted to continue to jump by 8 to 10 percent annually.
In a March 17 meeting, the Division III Strategic Planning and Finance Committee began examining spending cuts to offset the projected rise in travel costs and develop a structure for a balanced budget for the three-year cycle beginning in 2015-16.
“In an effort to present a balanced budget to the division, every budget line will be examined and considered, including travel expenses related to divisional championships,” said Alan Cureton, president of the University of Northwestern-St. Paul and chair of the Strategic Planning and Finance Committee.
While spotting the problem may be easy, finding a solution is far more complex. The reserve balance was not created to cover annual deficits, and if the division continues to use those funds in that way, it will eventually run dry – even if the reserve balance threshold is lowered from 80 percent of Division III’s annual budget to 50 percent.
Twenty-five percent of the division’s expenditures are devoted to non-championship initiatives, such as the conference grant program and the internship program for women and minorities, and the committee is hesitant to cut those significantly.
The other 75 percent of Division III expenses are devoted to championships, primarily for travel, lodging, and per diem for student-athletes and coaches. For instance, of the $20.8 million spent on championships in 2012-13, more than $16 million was devoted to travel and per diem expenses. The remaining $4.8 million was spent on committee expenses and coordinating and organizing the championships events. Making cuts to either of those areas is neither a practical nor effective way to balance the budget, the committee determined. So that means the division must tackle travel and per-diem costs.
The Division III Championships Committee already took significant steps to limit per diem expenses in February by recommending eliminating a $5 per diem increase – from $95 to $100 – that was set to be implemented in 2014-15. The committee also recommended scrapping a plan to extend an extra half-day of per diem money to all championship participants.
Together, the recommendations, which were later endorsed by the Strategic Planning and Finance Committee and will be considered by the Division III Management Council this spring, would save the division more than $1 million annually. But that still leaves a roughly $2 million projected deficit when the next budget cycle begins in 2015-16.
But how can that gap be closed? Can championship selection dates be moved up or championship start dates moved back so the division doesn’t have to pay to book expensive last-minute travel? Can mid-week single games be moved to three-team pods? Can charter flights be avoided, or limited, for large teams? (Seven football teams took charter flights for the fall 2013 championships, for instance, at a total cost of nearly $900,000.) Should travel party sizes be limited? Will schools be asked to cover a portion of their travel costs for championship events? With their own budgets tight, can they afford to?
These are the questions, among others, that the Strategic Planning and Finance Committee has asked the Championships Committee to tackle through the spring and summer.
“By seeking the counsel and advice of the DIII Champions Committee as well as randomly selected athletics directors, coaches and commissioners within the division, we can begin to ascertain what variables within the overall DIII budget are of the highest priority,” Cureton said. “The more input we receive from the membership, the better we can serve them.”
It’s clear to both committees that limiting the number of teams that could compete in championships is the quickest way to save. But such a step can be taken only through legislation, and recent survey data suggests the membership would oppose further limitations on access to championships. The committees have indicated such solutions should be last resorts.
Finding ways to ensure that enough student-athletes are given the opportunity to compete and have a quality championship experience while, somehow, simultaneously keeping costs down is the crux of the dilemma. Together, the two committees, along with the respective sports committees (through surveys) and the membership as a whole (through focus groups), are taking the first steps towards solving that budgetary Rubik’s Cube.