UAB, What Does it Mean?

The decision of UAB to end its football program has people wondering if what happened there was just a local issue or could it be the warning that others may soon follow. People want to know what comes next.

First there will be a mad dash from other schools to try to grab players and coaches since they are permitted a free transfer.

Second is a scramble by group of athletic directors needing to replace games. For 2015 the easiest thing for C-USA will be to reverse this year’s schedule replacing UAB with Charlotte. Three Sun Belt schools (Georgia State, @Troy, and South Alabama) will need to replace UAB as will Tennessee. Troy has to replace UAB with either an FBS or a high scholarship FCS to meet schedule requirements. Georgia State and USA were both set to travel to UAB. In 2016 UAB was slated to host Troy and travel to USA, Georgia State and Kentucky.

Third will be an embarrassing period of schools trying to get into CUSA a decision (embarrassing more in how some will likely end up talking publicly rather than the old-fashioned behind the scenes talk) that could be really good or questionable when the league announces its next television agreement.

With that out of the way we need to assess whether this decision by UAB is a function of a unique situation or something that might be repeated.

While the dominant story so far of UAB has been about the University of Alabama Board of Trustees and its past decisions to deny UAB the chance to hire Jimbo Fisher or build an on-campus stadium, there are other things to consider even though I place full credence in the board pushed for it theory.

The president at UAB is an alum, but he attended before the school not just before they added football, he graduated before UAB had any athletic programs. The president is an MD, not all surprising for a university where the crown jewel is the well renowned medical school. If the focus is on a graduate program, intercollegiate athletics have less purpose because athletics are aimed at uniting undergrads, tying bachelor level graduates to the school and attracting new undergraduate students. A medical school with a hospital has greater fund-raising needs than most schools, coordinating the fund-raising needs with the constant need for athletic donations may well have been a factor.

A number of people have noted that it is not understandable how a team could struggle so much for support in a state as football crazy as Alabama, but that may well be part of the problem as well. Birmingham consistently ranks at the top of the country in college football viewership on TV and Google searches about college football and Facebook likes and so forth. Those numbers may actually be bad because few people are just generically college football fans, rather they have a favorite team. The high interest in college football may be a sign that most of the market had already picked a team. Not carving out a larger supporter group made it easier to pull the plug.

Those are the possible factors unique to UAB. But there are other factors looming that might raise the possibility of other schools dropping football.

You have to first understand how the normal intercollegiate athletic program is funded and this includes many power programs.

The revenue sources are: Tickets, Donations, Sponsorships, Conference revenue, direct funding by the institution, and fees charged to students. While the media and fans go on at length about TV money (Conference revenue generally) very few schools have that as a major revenue source. Most schools with large conference revenue make 60%-75% of their revenue from tickets, donations, and sponsorships. Most schools in leagues without huge conference revenue get a significant part of their funding from direct institutional support and fees.

Now many states bar using tuition earnings to fund athletics or cap the amount but generally a university is free to use what is called auxiliary income (any money made from a source other than tuition generally) to support athletics. Many schools employ dedicated fees charged to students. For schools relying on direct support and fees, there are a number of looming issues.

The biggest is that for the next decade or so, enrollment in colleges and universities is expected to be flat or drop most years. While some schools will grow, others will lose enrollment.

If there are fewer students to pay the fees, there is less money for athletics. Likewise if enrollment is lower, chances are auxiliary income will be lower as well.

Another problem is a change in the national political climate. When state legislatures were dominated by people who grew up in the Great Depression and people who were first generation college grads, often thanks to the GI Bill, support for higher education funding was very strong. Today with a national anti-tax and anti-government sentiment holding a great deal of political clout, politicians fear no backlash if they cut higher education funding and in many cases they will be rewarded at the polls for their fiscal restraint.

Per student, higher ed funding from states is falling and there is little reason to believe the trend will not continue. Those cuts require increasing the cost of tuition. Cost increases will make it harder for people to afford the traditional four year campus experience. This will place more pressure on enrollment and those who cannot afford the traditional approach or fail to understand the economic value of developing your work network while in college will forego traditional education.

The cuts in higher ed funding won’t just pressure tuition costs. Schools will turn to their auxiliary balances to help pay operating expenses. Money used that way will not be available for athletics.

Finally we face a potential crisis in student loans. Default rates are rising and the economic recovery is in part being slowed by new grads who are carrying a great deal of debt and cannot buy a new car when they take that first job, nor can they quickly purchase a home. Money spent paying student loan debt is money not spent on a new TV, clothes, or luxury items.

If the default rate spikes, it is very likely that the Federal government will clamp down on loan eligibility and place tighter caps on the amount that can be borrowed by students. A move like that will make students and their parents more price sensitive. High tuition and fees will make some schools less competitive in attracting new students in what is already expected to be a competitive market for students.

Those factors could easily lead to a college having to eliminate athletics or more likely scaling back its athletic programs and dropping sports. This is why projects like AState’s Centennial expansion are so important. It creates a new revenue stream that insulates the athletic department to some degree from any potential revenue issues that may result in less funding being available to athletics.

While I do not expect anyone is dropping football in the next year or so. The trends make me believe that schools relying on massive amounts of institutional funding face potential risk.

You may be wondering where AState ranks in institutional support. In total dollars, 117 Division I public schools provide more dollars of institutional support to athletics than AState. As a percentage of the athletic budget, as a percentage of the athletic budget, 147 public Division I schools receive a greater percentage of their budget from institutional support than AState.

UAB received $18 million from the school, which was 64.17%. AState receives $9 million which is 57.27% from Sun Belt member FIU receives over 77% from the school.