Division 1-A Analysis

We have recieved this letter that was written by acting and interim SJSU President, Don Kassing in regards to SJSU and it's Div 1A status. <P> Sound off regarding this letter on coach fitz hill's touchdown message board! Just click the link below called "Talk about it".....

Dear Colleague:

You will recall the recent series of developments regarding the question of whether San José State University should continue its NCAA standing as a Division IA athletic program.

Petitions were circulated among faculty expressing support for a proposal to leave IA and redirect the presumed savings to academic and related purposes.

The signed petitions were presented to the Academic Senate which, at its April 19 meeting, passed a "sense of the senate" resolution recommending that the university president "immediately initiate the process of withdrawal from Division IA and the [Western Athletic Conference]."

The resolution noted that the cost of competing at the IA level "is enormous, probably exceeding $3 million in SJSU General Fund dollars annually…" Subsequent to the April senate meeting, a referendum was held to determine faculty sentiment regarding the resolution; pro and con arguments were made available as part of the referendum process.

The results of the vote, presented at the May 17 senate meeting, were 310.06 in favor of the resolution and 113.68 opposed. Although the resolution does not speak directly to the issue of football, it is abundantly clear from the language of the petition, the senate discussion, and the pro argument associated with the referendum that the objective involved is the elimination of that sport at SJSU.

It is also clear from the material that the intention in leaving IA was not that the university would need to abandon Division I, which includes a IAAA classification for institutions that do not compete in football. An alternative possibility would be to retain football, but play at the IAA level. IAA allows 65 scholarships instead of 85, and provides for almost the same number of coaches as in IA. The likely conference to consider -- the Big Sky -- covers (like the WAC) a large stretch of geography.

A second possibility would be a conference still in the process of formation, stretching from California to North Dakota. IAA would seem to make little sense for SJSU, given the intended purpose of the resolution. Finally, during the course of the petition-resolution-referendum process, there was frequent reference to other CSU campuses (Fullerton, Long Beach, and Northridge) and the Big West Conference of which they are members.

The Big West is a IAAA conference, and would be a likely choice for SJSU if football were to be dropped and an invitation to join issued.

I thought it would be important to respond to these developments. Toward that end, I asked for staff assistance in examining the ramifications for the athletics and university budgets in the event of a decision to "immediately initiate the process of withdrawal from Division IA." Since the goal appeared to be termination of the football program, which has a projected budget of $3.3 million for 2004-05, that proposed action became the root assumption of the analysis.

We have examined this goal from the perspective of two alternative approaches to achieving it: dropping football immediately (i.e., canceling the 2004 season), or continuing the sport this fall while targeting 2005 as the date for termination.

The reason for examining the first alternative is the likelihood, under the current NCAA rule regarding players' rights when their sport is dropped, that the immediate announcement called for in the senate resolution would lead many San José State football players to seek immediate transfers. It is possible -- some would argue probable -- that there would be an insufficient number of players remaining to field a team next fall. Accordingly, the analysis looks at costs and savings in both scenarios.

We also studied a third scenario, examining the budget implications for 2005-06 if, indeed, the university determined that the 2004 season should proceed as scheduled and as the final season of football competition. We incorporated into each of the scenarios consideration of the financial consequences involved in dropping two women's sports (to help maintain continuing title IX compliance) and adding a sport (outdoor track and field) for both men and women to assure the men's program meets the six sport NCAA minimum for Division I and to facilitate a possible entry into the Big West Conference. That conference has outdoor track and field as a core sport for men and women, required of all members.

The three scenarios and their attendant assumptions and explanations are summarized here and described in detail in the attached paper. The difficulty of projecting certain of the income and cost items presents a challenge. The projections have been developed from a conservative frame of reference while recognizing that in some areas of the budget a worst case approach is necessary for planning purposes. The cost categories involved -- keeping in mind that not all of them apply to every scenario -- include the following:

• Loss of conference funds

• Loss of some NCAA funds

• Spartan Foundation fundraising

• Football gate receipts

• Advertising and sponsorships

• Contractual obligations for football coaches

• Contractual obligations for support staff

• Football guarantee funds

• Costs of replacement sports

• Scholarship costs

• Game cancellation expenses

There are also savings involved in some of these categories, as well as in a few other areas and, of course, in the funds realized through the elimination of football.

The bottom lines for the three scenarios, along with explanatory summaries are described below:

Scenario I -- Football Dropped Immediately

This is the most problematic of the three scenarios. Without football, the university automatically discontinues WAC membership and, because of scheduling imperatives, would need to wait at least one year before being able to join another conference. Funding from the WAC would disappear, as would the university's membership in the WAC Academic Alliance, a promising program founded by SJSU. There would be no revenue from gate receipts, advertising and sponsorships, and road game guarantees previously available from football.

A serious decline in private fundraising is projected. A significant cost would be incurred through the need to pay off coaches' contracts and the scholarships of those players who choose to remain at the university to continue their studies. There would be less money available from the NCAA and a requirement for start-up funds for men's track and field (to maintain the NCAA six sport mandate).

The largest outgo of dollars would result from the debt that the programs (and the university) would now have to pay because of scheduled game cancellations. This debt could run to in excess of $3 million. The estimated savings from dropping football prior to the 2004 season would be $4,404,000. However, costs and revenue losses resulting from such an action would be approximately $7,271,000, leaving a total debt of nearly $3 million.

Scenario II -- Continuing Football in 2004

The dramatic reductions displayed in several categories under the first scenario would be matters of somewhat less concern in this situation. However, the announcement that this would be our final season would still produce a negative financial result. Fundraising, gate receipts, and advertising and sponsorships would all see substantial revenue declines, a natural consequence of the final season announcement exacerbated by the probability that the team would be much less competitive. Indeed, the greatest challenge in this scenario would be to field a team, inasmuch as many players could be expected to take advantage of the immediate transfer opportunity now available under NCAA regulations.

Savings would be limited, although the need to cover perhaps 55 instead of 80 scholarships would certainly help. A further decrease in scholarship expenses could also come from the departure of some student athletes from the two women's sports whose cancellation in 2005-06 would have been announced. Again, in this scenario there would be no money to move from athletics to the academic side. And again, there would be a deficit instead, this time totaling $1,724,000.

Scenario III -- 2005-06 as the First Year Without Football

The decision not to attempt an examination of what the athletics budget might look like in 2005-06 if football had been dropped the preceding year is based on the near impossibility of making credible estimates and projections given the size of the 2004-05 deficit. In scenario III, the analysis, though still challenging, grows out of the assumption that football would have been played in the fall of 2004. Some arrangement, probably a loan to be repaid as soon as possible, is presumed to be in place to handle the deficit noted in Scenario II. It is assumed that the two women's sports would now have been dropped, and that the two outdoor track and field programs would now be in operation. Because it has often been suggested as a potential affiliation for San José State University athletics, it is further assumed that, effective this year, the Big West is the athletic program's new conference home. Losses in revenue from conference distributions are still projected, however, because the Big West makes no distributions. Football gate receipts, road game guarantees, and advertising and sponsorship dollars would be gone of course and a large reduction from the 2003 total would still be expected in Spartan Foundation fundraising.

The costs of replacement sports (except for needed expenditures on facilities) and scholarships for student athletes whose sports have been dropped are incorporated in this scenario, as are the savings realized from the two women's sports that would have been terminated. There could be a small amount of savings available, but they would probably be needed for the replacement sports.

In a letter that I wrote to the chair of the Academic Senate, distributed to the senate membership prior to the April 19 meeting, I noted a number of reasons why I thought a decision to leave Division IA (and drop football) at this time was ill-advised. Some of those reasons were set forth again (along with others) in the con argument prepared for the referendum that followed the senate meeting. One of them raised the issue of what discontinuing our IA classification would mean for the athletics budget. It seemed to me that this matter had yet to be carefully and comprehensively reviewed. I still hold with the reasons described in my letter, and in the con argument as well. But given the expectation on the part of proponents of the senate resolution that leaving IA would allow for the delivery of $3-plus million per year in savings to the university for use in academic and student support programs, it seemed important to take a close look at whether such savings would be possible.

The attached analysis concludes that savings of the suggested magnitude (or perhaps any magnitude) almost certainly would not materialize from the change in IA classification and the elimination of football. One may quibble with this or that calculation or projection, but I believe it would be a daunting task indeed to assemble a convincing contrary argument. I am open, even so, to a critique of the analysis offered here, and to discussion of a differing point of view supported by credible data. In the meantime, I would respectfully observe that the best course of action is the appointment, by the president, of a task force comprised of representation from the several groups that are stakeholders in our athletic program. That approach, intended to allow for a full review of all the complex particulars (finances certainly included), has been recommended by the Academic Senate. I support the senate recommendation. So does President Paul Yu.

In addition to the financial analysis, and the explanatory detail that follows, I have attached information on the athletics budgets of members of the Big West Conference. It is of interest that, if one combines the university support and student fee revenue categories for the seven public members of this conference, the average of total revenue they contribute is 72 percent (with a range of 58 to 82 percent). For San José State University, which has the highest figure for university support and the lowest for student fee revenue, the combined total represents 62 percent of budget revenue.

Five of the seven public Big West institutions have higher percentages. If the university dropped football and joined the Big West, the total budget for athletics would be reduced, of course, but it is not at all clear how that reduced budget would be financed.

The figures shown in the attachment provide a sense of what might be necessary for SJSU.

Leaving IA:

Implications for the Athletics Budget

The resolution passed by the senate on April 19, and then endorsed by a faculty referendum, recommended immediate action by the university president. However, there is a question of interpretation as to whether the proposed departure from Division IA, and the attendant termination of football should take place effective for 2004-05 or to be announced now for implementation in 2005-06. In other words, would the 2004 football season need to be cancelled or would the university declare that that season would be the last one for Spartan football? This is a difficult question to answer.

As noted in the summary, the NCAA rule on the rights of student athletes when their sport is eliminated specifies that they may leave without penalty (i.e., without sitting out for a year) at the time the announcement of program termination is made. Thus, if the university announced now an intention to drop football after that 2004 season, many Spartan players, particularly those in the first or second years in the program, would likely leave before next fall. We would be hard-pressed to field a team from those remaining, let alone compete effectively at the IA level. One can argue that the senate resolution did not suggest that football be dropped for the 2004 season, only that the process of withdrawal from Division IA begin immediately. Even so, the result could very well be the same. Scenario I assumes that, in effect, differing interpretations on the point represent a distinction without a difference. It offers a picture of what the athletics budget would look like if the university did not play football in 2004.

Scenario I – Football Dropped Immediately

An estimate of the savings resulting from the termination of football for 2004 would include, obviously, the funds intended for direct expenditure on the sport itself ($3.3 million) and those emanating from the elimination of as many as nine support positions ($716,000). In addition, because SJSU could not remain as a member of the WAC and could not join another conference until 2005-06, at the earliest, $398,000 in conference dues would become available. Total savings would approximate $4,404,000. In each instance, however, there would be offsetting costs and revenue losses. The table below breaks down the costs and losses by category, in rounded numbers. Comments follow the table, and a specific explanation of each item in all three tables is detailed in an attachment.

Table I

Costs and Losses for 2004-05

Category

Estimated Costs/Losses

Conference Distribution-$617, 000

Reduction in NCAA Funds-150,000

Spartan Foundation Funding-825,000

Football Gate Receipts-388,000

Advertising/Scholarships-221,000

Contractual Obligations – Football Coaches-583,000

Contractual Obligations – Support Staff 179,000

Football Guarantees-700,000

Replacement Sport (start-up costs)-60,000

Scholarship Costs-352,000

Game Cancellation Expenses-3,196,000

Total-$7,271,000

Clearly, dropping football for the coming fall would not yield the $3-4 million presumed to be available for transfer to academic and related purposes in accord with the senate resolution. Instead, all of the savings would be needed to compensate for the costs and revenue losses consequent upon cancellation of the 2004 season, and beyond that, the athletic department (and the university) would incur a debt that could approach $3 million. Given that the figures in Table I are estimates and that in the case of the game cancellation expenses category, negotiation could lessen the listed amount, it is possible that the debt could be materially reduced. It is also possible it could increase. The table reflects approximate costs and losses that would need to be anticipated and incorporated into a budget plan. And it would be extremely difficult for even the most optimistic plan to produce any savings at all from dropping football now.

Scenario II – Continuing Football for 2004

If one assumes that a sufficient number of the 80 players could be persuaded to remain in order to have a season this fall, the loss to the athletic budget would be significantly reduced, although there would still be a sizeable debt to deal with. Football would be a cost factor in this scenario, though, with 25 fewer scholarships, approximately $300,000 in savings would be realized from the original $3.3 million outlay. It is anticipated that revenue from fundraising, gate receipts, and advertising and sponsorships would be halved, inasmuch as this would be the final season and one played by a team that would likely struggle to be competitive against IA opponents. Conference and NCAA distributions would be restored, but so would conference dues. We would save some funding from the two women's sports scheduled to be dropped in 2005-06, since some of the student athletes would likely leave to pursue other opportunities. (The same calculation is used here as in the first scenario.) The athletic department would still need to plan an expenditure for track and field, in anticipation of adding the sport for the following year. Table II shows the costs and losses expected from continuing the sport for this year only.

Table II

Category

Estimated Costs/Losses

Football (including 55 scholarships)-$3,000,000

Spartan Foundation Fundraising-$550,000

Gate Receipts-$194,000

Advertising/Sponsorships-$111,000

WAC Dues-$398,000

Track and Field-$60,000

Total-$4,313,000

Assuming half the income initially budgeted for fundraising, gate receipts, and advertising as sponsorships ($855,000), together with conference ($617,000) and NCAA ($150,000) distributions, game guarantees ($700,000) and a savings of $88,000 from decreased scholarship costs in two women's programs, department revenue from these sources is estimated to total $2,410,000. Although, there would again be no savings to transfer for use by the university in other areas, the debt in this scenario would be significantly reduced, to an approximate figure of $1,724,000.

Scenario III – Football Dropped for 2005

The figures depicted below in Table III are projected from the second scenario in which football is to be continued -- with certain limitations -- in the fall of 2004. This table is based further on the assumption that while football -- funded at very modest levels -- would not be played in 2005, outdoor track and field programs for both men and women would be in place and two women's sports would also have been dropped. The absence of football would mean, of course, that there would be neither gate receipts nor game guarantees, and a large drop-off in fundraising dollars would be anticipated. There would continue to be scholarship costs for student athletes (from the three terminated sports) who decide to remain in order to continue their education. For this scenario, it is assumed that the university has now joined the Big West Conference, which makes no distribution but charges only modest dues. Staff positions supporting the football program again, as in Scenario I, would be gone. Finally, it could be expected that the debt produced in Scenario II would need to be paid off in 2005-06 if funds become available.

In Scenario III then, it could be expected that eliminating football ($3.3 million) support positions ($716,000), two women's sports ($493,000), and WAC dues ($398,000) could produce theoretical savings of $4,907,000. Fundraising by the Spartan Foundation might optimistically be expected to yield another $300,000. Against this total ($5,207,000), Table III indicates what offsetting costs and losses could be for 2005-06. The result, essentially, is no savings worthy of mention.

Table III

Category

Estimated Costs/Losses

Conference Distributions-$617,000

NCAA Funds-125,000

Fundraising-800,000

Football Gate Receipts-388,000

Advertising/Sponsorships-221,000

Replacement Sports-250,000

Guarantees-700,000

Scholarships-319,000

Conference Dues-30,000

Holdover Debt-1,724,000

Total-$5,174,000

Given what many would regard as an optimistic set of assumptions – that the university could even find enough players to field a team in 2004, that, if we could not, non-conference road opponents would not seek redress for lost gate revenue, that some material percentage of revenue could be anticipated from fundraising, gate, and advertising and sponsorship sources, that a bare bones outdoor track and field budget would work, and that the Big West Conference would wish to admit a new member with such a considerable measure of uncertainty – the athletic department would have, at the end of the 2005-06 academic year, almost nothing to return to the university to expend on the programs expected under the senate resolution to be beneficiaries of the elimination of football at San José State University (as compared with a two year presumed income for these programs of $6-7 million over a two year period). It would be well to keep in mind here that the above analysis does not incorporate considerations such as the loss of revenue to entities like Spartan Shops (which brought in $140,000 in net revenue from the SJSU football program in 2003), nor the possibility that the Associated Students might reasonably be expected to decrease its contribution to athletics if the sport featuring the largest numbers of student participants and student spectators were to be dropped. The calculations do not cover what almost certainly would be a need to enhance funding for men's and women's outdoor track and field. The difficulty of eventually resolving the remaining gender equity problem (by adding other men's sports, eliminating other women's programs, or some combination of the two) is not dealt with in the analysis, although there would still be a significant imbalance in numbers of participants and scholarships because of the loss of football. Neither does the analysis deal with the potentially damaging impacts of eliminating football on university fundraising for academic purposes. At the very least, one can conclude that implementation of the senate resolution would carry with it a considerable measure of risk and uncertainty at a challenging time for university finances.

With time, care, and expertise, the financial picture presented here could perhaps be improved. But it is also reasonable to suggest, given the available evidence, that dependency on general fund and student fee revenue sources may well increase (rather than diminish) as the athletic program is scaled back. A better understanding of possible financial risks and consequences is one of many reasons to suggest that the best way of planning the future of football in particular and athletics in general at SJSU is to convene the task force recommended by the Academic Senate.

I respectfully suggest that that course of action, rather than an immediate initiation of the process of withdrawal from Division IA, is a better option and one that would be in the best interests of the university. It is an option that would allow a careful assessment of matters not dealt with in detail here, nor in the discussion of the senate resolution. Do we want to pursue a course of action that can seriously jeopardize the progress that we have made with women's sports? As an institution that places a high value on diversity, are we well-advised to take an action that would significantly diminish the number of male African American students on campus? Is it appropriate to proceed to "immediate" (or any other kind of) action without substantial consultation with student government? Would we not want to know exactly how we would plan to finance a Division IAAA program, if that were to be the preferred option? These and other questions deserve the kind of thoughtful and informed consideration that a task force approach can provide. And it would certainly seem wise to hear from the community--from business, government, alumni, donors, and others--on all of these matters. That kind of input, developed through representative participation and thorough study, has thus far not been a feature of the discussion.

Attachment I

Explanation of Budget Costs/Losses Categories

Conference Funds.

If SJSU did not play football in 2004, the university would lose WAC membership immediately. The lost funds show up in Scenarios I and III. The losses are partially offset by savings realized from not paying WAC dues, as noted in the text. Big West dues are significantly lower, but that conference distributes no funds to member institutions.

NCAA Funds.

The current NCAA payout is $309,000. Eliminating football would reduce this amount by more than 50 percent. The addition of men's and women's track and field with a minimum number of scholarships would increase the reduced total by a small increment, which in turn would be adversely affected by the loss of two women's sports. The Big West Conference has a lower payout figure, which is reflected in the table for Scenario III.

Spartan Foundation Fundraising.

The great majority of private support comes from donors with a strong connection to the football program. The athletic department estimates that all but approximately $125,000 from a budgeted figure of $1,265,000 for 2004-05 would be lost. A somewhat higher retained amount is used in the table calculations. It should be noted that most of the private funding is not paid up front, but instead periodically during the course of the year.

Football Gate Receipts/Advertising and Sponsorships.

Obviously, there would be no receipts for Scenarios I and III. The currently anticipated $388,000 for the 2004 season is halved for Scenario II. The same approach is used for advertising and sponsorship revenues. Football generates about 75 percent of total revenue in this category. The loss of $221,000 in Scenario I and III is a reflection of the revenue from advertising and sponsorships attributable to football in 2003, carried forward to 2004 and 2005.

Contractual Obligations for Football Coaches.

The listed figure in Table I represents full payment of the head coach's salary and allowances through his contract period ending April 30, 2006 ($304,300) and assorted obligations to three MPP football assistants, six other assistants, and the director of football operations totaling $278,500 (all to be paid in 2004).

Contractual Obligations for Support Staff.

As many as nine support positions would need to be eliminated under Scenario I, in part to save money, in part because of their responsibility toward the football program. Three are MPP positions, and the other six are in bargaining units.

Football Guarantees.

The loss shown in Table I is a net figure derived from the total dollars guaranteed through road games at Washington and Stanford, minus the savings from travel and other expenses associated with the game. (Total guarantees = $775,000, savings = $75,000). The same figure is used in Table III.

Costs of Replacement Sports.

Six men's sports are required for Division I classification. The loss of football would reduce the San José State University number to five, so it would be necessary to add men's track immediately under Scenario I, to compete at a very modest level in the spring of 2005. The figure used in Table II is an estimate of startup costs for launching the sport in 2005-06. Having both programs in place for that year, as in Scenario III, would likely require the bare minimum outlay reflected in Table III.

Scholarship Costs.

The projections in this category are difficult to make. It is currently anticipated that Spartan football will have 80 scholarship players in 2004-05 (17 seniors, 33 juniors, 16 sophomores, 14 freshmen). The university, in good faith, would need to honor scholarship commitments for all 80. However, it is clear that many would leave, and that the most likely to stay would be seniors and juniors. Three CSU institutions that have dropped football relatively recently (Fullerton, Long Beach, and Northridge) were consulted as to their experience in this area. Northridge, which ended football effective for the 2002-03 academic year, reported that approximately 50 percent of its scholarship student-athletes continued in school after football was dropped. The Fullerton estimate (the institution dropped the sport in the early 1990s) is that about 25 percent continued. At Long Beach, which soon followed Fullerton, personnel changes have resulted in an inability to document the numbers. For purposes of this analysis, a working percentage of 37.5, or 30 student athletes, seems reasonable. Of this total, 26 are estimated to be in- state-scholarships ($11,000 per scholarship) and four on non-resident awards ($22,000 per award). In Scenario III, the working assumption is that there would be 18 football players continuing to attend SJSU (including two nonresidents) and eight more (one nonresident) from the two eliminated women's sports.

Game Cancellation Expenses.

SJSU has three non-conference games scheduled for 2004. If football is dropped, penalties of approximately $1 million would need to be paid. For the WAC conference games, non-participation would mean forfeiture of the WAC distribution at year end which has already been discussed above ($600,000). In addition, for the home games SJSU would be liable financially per the travel contracts already in place negotiated by the visiting schools. That could include the following: charter agreements (average minimum cost at $60,000 for the three home games where teams will fly into San Jose; i.e. Rice, UTEP, and Boise State). Hotel contracts to be broken would be the responsibility of San José State University. (A typical agreement, i.e., one in which we have signed for the Westin Park Central in Dallas provides for a $12,000 cancellation fee should we not appear). Therefore, assuming a $12,000 hotel cancellation fee for each of our 4 conference games, the total would be $48,000. Therefore, charter obligations of $180,000 (average figures) plus hotel costs would be equal to a potential obligation to SJSU of $228,000 for our home games.

For the 4 road games, SJSU could be responsible for ticket revenue loss as a result of non-participation and due to the start of the season being just a few months away. That liability could be as follows: SMU: 15,000 tickets @ $25 or a total of $375,000; Nevada: 17,000 tickets @ $22 or a total of $374,000; Hawaii; 35,000 tickets @ $29 or a total of $1,015,000; Tulsa: 17,000 @ $12 or a total of $204,000. Total potential liability for the road games due to loss revenue of the conference home teams this fall could be $1,968,000. (Source for the ticket numbers was the WAC office, and ticket price numbers reflect SJSU costs for the upcoming season for any sold tickets by SJSU fans.)

Thank You,

Don W. Kassing -SJSU Acting President


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