How will Lovie Smith's $21 million price tag be received in budget-challenged state?

How will Lovie Smith's $21 million price tag be received in budget-challenged state?

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CHAMPAIGN — The palpable buzz created by the hire of former NFL coach Lovie Smith as the next Illinois football coach didn't come cheap.

Smith's six-year, $21 million deal — plus possible bonuses — follows more than $5 million spent by the athletic program on legal investigations and coaching buyouts just since last spring.

The tally includes:

— Almost $1.35 million to buy out the contracts of former head coach Bill Cubit ($985,000 left on $1.2 million salary, negotiated in November) and his son, offensive coordinator Ryan Cubit ($361,000 for remainder of his contract, offered in December).

— $1.36 million for two independent investigations into Illini athletics conducted by Chicago law firms — $651,671 for Pugh, Jones & Johnson for a probe into accusations of abuse by women's basketball players; and $633,703 for Franczek Radelet's months-long investigation into allegations of medical mistreatment by football coaches.

— A $2.5 million buyout of former athletic director Mike Thomas, who was fired in mid-November after the final report came out, though he was cleared of wrongdoing.

New athletic director Josh Whitman also said he will give Smith the resources to bring in assistant coaches near the top of the Big Ten, though he didn't specify an amount.

All of the money comes from the Division of Intercollegiate Athletics, which has reaped the benefit of lucrative Big Ten television contracts in recent years. Overall athletic revenue soared from $47.9 million in 2005 to $83.7 million last year.

But how will this play in a state with a huge deficit and no working budget? Or on a campus that cut about the same amount as Smith's new contract from its budget this year — and likely faces more of the same? Or with UI students waiting to hear if they'll have to repay part of their state-funded financial aid this year?

"We obviously had those considerations," UI President Tim Killeen said Monday, acknowledging that it's new territory for the UI athletic program. "This is a step for us, in the financial aspect."

He said UI officials considered compensation norms for Big Ten coaches, the track record of other NFL coaches at the collegiate level, and anticipated earnings from the Big Ten television contract — as well as the positive impact of Smith's hiring on season ticket sales.

In one day, as of 5 p.m. Monday, more than 1,000 new season tickets had been sold, according to Jason Heggemeyer. associate athletic director in charge of ticket sales.

Killeen said he talked with UI trustees in detail about the proposed compensation package, and shared an in-depth analysis prepared by Whitman with the board's Executive Committee and others.

"I have to say that our JD/AD has done his homework on issues related to coaching compensation, normatives, comparatives and what we might expect," he said, referring to Whitman's law degree. "The questions had been addressed."

Board Chairman Edward McMillan said Monday the university is fortunate that the Tampa Bay Buccaneers are still paying Smith a buyout from his contract there. Illinois will pay him $2 million each of the next two years, and his salary will gradually rise to $5 million in each the final two years of his contract.

"I'm comfortable," Killeen said. "I do recognize that this is a step. It's a step towards the eminence not just in academics — we are going to nurture our academic pre-eminence above all else — but also in the athletic arena."

Killeen and others also argued the money comes from athletics — ticket sales, donations, Big Ten revenue, etc. — a separate revenue stream from the state funding and tuition revenue that pay for academic programs.

"These funds are not intermingled with the support for the academic programs and the operational programs or the MAP program," he said. "We'll make sure our students are not negatively affected in any way. We expect this to add value" to the university as a whole, he added.

"This doesn't come out of tuition. It doesn't come out of state funding. It's strictly out of athletic funds," McMillan said.

That's not quite the whole story, one UI professor argued.

While praising the Lovie Smith hire as a "brilliant move" by Whitman, media and cinema studies Professor Jay Rosenstein noted that students pay millions in fees to help support athletic facilities, including a sizable chunk of the State Farm Center renovation.

"If the athletic department has so much revenue that it can spend $5 million on buyouts and legal fees," he said, "and on top of that they have $21 million plus whatever bonuses Lovie Smith is going to get ... then I think it's time for them to move out of mom and dad's basement and finally make it on their own.

"Because the fact is that the athletic department is not self-supporting," he said. "It costs the campus money and it costs students money. Students are the group that has the least amount of money. Let's give the students a break."

Illinois Student Senate President Mitch Dickey reacted to the news of Smith's hiring first as a fan: "I haven't been this excited about Illinois football probably at any other point in my time on campus."

But Dickey, who has led the campaign to force lawmakers to fund the Monetary Award Program grants for needy students, acknowledged the size of the football contract "looks bad" in the current budget climate.

He's reassured by the fact that Big Ten revenue is projected to increase substantially next year. The UI's reports to the NCAA don't break down Big Ten Network-related revenue, but the line item for "NCAA/Conference Distributions," which includes shares of conference television agreements, jumped from $4.5 million in 2005 to $29.3 million last year.

"Half of me says we really should be looking into how athletics can best be supporting our academic mission," Dickey said, noting that the University of Texas athletics actually funnels money back into academic programs.

"It's an entertainment industry," Dickey said. "You have to pay market price for the best of the best, to attract the kind of attention and therefore the donations and the revenue streams that would make it possible for those things to happen."

He said Illinois made some mistakes this past year, including offering Cubit a two-year deal as head coach before hiring a permanent athletic director who had his own plan.

"Most people agree with that," he said. "We'll learn from our mistakes, even though they are immensely costly."

Dickey said Whitman and university leaders "understand what they need to do and how to deal with it."

McMillan said he understands why someone would question the size of Smith's contract at a time "when we're financially challenged." But the university is recognized both for its academic prowess and its athletics, he said, "and people place high importance on it, particularly in football and basketball."

Though the UI has enjoyed "outstanding" success in other sports, "at the end of the day football is especially important to the total revenue stream for the athletic department."

As for the costs incurred this past year, McMillan said, "fortunately we have an athletic director who has a Bronze Tablet in finance. He's also a lawyer, a very bright young man. I'm very impressed with his intelligence, his drive, his personal sensitivity."

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CarlWinslow wrote on March 08, 2016 at 7:03 am

When you don't have to worry about pay increases for most of your employees you feel more obliged to set fire to large piles of money--moreso than than usual, at least

Aye_Yi_Yi wrote on March 08, 2016 at 7:03 am

As a UIUC employee making about 30k/yr, waiting to see if I will have a job after July during a time when wage increases have been frozen in my department, this decision is insulting.  I am angry with the State and the University for forgetting about us. With very little hope on the horizon and morale as low as I've seen it among staff, to flash this news in front of us is sickening.  

 

kiel wrote on March 08, 2016 at 7:03 am

Will UIUC start spreading revenue from the AD around campus, like the University of Alabama and other SEC schools have started to do, and use it to attract new faculty and support students? Or will any revenue just stay in the AD, as has been the model here? The flagship land-grant University of Illinois is BLEEDING faculty -- faculty who bring in hundreds of millions in grant money, teach huge undergrad courses, and train future world-class researchers -- with no plan or means to replace them. The damage is likely already permanent; it's very sad.

But hey, football, so yay. Go team.

justthefacts wrote on March 08, 2016 at 9:03 am

You have to have revenue to share revenue. There only 2 revenue generating sports and football is the largest by a wide margin. A half full Memorial Stadium does not generate excess revenue. In order to fill those empty seats the team must be competitve and fun to watch.  Good coaches have good teams and good coaches cost a lot of money. In this case, you have to spend money to make money.

sanjuan wrote on March 08, 2016 at 11:03 am

I'd like to introduce you to the word of the day, Grumps:

 

Compassion

andrewscheinman wrote on March 08, 2016 at 11:03 am

John Rogers, the preeminent UIUC faculty member in advanced materials for electronics and biological applications, just left UIUC for Northwestern, which basically built him a building for his research effort.

Maybe UIUC could use some of this football money to create "football scholarships" for academics.  You know, bring in people who are incredible teachers/researchers and have them do their thing in exchange for appearing at football games, you know, maybe we coud use them as mascots, dress them up in their mortarboards and hoods (the academic kind) and have them dance around at the games.  And in exchange give them some petty change out of the football fund, maybe a couple mil each ...

Of course, we could go even more unconventional and PAY the poor kids who play in the games and get life-destroying concussions as a result.  Yeah, what's the chance of THAT happening?

justthefacts wrote on March 08, 2016 at 1:03 pm

Northwestern has a very competitive football team. The coach for the Northwestern football team is paid approximately $2.5m, not counting a multimillion loan made to the coach by Northwestern. Perhaps having a good football team results in increased donar contributions to the university. Perhaps Northwestern benefits in several ways from having a competitive football team. Northwestern is a private school. They can spend their money as they see fit. It appears they have determined that there is value, benefits over expenses, in having a good football team.

Having an embarassingly bad football team certainly has no benefit to any university. There are really only 2 choices; either have revenue sports which are entertaining and competitive or get out of the revenue sports business entirely. The University of Chicago made this decision decades ago and it has worked well for them. Would that work for the U of I?

ddws wrote on March 08, 2016 at 11:03 am

According to the Fighting Illini Annual Report for 2014 http://annualreport.fightingillini.com/2013-14/#financial Athletics received about $3.7 million (or 5% of its budget) from student fees and campus support.  Illinois Athletics is not self-supporting.  See also http://www.usatoday.com/story/sports/college/2015/05/26/ncaa-athletic-fi... Only 24 Div I athletic programs are self-supporting, and Illinois is not one of them.

C in Champaign wrote on March 08, 2016 at 1:03 pm

This is true. Illinois students pay fees of roughly $3,000 per year, which is spread accross some seventeen areas that include things such as General Fees that support acedemic facility improvements, Service fees, Krannert, Illini Media (Daily Illini & WPGU) Cultural programming across campus, Health Services/Insurance, Library fees, Transpoprtation fees, etc...  ( https://registrar.illinois.edu/fee-info ) And yes, part of that fee goes to support the renovation of The Assemby Hall. A building that hosts far more than just Basketball games. (And to be clear, I think they spent far too much on the renovation, but that is another debate.)

In the grand scheme, using the $3.7 million figure from above, dividing across the 43,600 students that attended the University in 2014, you will will find that about $85 per student was transferred to the Athletic Department. Or if you prefer, only dividing among 32,579 undergrads, about $113 each.

At the end of it all, Lovie Smith's salary won't be paid by student fees. His salary is an invesment by Department that, if it pays off, will generate far more ticket sales revenue than it cost to pay him. Then maybe, you can get to the department putting some back into the system. Maybe.

Don Mega wrote on March 08, 2016 at 1:03 pm

.

Lostinspace wrote on March 08, 2016 at 3:03 pm

I'm sure that some of us would be comfortable with this if the administration were to assure us that, mandatory student fees aside, all athletic expenses (except for those programs offering courses for the general student) are covered by the Athletic Department; these expenses would include salaries, benefits, perks, facilities maintenance, security, travel, scholarships, supplementary instructional costs, etc.

If this is the case, it would be a simple matter to tell us so.

If not, let us know what *is* the case.

Given what is happening around the country -- academic quality being sacrificed to subsidize athletics -- the absence of clear information feeds scepticism.

Sid Saltfork wrote on March 08, 2016 at 4:03 pm

This just gives Rauner more propaganda in his withholding of higher education funding.  He has demanded cuts in college, and university funding across the state due to high administrative salaries.  Up until now, the cuts have been on the non-academic employees across the state. 

The U of I just does not get it.  Make administrative reforms before hiring an expensive football coach.  It makes no difference who pays him.  The public perception favors Rauner's demands.

BruckJr wrote on March 08, 2016 at 8:03 pm

"We'll learn from our mistakes," said Dickey.  LOL. From the mouths of babes.

Champ Townie wrote on March 09, 2016 at 11:03 am

 

Prior comments correctly state that the Athletic Department is not fully self supporting since they get substantial funds from student fees.  Considering the current financial crisis, not only should the Athletic Department become fully self supporting, they should also contribute to the academic mission of the campus instead of spending so much money for themselves.  Is spending so much money on non-revenue sports that no one attends and giving an ex-basketball player a salary of $200,000 (more than almost all faculty) to be a PR rep a higher priority than keeping top faculty, maintaining buildings or keep class sizes reasonable for students?

yates wrote on March 09, 2016 at 11:03 am

Why are some making this a taxpayer vs union issue? The university just placed a large wad of cash on a roulette table. The team will have to be awsome good to fill up enough seats to recoup all that. It's done and all that it left is to hope we win and win often.

Sid Saltfork wrote on March 09, 2016 at 1:03 pm

yates, I never thought that I would say this.  Good comment. 

I think that you can trace the "taxpayer vs. union" issue back in the comments to see that it was the regular troll.  Yeah, the one or two sentence hater, Grumpy.  It is his only theme.

cuworker wrote on March 09, 2016 at 1:03 pm

The issue proposed is an imaginary issue, suggested purely for the purpose of provoking a response from people who do not understand how the university's Division of Intercollegiate Athletics operates.

Contrary to Professor Rosenstein's implication, neither students nor taxpayers contribute millions of dollars toward a budget that goes to pay coaching salaries.  The per-full-time-student Service Fee of $288 per semester goes to support the student union building, and several recreation centers on campus that students can use at no charge, as well as a portion that goes to support State Farm Center, which hosts many events other than basketball games.  It has been the site of many concerts, circuses,  plays, and other performances over the years, as well as being the only building on campus large enough to host an indoor commencement cermony.  The building has purposes far beyond just athletics. Less than 1% of the DIA budget comes from the taxpayers or the students

Football is a net generator of revenue for the university, not as Professor Rosenstein intimated, a cost to the university.  Budget-wise, according to businessofcollegesports.com, the Illinois football program took in a little over $29 million in fiscal year 2014,and spent about $16.5 million, for a profit of $12.7 million.  What happens to those profits?  Well, the women's basketball team has many of the same expenses as the men's team, except their games are not nearly as well attended, so the women's basketball program loses about $2.5 million per year.  By federal law, the university cannot have a men's basketball team without also having a women's team with similar resources. 

The profits also go to support many other sports such as golf, wrestling, baseball, and tennis, where Illinois is one of the top programs in the country, but the sports do not generate the revenue necessary for them to be self-supporting.

So if the football program made a $12 million profit, we seem to be doing OK--why are we spending more money to get a better coach? One reason is that in the last few years, about 1/3 of the seats in Memorial Stadium are empty every game.

That is about $1.5 million dollars per home game ($9,000,000 per year) the university is losing by not putting a competitive product on the field. (20,000 empty seats times average $75/ticket).

If Beckman or Cubit had been successful, their salary probably would have grown to numbers similar to what Smith is being paid, but let's say Cubit didn't get any raises at all. He would have made about $12,000,000 over that six-year period, about $9,000,000 less than Smith's deal, or $1.5 million per year. If we can put a product on the field that even sells 1/3 of those empty seats, the university is $1.5 million dollars per year ahead, after accounting for Smith's salary difference over Cubit's.

By all reports, the DIA Ticket Office has already sold enough NEW season tickets in the two days since Smith's hiring to fill 10% of the empty seats from last year. The Horsehoe (south endzone) seats are already sold out to season ticket buyers.

And that is just ticket sales--what about the effect of a winning football program on donations?  The university is a world-class educational and research institution, but the fact is that for every donor who gives to build a new Engineering building or Ag Lab, there are a thousand alums whose only connection with the university these days is Fighting Illini sports, and as the teams' success go, so go the donation levels. There is an $1.5 million endowment from the retired president of Busey Bank that can only be used toward a head football coach salary. Increased donations also cause money to flow into the I-Fund, which the the university's primary way of funding the scholarships given to athletes who come to the university.  The football program alone has over 50 students attending on an out-of-state tuition basis (about $50,000 per year). The donation-driven I-Fund covers as many of these costs as donations will allow, to minimize the impact these institutional scholarships have on the university's finances. When the team is up, so are donations.

A coach of Smith's caliber cannot be hired for $2 million per year.  For that kind of money you get a little-known guy from a small college like Toledo or Western Michigan.  If Smith did not have $ millions coming from the Tampa Bay Buccaneers severance package for the next two years, we probably could not have afforded him.  Smith was already being considered for hire by the NY Giants NFL team.

The Smith salary package is a good deal--for Smith, as it should be, but also for Illinois. Win-win.

 

 

 

 

tuscola2 wrote on March 10, 2016 at 9:03 pm

Hopefully the IL Legislators will cut he U of IL budget by $21M and the $4M included to hire footbal staff. If they can go raise money for a non essential activity the admins should be incharge of raising to self fund the University. The costs estimates used above are only a fraction of the total, health care, travel, equipment, manintenance of sports facilities are just a few of the costs. IL is broke, yet these well educated elitist are spending money like it is somebody else's. Oh wait it is. Nevermind.

tuscola2 wrote on March 10, 2016 at 9:03 pm

Hopefully the IL Legislators will cut he U of IL budget by $21M and the $4M included to hire footbal staff. If they can go raise money for a non essential activity the admins should be incharge of raising to self fund the University. The costs estimates used above are only a fraction of the total, health care, travel, equipment, manintenance of sports facilities are just a few of the costs. IL is broke, yet these well educated elitist are spending money like it is somebody else's. Oh wait it is. Nevermind.