UNIVERSITY PARK, Pa. -- David M. Joyner, director of Intercollegiate Athletics (ICA), provided a status report today (Sept. 19), including a review of the ICA organizational structure, sports sponsorship and a prospective five-year financial plan.
According to a report to the Board of Trustees Committee on Finance, Business and Capital Planning, Joyner indicated that ICA currently supports 810 student-athletes across 31 varsity sports (16 men’s and 15 women’s), 514 of which receive some type of grant-in-aid/scholarship support. Additionally, ICA also oversees a broad-based student-centric recreation program, which includes 68 club sports, a robust intramural program, campus fitness facilities and participation by some Commonwealth Campuses in the Penn State University Athletic Conference (PSUAC).
Joyner and Associate Athletic Director for Finance Rick Kaluza reported that, as of June 30, the ICA cash reserve balance remained positive, despite significant budgetary pressures and challenges, which led to a $6.15 million operating loss in the most recent fiscal year. The loss was attributable to the significant current financial challenges to the football program, which impacted both revenues and expenses across the ICA budget. Overall, revenues were negatively impacted by loss of bowl revenue as well as worse-than-projected football attendance during the 2012 season and decreased gift support to the Nittany Lion Club when compared to the prior year. Expenses experienced upward pressure including one-time severance payments to members of the previous coaching staff. Another component of the operating loss was the introduction of the two varsity hockey programs and the associated costs needed to ramp-up the programs to prepare for Big Ten Conference play in fiscal year 2013-14.
A prospective five-year plan highlighting the near-term financial challenges ICA will face in the coming years also was presented. The plan shows a funding gap over the next four fiscal years before the cash reserve rebounds to a positive $2.79 million at the conclusion of fiscal year 2017-18. The projected negative pressure on the reserve balance was attributed to several factors including the absence of conference bowl distributions through fiscal year 2016-17, flat projections for football attendance and gift support to the Nittany Lion Club and no football ticket price increases during the planning period. On the expense side, increases in debt service were highlighted, including $60 million of internal debt service required to cover the NCAA fine and $10 million of internal debt service to fund the new Beaver Stadium HD scoreboards in fiscal year 2014-15.
To temporarily fund these negative projections, Joe Doncsecz, associate vice president for finance and corporate controller, indicated that the University is exploring a $30 million external borrowing program which will help support ICA’s planned reserve deficits and some critical capital needs that may emerge during the planning period. Approximately $5 million to $10 million of this program could be used to fund operating needs over the next three years, while the remaining $20 million to $25 million would be earmarked to address short-term capital needs for strategic projects of a critical nature that might otherwise be shelved in light of ICA’s challenges. Specific projects currently are being evaluated for inclusion in the program. All debt service related to the special borrowing program would be repaid by future ICA revenues and will not be funded by taxpayer funds, student tuition or by gifts unrelated to ICA.
Joyner acknowledged that the next five years will be a critical period for ICA. While temporary financial support is needed in the near term, financial prospects brighten significantly with the restoration of bowl revenues and the potential of additional conference television revenues toward the end of the planning period.