Fun With Finances: Terps' Athletic Department Debt Exceeds $83 Million, Has Lost Reserve Funds

Ever since Debbie Yow left her gig in College Park, we've been hearing whispers that some funny accounting during her reign left Maryland in a bigger hole than it appears. How big? $83million big, per the WaPo and Testudo Times fave Steve Yanda.

The University of Maryland athletic department has been able to balance its finances at the end of each fiscal year using a unique arrangement, utilizing fundraising revenue kept in independent foundation accounts to pay for expenses.

But the revenue in the accounts - which surged after a number of successful seasons from the revenue-producing football and basketball teams in the early 2000s - could not keep pace with the department's expenses. When the department withdrew roughly $1 million at the end of the fiscal year that ended June 30 to help balance its most recent budget, the reserve funds were exhausted. [...]

At the same time, the athletic department over the past decade made several improvements to facilities used by revenue and non-revenue generating sports. Two of those projects - a new basketball arena and major renovations to the football stadium - largely contribute to the department's debt, which currently exceeds $83 million.

Translation: Maryland kept a rainy day fund from the days when they were raking in tons of dough (ie, 2001), and that money wasn't on the departments' books, but instead the UMCP Foundation's. That rainy day fund has been drawn from and drawn from with nothing being put back in, and now it's toast, leaving the department in the strange position of actually having to spend the same amount (or less than) they make.

Meanwhile, they're still trying to pay off Byrd Stadium renovations and the construction of the Comcast Center, which makes up a pretty hefty amount of debt that they need to get rid of. Apparently, they don't have any extra dough to do it with anymore. Yes, that is a mighty uncomfortable spot to be in.

And just in case there was any doubt as to who, exactly, might've been at fault for this funky system, Randy Eaton comes in with a zinger.

"I can just tell you - and I'm not throwing anybody under the bus and I'm not trying to make a bad comment - but I think there has long in this industry been a philosophy of ‘Get me through the next 10 years and then it's somebody else's problem,' " Eaton said. "Things that we're no longer doing here."

First off, read the entire thing. It's worth it. Yanda gets loads of hate around here, but this is a legitimate piece, it would appear.

Now, down to business: unsurprisingly, they're going to have to start paying off this debt soon, and they say that they expect to do so. $83mil sounds huge, and it's rather sizable, but it isn't some insurmountable, "We're about to go bankrupt" amount. It isn't good and it'll obviously hurt a lot over the next few years, but it can be done so long as things are done smartly and they figure out a way to actually and honestly balance the budget in the next few years.

And I'm guessing that includes cutting sports. I'm more averse to it than most, but it has to be done. The non-revs lost $13mil last year alone, the report says, and more than $64mil over the past five years. A lot of that fat has to be trimmed. The ones that go are going to be the ones that lose the most money, I'd assume, and frankly I have no idea what those are. Water Polo would be high on the list, I would guess, but past that ... golf? I mean, clubs can't be cheap, right? Past football, basketball (both sexes), soccer, lax, probably wrestling, and perhaps baseball, I'm not sure any sport is safe.

This is why Wallace Loh ordered that commission, I suppose. And I'm not expecting just one or two to go - a bunch of the 27 will be biting the dust, because individually a single one does little to account for the debt. Only several combined will make a sizable dent.

You'll notice, though, that non-revs aren't the only ones to blame, and football and basketball - which, apparently, have just stopped making money at the same rate they used to - need to start pulling their share of the weight, too. The big things in both of those can't be helped - Comcast Center is built and Byrd Stadium renovations can't be undone - but revenues in those sports can be helped. They slumped when the teams started to lose (no surprise) so winning is a sure-fire way to at least start to get them back on track. As unintuitive as it might seem, pulling back on things like recruiting budgets and coaching salaries - which they obviously have not done - would do more harm than good.

Really, there's no surprise that this hit after an eight or nine year period where both of Maryland's revenue sports started to decline. Think about it: two years ago football won 2 games, and last season basketball missed the NIT. When the big sports fail, the department fails. I'm not an economist, but I'm guessing things will get better when Maryland returns to at least regional prominence in those two, as they appear to be doing.

And yes, it is terribly ironic that one of Debbie Yow's biggest accomplishments at Maryland was her "balanced budget." I'm not sure I ever believed it, but for all the bleating I heard about it, I certainly expected a lot better than $80mil in the hole.