It Became Clear This Week Just How Reckless The Move To The B1G Was For UMD (UPDATED 2X)

In short the situation is this:

  • The Athletic Department has $21 million that it currently owes to the University. $20 million more is already in the pipeline. $52 million more would probably have to be loaned if the Terps end up having to pay the ACC exit fee
  • The Athletic Department still has $80 million in debt from the Debbie Yow era spending spree.
  • At the same time, the Department will have to rapidly and dramatically increase spending if Maryland is going to be competitive as an Athletic Department in the B1G.
  • Even the University's own estimates concede that there is no hope of the Athletic Department turning a profit until 2017-2018. And of course that assumes baseline spending. And I would imagine it assumes that we don't seriously upgrade our facilities, as the AD has made it clear that he wants to for the football team.

Even assuming that, at some point around 2020 the B1G money starts rolling in, as the AD indicates, that still leaves seven whole years of economic misery, and many more years before the University is paid back in full for it's investment in the AD. The University already seems on the hook for at least $40 million, and most likely much more in direct loans to the AD.

And so something has to give. It seems clear to me that for the move to the B1G to work, the University will have to continue to pump money into the Athletic Department over at least the next seven years, keeping it afloat while the AD slowly returns itself to profitability and is able to pay off the loans.

And of course all of that investment, is investment we are not making in updating our biology labs, our chemistry labs, in keeping the cost of tuition down, in renovating dorm rooms, etc. There is a significant opportunity cost to this. Imagine what a 21 million dollar (likely much, much more before it's all said and done) investment could be put to use achieving on campus.

Even if things work out swimmingly and by 2030 we are competitive in the B1G and the AD has successfully paid off all of the loans it owes, the question you have to ask yourself is will being in the B1G instead of the ACC be worth the investment that the University put in, at the expense of investing in other things? Will being in the B1G as opposed to the ACC really attract that many more students to Maryland in a way that, say, investing in a top notch Physics Department would?

And I think there is also significant risk that the University will not politically be able to continue to justify massive loans to the AD at a time where college tuition is rising rapidly.

In short, I think today it became clear that the move to the B1G was a bold, risky, and reckless move that may work out well for the AD over the long haul, but that is very likely to require a massive investment from the University as a whole in ways that will hamper the University in other respects. And there is also a risk that the University politically won't be able to give the AD what it needs to make the move to the B1G successful and that the move to the B1G will be a disaster for the AD.

At the very least, to me it is abundantly clear that the move to the B1G was not honestly debated in public. Perhaps I just wasn't paying attention, but at no point until yesterday, did I feel as though the true cost to the University was disclosed.

It seems to me the prudent thing to do would have been to at least pay down the debt from the previous administration before undertaking such a bold move. Thereby putting the AD in a position where it wouldn't' need such a massive influx of cash from the University to sustain it.

Or maybe, just maybe, we are a basketball school and a fine public university, and there's nothing wrong with that, and the whole idea of moving to the B1G is a Gatsby-esque folly.

UPDATE: as bschock pointed out in the comments, it's not quite fair to count the 15 million annually, AND the exit fee. The withholding of the 15 million is tied into the exit fee, so if for example we win our lawsuit against the ACC, then we would get the 15 million they've withheld from us back. This improves the situation in terms of how I understood it before slightly.

Although, that being said the basic fact remains, the AD is in serious economic hell, will need a large influx of cash from the University over the next 7 years simply to make ends meet on current baseline spending, and the AD actually intends to go further into debt to strive to be competitive in the B1G. All of this on the vague promise that once the B1G cash starts rolling in we'll finally get our house in order.

UPDATE 2: Interaction with a commenter lead me to realize what the simplest form of my objection is. It is this:

What is now really clear (at least to me--maybe it was clear all along to everyone else) is that the relative funding barrier that existed between the University and the Athletic Department, has been eliminated in the name of moving to the B1G. Thus, it's not really just the Athletic Department that has skin in the game, but the University as a whole. To me, this is very risky because it's not clear to me that the extra revenue we make by joining the B1G will not be offset by the massive investments we need to make in the AD to be successful in the B1G. And the risk is not efficiently distributed because it will not be the risk takers (Loh; Anderson) who end up paying the consequences if the B1G move fails--they will have golden parachutes to a new administrative job as sure as the sun will rise tomorrow--no, it will be students in the form of higher tuition who are underwriting this risk.

People are right to point out that there was risk to staying in the ACC. We can debate which was riskier, but the salient point is that the risk was basically distributed to the athletic department alone.

Final comment: this notion that because the money the University is giving to the AD is from a seperate self-sufficient fund, that it isn't real university money is bunk. First, it's clear that the University isn't finished loaning the AD money. Second, please understand the basic economic principle of "opportunity cost." The university had this cash asset available for investment, and now it doesn't. That has consequences. Period.

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