Texas Tech University budgeted $14.71 million of institutional operating and debt support to the athletics department for the fiscal year that started Sept. 1, a development that could become more common in a looming new age in which major-college sports programs will share revenue with their athletes.
The settlement in the House v. NCAA case that would allow athletics departments to pay players more than $20 million per year received preliminary approval last week from a federal judge. It could go into effect in August 2025 if it receives final approval. The Texas Tech athletics budget this fiscal year is $128.97 million.
Tech athletics director Kirby Hocutt has said Tech will share revenue to the maximum allowable, though he’s not sure if Tech will increase scholarships to equal new roster limits, even for Texas Tech football.
“I think if any unit on this campus was facing a 20-something-percent cut in their revenue,” Tech President Lawrence Schovanec said last week, “we would have to look at how we might respond, and we will in this case, especially when you consider the market value of athletics. It does play a role in our branding, our recruitment, and we can cite that with all kinds of data.”
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As an example, Schovanec said about 146 students from Kansas City enrolled this fall on Tech’s Lubbock campus. He said that number has grown since Tech’s marketing agreement with the Kansas City Chiefs that prominently advertises the Double T during games at Arrowhead Stadium. The seven-year contract began in 2021.
In yearly financial reports to the NCAA maintained by USA TODAY, Tech showed a little more than $5.7 million in direct institutional support for both the 2022 and 2023 fiscal years. It reported direct institutional support between $1 million and $3.5 million every fiscal year from 2005 through 2017 and less than $200,000 each year from 2018 to 2021.
In fiscal year 2021, when its revenue streams were severely impacted by pandemic restrictions, Tech athletics reported about $8.3 million in indirect institutional support and $3.2 million in direct government support. Indirect institutional support is the value of services provided to an institution that an athletics department is not charged for.
Schovanec said he thinks institutional support was higher than $5.7 million in fiscal year 2024, the data from which Tech athletics will report to the NCAA this winter.
“We didn’t go from 5.7 (million) to 14.7 (million) in one year,” he said.
“It’s more than when I became president,” said Schovanec, who took office in August 2016. “At the same time, there’s some numbers in there (this year) that I think could give a misleading impression of the nature of the support. There’s some debt service on facilities, and I’m not just talking about the new (Jones AT&T Stadium) south end zone.
“Also, if you do a comparison to other institutions in this changing environment, you’ll see that institutional support … We’re in the bottom end of that scale.”
Putting Texas Tech’s institutional support into context with peers
For fiscal year 2023, the University of Houston athletics department reported more than $48 million from direct institutional support and student fees and the University of Central Florida athletics department reported more than $36 million through a combination of student fees, direct institutional support and direct government support.
Cincinnati reported more than $35.5 million in direct institutional support and $2.5 million in indirect institutional support. All three schools started competing in the Big 12 last year.
Arizona athletics was subsidized $47.6 million for fiscal 2023 with about $35 million of that in indirect institutional support, according to USA TODAY’s records. Arizona State athletics received about $27.5 million, more than $11 million each via student fees and direct institutional support. ASU athletics did, however, report transferring $6.4 million back to the institution.
Schovanec said the entire budgeted subsidy of $14.71 million for athletics for this fiscal year might not be necessary, depending on revenue-generating initiatives athletics might develop and whether some fundraising from a capital campaign could be used.
Hocutt and Tech deputy AD Jonathan Botros said this summer they’ve been brainstorming new revenue ideas. That could include monetizing Jones AT&T Stadium via concerts, private functions, daily tours, even its parking lots for non-sports events such as barbecue competitions.
Hocutt’s also open to putting corporate logos on playing surfaces and sponsor patches on uniforms. Loosening of restrictions on such advertising has been under discussion at the NCAA level.
Athletics departments can be viewed by some in a bad light for receiving money transfers from the university, but the cash flows both ways. Sports business reporter Kristi Dosh, in a 2017 article for Forbes, noted that at many universities the university and the athletics department split licensing revenue equally, even if sports might more often trigger the buying impulse for branded merchandise.
Schovanec and Hocutt, in an interview last week, noted that athletics pays full cost of its scholarships, about $7 million to $8 million a year, and senior associate athletics director Robert Giovannetti said Tech athletes don’t receive out-of-state tuition waivers.
“We’re paying debt service on every construction project on this campus,” Schovanec said. “And what we don’t get from other units on this campus is sort of the cash flow that’s related to the athletic tuition dollars, so I’m comfortable with where we are.”
Though there was no public announcement, Tech began a university-wide capital campaign four years ago that Schovanec said has already raised $700 million. Athletics is one of four components of the campaign.
“When I say we haven’t definitively decided what our contribution’s going to be in the future,” Schovanec said, “it’s because the campaign would bear upon that. If we get endowments for student scholarships and supports, that would offset maybe what we have to do (in institutional support to athletics).
“And if you didn’t have to pay $6 or $7 million a year in scholarships, that’s six or seven more that you have for operational costs to offset the $20 (million) or whatever million go into revenue sharing.”
What are sources of Texas Tech athletics’ institutional support dollars?
In a 2022 interview, Botros said the money transfers Tech athletics receives do not come from state tax dollars or student tuition. Schovanec said last week that’s accurate.
“We don’t use tuition dollars,” he said, “so where we have gotten this money is from auxiliaries: dormitories, resident housing, food service. And also from interest-bearing accounts that we hold.”
“We’re customers of that,” Hocutt said. “We’re paying room and board to the university for our athletes. We’re paying into food service for the food offerings.”
The Texas Tech University System Board of Regents approved the budget in mid-August.
Asked how the amount of institutional support for athletics is determined each year, Schovanec said, “It’s always kind of balancing what we think we need for athletics to be competitive in this conference and on a national level and also trying to balance the fact that we’re fundamentally an academic institution.
“And so it’s not a hard science. We have input from our regents way into the conversation. It’s very much kind of a group decision on how we do these things. There’s not some formula. We’re just weighing the needs and what we want to do to be as competitive as possible.”
