Michigan State’s athletic department turned a profit in 2011, but all because of what can only be described as a confusing “subsidy” from the university.
The USA Today released its annual report on athletic departments across the country on Tuesday and it stated that Michigan State had total revenues of $84,510,199 while it had total expenditures of $84,004,229. But the subsidy of $3,650,280 put Michigan State over the top.
It came as a surprise to athletic director Mark Hollis.
“Every school does it a little bit differently, $2.9 of our $3.5 (million) is basically a number that the institution comes up with that is very arbitrary and really is not a direct cost,” he said. “It’s things like percentage of payroll, percentage of the president’s salary — they basically take what it cost to run the university and allocate part of that. So it’s not real dollars.”
Um, OK. If that made sense (sorry, I had a hard time in math, let alone accounting), then here is the rest of what Hollis had to say on the issue.
“It’s kind of services on campus,” he continued. “There’s complexities in that whole report. I was as taken back by that number and have had several conversations with Peggy Brown, our business manager about what makes up that, because it’s not a budgeted number. There’s no income, there’s no out-flow of that. Also, we provide the university with a percentage of our revenues that helps offset that.
“My initial reaction, I think in our budget, we have an allocation of funds to the university and then we’re also being charged on the other side, I think for the same thing. It’s something I want to dive into a little bit. It doesn’t impact our finances as far as how an athletic department runs. The majority of that is an arbitrary number that was allocated by the university for accounting purposes.”
I’m not sure exactly what it all means, but as Hollis said, Michigan State’s athletic department was in the black for 2011.
Will that remain the same in 2012? That remains to be seen.
One line item to pay attention to – expenditures on coaching staffs. In 2011, it went up from $25,025,053 to $27,693,650. With the increase in salaries in football, specifically, one wonders what impact that might have on future balance sheets.
But as has been said many times, that’s the cost of doing business.