MSU STRATEGIC INVESTMENT PROPOSAL FOR INSTITUTIONAL PRIORITIES
PROPOSAL OVERVIEW
TitleStabilization of Base Operation Funding for Athletics Request Date2012-11-29
DepartmentAthletics Emailpfields@msubobcats.com
RequestorPeter Fields Phone406-994-4226
INSTITUTIONAL BENEFIT
Campuses Bozeman Billings Havre Great Falls FSTS Extension MAES
Cross Depts  
TIMEFRAME
Proposed Dates Start: Immediately End:  
PROPOSAL SUMMARY
MSU Athletics proposes the permanent increase in base funding for medical services, insurance and scholarships for student-athletes. Insurance rates, medical fees and scholarship expenses have risen dramatically in recent years and are uncontrollable cost centers. Current funding levels are inadequate for Athletics to maintain reasonable operating levels.

This proposal establishes a funding base that will allow Athletics to solidify their financial position. The increase in funding is in conjunction with a strategy to grow additional revenues to cover other operating categories that are vital to Athletics’ future.
STRATEGIC ALIGNMENT
This proposal addresses the strategic objective of "Stewardship" for Montana State. MSU Athletics takes great pride in its responsibility to represent the MSU Campus and Bozeman communities with the highest form of citizenship and pride. Athletics is one of the most visible extensions of MSU to outside constituents and represents MSU at events across the nation and in televised programs broadcast across the country. It is the role of the Athletic Department to display the highest degree of class and sportsmanship possible to fully embody the MSU culture. It is also Athletics’ responsibility to operate openly, wisely and ensure public funds are used efficiently.

This proposal assigns funds to expense categories that display all of the aforementioned responsibilities of MSU Athletics. By providing necessary medical services and insurance coverage to our student-athletes, the message is sent that we care about our students and appreciate their hard work, dedication and we will do the right thing should they encounter an injury while representing MSU. The increase in scholarship funding will cover expenses associated with obtaining a college education such as room and board, fees and books. Medical hardship scholarships and Post-eligibility scholarships would also benefit from the increased funding. Without scholarship assistance some student-athletes would not have the opportunity to attend a university. With a 2011-2012 cumulative GPA of 3.17 and a graduation rate of 77%, student-athletes are personifying MSU’s proud academic culture extremely well.

In addition, these increases in funding will allow Athletics to concentrate new revenue to other cost centers such as recruiting, facility management, team travel, equipment, student employees and future project planning.
COST AND REQUIREMENTS
Funding Type: One-Time Only Funding Base (3-yr Recurring) Funding
  FY13 FY14 FY15 Base ($) OTO Startup ($)   FTE;
Salaries              
Benefits              
Materials & Supplies              
Travel              
Contracted Services              
Capital              
Other Operations       576000       
TOTAL 576000     
Please comment, if necessary, regarding cost and requirements.

Funding stabilization for the expense categories of Medical Services, Medical Insurance Premiums and Scholarship Funding:

Medical Services for Student-Athletes: $252,000 per year

Medical Insurance Premiums for Student-Athletes: $127,000 per year

Scholarships for Student-Athletes: $197,000 per year

These increases will partner with Athletics’ revenue growth plan to balance critical cost categories and correct funding deficiencies.

PROPOSAL SCOPE
Describe the Proposal

Athletics proposes a partnership budget plan to rectify the financial situation currently faced.  Revenue streams will be grown through Athletics’ efforts to cover the increase in controllable operating expenditures while this proposal will grant funding to cover uncontrollable cost centers.

This proposal would increase the base funding for medical services, insurance premiums and scholarship funding.   These have been identified as uncontrollable cost centers for Athletics.  Insurance rates, medical fees and scholarship expenses have risen dramatically in recent years.  Current funding levels are inadequate for Athletics to maintain current operating levels.

A new funding base will allow Athletics to solidify their financial position.  This partnered vision for Athletics’ financial stability will allow current levels of success to be maintained and future success to be greatly aided. 

If proper funding levels are not reached, current operational standards are unsustainable.  A drastic shift in department policy would be enacted that would reduce overall budgetary obligations severely and reverse progress made in recent years.

Athletics’ Summary:   MSU Athletics is currently in the midst of unprecedented success.  Student-Athletes recorded a cumulative GPA of 3.17 compared to the overall University GPA of 2.96 in the 2011-2012 academic year.  That success marks 21 consecutive semesters of a cumulative GPA of over 3.0.  In addition, the graduation rate for Student-Athletes was at 77% compared to the University rate of 51%.  In 2011-2012, MSU Athletics ranked 1st in the Big Sky in Academic Progress Rate and had 46 student-athletes achieve all A’s for the spring semester.

In the competition realm, MSU Athletics has reached new heights of success.  In 2011-2012, MSU won the prestigious Big Sky Conference President’s cup for the 2nd time in school history.  MSU Athletics also achieved awards for Athletic Director of the Year, FCS Football Coach of the Year, FCS Assistant Coach of the Year, and saw 37 athletes honored for All-Conference recognition.  In the past 10 years, student-athletes have brought 74 individual conference championships and 13 team conference championships home including back-to-back-to-back football conference championships.  All of these successes come with a price.

Current funding levels for Athletics are unsustainable for the operations of today.  Estimated levels of funding for optimum efficiency are short by approximately $1 million.  There are a multitude of factors that have contributed to this uphill path, most are market induced.  For example, salary markets for coaches have escalated very quickly with FY12 experiencing a jump of nearly $100k due to base pay increases to retain employees and earned incentive bonuses.  Medical services and insurance premiums have sky-rocketed from $26K in FY08 to a cost of $225K in FY12.  Scholarship expenditures increased $196K in FY12.  Travel expenditures continue to rise with the cost of fuel and the reality that Bozeman is a difficult city to travel from for competition and recruiting.

A budget oversight committee recently reviewed Athletics’ operations and performed a peer evaluation with nine other institutions.  The study revealed that Athletics is operating near maximum efficiency, but still falling behind.  It showcased that Athletics ranks near the top in revenue generation, yet has kept key expense categories such as coaching salaries, marketing, and team travel near the middle to bottom of the peer group.  Those expenses are now starting to catch-up to the successes being achieved.  Current budget levels are unrealistic to meet the needs of the teams and programs.  Critical budgetary items such as recruiting, team travel, equipment and facilities have been cut or reduced to levels that are insufficient.

In addition, it was revealed that general funding support for Athletics has actually decreased each of the past 5 years in relation to MSU’s total general fund.  In FY09, Athletics represented 4.54% of the total MSU general fund.  In FY13, that % has decreased to 3.91%.  Expenses have been rising as funding has been decreasing. 

Partnership Budget Plan:   Athletics will grow revenues by approximately $440,000 through increased ticket prices, Bobcat Club membership fees and skybox suite fees.  These increases will represent a ceiling mark for pricing as MSU Athletics already represented the 2nd highest peer evaluated institution in all of those categories.  Simply put, Athletics is maxing out all pricing levels.  The additional revenues will be distributed to cover cost centers involving equipment, team travel, recruiting, coaching salaries, student-hourlies and game-day services.

This proposal will grant funding to cover uncontrollable cost centers involving medical services, insurance and scholarship expenditures.  Reasoning for the selected cost centers follows:

Medical Services/Insurance:  All MSU students are required to have a primary insurance before enrolling.  Some students stay with their parents’ insurance, others switch to MSU’s health insurance policy offered on campus.  Historically, MSU Athletics has purchased the MSU primary insurance policy for student-athletes that do not have the financial means or that are not covered under their parents’ policy. 

However, the MSU offered policy does not cover athletic injuries and some private primary policies do not cover all athletic injuries.  Athletics must have a secondary insurance policy in place to capture additional or uncovered medical costs resulting from athletic participation.  There is an NCAA insurance policy in place for catastrophic injuries, but that does not activate until expenses exceed $80,000.  It has been the responsibility of MSU Athletics to insure the gap between the primary insurances and the NCAA policy, approximate coverage of $7,500-$80,000.

In the past, MSU had covered all insurance expenses through UPBAC assistance.  However, that assistance has stayed at a consistent level and medical insurance premiums have grown astronomically given the risk of athletics.  In FY08, athletics self-funded $8,063 in additional medical insurance costs after the University assistance.  In FY13, the estimated cost of self-funded insurance expense is set to balloon to $225,000.

The nature of athletics has caused the insurance agencies to push more of the burden of risk onto the policy holders each year, causing premiums to dramatically increase.  This increase in premiums has led many student-athletes to not have primary insurance coverage because of the cost.  This is why MSU Athletics has had to purchase primary plans.  In addition, general medical procedures, rehabilitation and supplies all increase approximately 12% each year.

Medical expenses and insurance coverage have also become heated topics within the student-athlete recruiting world.  Many students and parents are examining teams and opportunities based upon how institutions protect the student-athletes and take care of their health needs.  When a school offers the assurance that a student-athlete will be covered by insurance for any athletic related injury incurred by representing the school then that is a major advantage to competitiveness.

Scholarship Expenditures:  In general, scholarship expenses increase 4-5% per year for room, board, books and fees.  In FY12 alone, Athletics saw an increase in cash expenditures for student-athlete scholarships of nearly $155,000.  In addition, FY12 saw an increase of $42,000 in post-eligibility scholarship and medical hardship scholarship expenses.

Many student-athletes rely on athletic scholarships as their sole source of obtaining a secondary education.  Without the opportunity to compete for MSU Athletics, a student-athlete may not have the financial means to attend college.  Athletics allow these student-athletes to realize their competitive dreams while also fulfilling their academic aspirations.

Scholarships also represent the most crucial recruiting tool for coaches and programs.  Without the ability to offer competitive scholarships, MSU teams have nearly no chance of bringing in top-level student-athletes.  Coaches use scholarships to attract high-level academic and competitive performers to represent MSU across the nation at events.  It is vital to properly fund this cost center so that our programs have a chance to succeed.

 
Describe the broader impacts and benefits of this proposal

Student-Athlete:  Increased funding will allow Athletics to ensure student-athletes the best possible experience with MSU.  Specifically with this proposal, they will be properly insured for any competition or training injury sustained while representing MSU.  With proper medical coverage, injuries can receive expert attention which will reduce long term effects of the injury and increase recovery times. 

More student-athletes will also be assured of receiving proper financial aid to attend MSU.  Higher caliber of students will be attracted to MSU and our student population will benefit from the influx of talent.  These factors may assist with graduation and retention rates as students may feel more valued by the institution.  If a student-athlete feels appreciated by the institution, it stands to reason they will feel more involved and part of the MSU community.   

Industry Trends:  From a competitive and recruiting standpoint, the chosen expense categories are becoming mandatory requirements when student-athletes are choosing their collegiate futures.  Parents are pushing their children to institutions that promise to take care of the student-athlete should an injury occur.  Without the opportunity to reassure the parents and the athlete that MSU will stand by them, coaches and teams will suffer a major disadvantage in recruiting efforts. 

Scholarships are another cost center that is mandatory to attract the best talent to MSU in the classroom and the field.  The top athletes simply will not consider MSU without educational expenses covered.  This will in turn affect performances, success and ultimately revenue dollars that stream in from subsequent success.

Budgetary Impact:  This proposal, partnered with Athletics’ revenue growth plan, will stabilize the Athletic budget and set a direction for the future that will greatly enhance the opportunities for success.  By adjusting these funding sources, MSU athletics can balance other expense categories and once again ensure that the resources granted are being used with the highest efficiency.  This proposal is not designed to expand the Athletic budget, but to stabilize it and return it to a proper balance.

 
ADDITIONAL INFORMATION
Implementation Plan

Implementation will be immediate. Base funding request is for FY13.

 
Assessment Plan

MSU Athletics receives constant assessment from competitive and academic standpoints.  The public and community expects Athletics to be successful on and off the field of play and to represent MSU with the highest level of class.  The student-athletes are some of the most recognizable individuals from the University and their actions and performances are directly tied to public perception.  The performance of our student-athletes in the classroom and in competition has not disappointed as described earlier.

Due to these levels of success on and off the field, Athletics is viewed through a very critical lens.  In order to succeed at this rate and level, resources have to be assigned and monitored very carefully.  It is the responsibility of the athletic department leadership to ensure that the resources granted are applied appropriately.  These allocations are monitored very closely by department staff and University personnel.

The effects of this funding plan will be monitored by the Athletics Business Office and the Budget Oversight Committee for Athletics.  In conjunction with the revenue growth model proposed by Athletics, the additional funding provided from this proposal should enable Athletics to have a sustainable budget model for the foreseeable future.  The main goal of budget sustainability would be evaluated constantly and no shortfalls should be created.  By maintaining a sustainable budget, Athletics will have succeeded in meeting the funding plan.

 
If assessed objectives are not met in the timeframe outlined what is the plan to sunset this proposal?

Should the assessed objectives fail and Athletics is denied the additional operational funding, a budget reduction process will take place.  Athletics has created an operation reduction plan in the event that necessary funding levels cannot be met.  This plan will include major reductions to scholarships, personnel, travel expenditures, equipment expenditures, building and grounds maintenance and medical services for student-athletes.  Major repercussions would result from this operations reduction plan.  Below lists the exact plan and the repercussions that would follow:

Scholarship Reductions: Reduction of 11.52 non-residents or 21.12 resident scholarships.  One possible scenario would be 5 non-resident football scholarships and 7 non-resident scholarships from Olympic sports.

Repercussions:  Scholarships are direct contributors to team success as the top student-athletes will receive a scholarship from different institutions.  By cutting scholarships, our teams’ opportunities at some of the top student-athletes are severely limited.  Furthermore, a decline in scholarships will decrease the opportunity of some student-athletes to attend college as a scholarship might be their only means to achieve an education at this level.

Personnel Reductions: The elimination of up to 9 full-time employees

Repercussions:  A reduction of employees would greatly affect the workloads of other employees or the safety/opportunities of student-athletes.  Possible reductions could be an assistant coach from each sport.  This would put a heavier workload on the remaining coaches and put MSU at an uneven staff level with almost every other Big Sky school.  This would reflect in our ability to recruit and develop kids as the coaches would have less time for each area.  Other areas of reduction could include Strength & Conditioning, Training Room and Academics Center.  These areas are critical for a student-athlete’s development and safety. 

Travel Expenditures: To reduce travel costs, travel limitations would have to be enacted that restricted the number of travelers and enforce more travel standards such as bussing further distances and installing stricter rate limits for hotels/meals. 

Repercussions:  The possible side effects of reducing the travel squads would be to leave out student-athletes from team trips.  This can alienate the student-athlete and make them feel apart from the team, potentially leading to lower retention rates.  If policies are enacted that force bus trips instead of air-travel, there is a potential for an increase in class-time missed due to the distances teams must travel for competition.

Equipment Expenditures: Relegate department funded equipment purchases to only include safety related items and competition required equipment.

Repercussions:  Equipment and gear are major recruiting tools for programs.  If teams are not given the option to cloth and equip their athletes appropriately, recruits will not join.  In addition, some equipment is necessary for development purposes and could hurt performances.  Providing clothing to student-athletes also expands the MSU brand as the athletes interact in the community.

Building & Ground Maintenance: No additional improvements or expansions would be allowed.  Game day services and presentation would be taken down to a bare-bones platform.

Repercussions:  By only maintaining facilities and not upgrading, it is only putting off projects that will become necessary.  This might also drive customers away if facilities are not seen in a positive light by the public during game days and special events.  That would then decrease revenue streams.  The ability to attract other events for additional revenue might be affected as well.   Facilities are a great recruiting factor for student-athletes and personnel.  A decrease in athletic or personnel talent would be felt immediately in competition and in revenue streams.

Medical Services Reduction: Place a cap on medical services provided to student-athletes.  Once the budget is reached, the student-athlete would be responsible for their own medical expenses if they are not covered by insurance.

Repercussions:  Medical Services serve a vital role in the safety and health of our student-athletes.   It is standard procedure in Division I athletics to pay for medical services for student-athletes for injuries from NCAA participation.  By not providing services, MSU will not be considered by some athletes when in comparison with most other Division I institutions.  It may also be irresponsible to expect an athlete to risk injury for participation and not support them if they are injured.  If an injured athlete cannot afford the medical services, they may not recover sufficiently from that injury and may have complications later in life.

 
SIGNATURES
Executive/VP: Peter Fields (pfields@msubobcats.com)