The framework for cuts to East Carolina University’s athletics budget have been laid out. In a special Board of Trustees (BOT) meeting on Monday, the Athletics Fiscal Sustainability Working Group presented a report detailing 10 areas for recommended cuts.
“We really have two parallel issues that we were dealing with at the same time,” ECU Athletic Director Jon Gilbert said. “The sustainability of where our athletic finances have been over the last several years and then COVID-19 and the realities of what those financial pressures would be.”
Put together at the request of ECU Interim Chancellor Ron Mitchelson and Gilbert in January, the group was tasked with reviewing the athletics department’s financial sustainability over the long-term.
An 18-page document dated May 14, it lays out in full detail the department’s financial situation and how that has been impacted by the COVID-19 pandemic and subsequent fallout.
“Clearly when they started this process we were not aware of the coronavirus,” Gilbert said. “Given the 10 recommendations from the Fiscal Sustainability Committee, coupled with the coronavirus, obviously our decisions will need to be made at a more rapid pace.”
According to the document, ECU’s athletics department is operating in a $7.4 million shortfall for fiscal year 2020, which ends on June 30, and is projected to be in the hole $5.6 million for fiscal year 2021. The numbers were calculated before the coronavirus caused the American Athletic Conference and NCAA basketball tournaments, as well as the remainder of the spring sports schedule, to be canceled.
Gilbert said on Monday the department is projecting a $5 million addition to the deficit for 2020 due to COVID-19. Pushing the total number to $12.5 million, Gilbert did say it has recovered to around $10 million stemming from the lack of operational expenses during the canceled seasons.
“Once the NCAA tournament and the AAC tournament was canceled in the month of March, my leadership team -- we obviously knew pretty quickly that there were going to be some substantial revenue markets that would be hit in this fiscal year and fiscal years moving forward,” Gilbert said.
While not in the report, Gilbert said budget cuts in “all operating units” could be in the 10-20% range and previously budgeted for positions within the department that are currently vacant will not be filled. ECU will also not enroll its full amount of student-athletes in summer school, instead focusing only on those that need those classes to graduate on time. That cutback will save the department around $500,000, according to Gilbert.
Gilbert said he has articulated to the interim chancellor his willingness to take a 20% reduction in compensation and the elimination of performance bonuses for the foreseeable future.
Among the highlights of the report is the recommendation of the working group to leadership of “the elimination of one or more sports.” ECU currently sponsors 20 sports programs, four more than the NCAA-mandated 16 required to be a Division I institution.
The report shows ECU funds nine men’s and 11 women’s programs and ranks second in the AAC to the University of Connecticut in that regard. With UConn leaving the American after the 2019-2020 sports season, ECU is set to lead the conference in number of league-sponsored programs barring any cuts, according to the report.
“This decision is really gut-wrenching for me, personally,” Gilbert said. “It’s not something that an athletic director wants to do. I understand the financial realities of where we are both athletically and as an institution.”
A two-year moratorium on athletics fee increases was also recommended in the report after the UNC Board of Governors voted against a tuition and fee increase which included a $50 hike in the athletics fee.
It was also recommended by the working group that university leadership “establish an annual amount, not to exceed $4-6 million annually, to transfer from institutional funds in support of ECU Athletics.”
On top of the projected operating deficits laid out in the report, it also states other capital investments could add $5.5 million and $3.8 million to the 2020 and 2021 fiscal year shortfalls, respectively.
Another notable portion of the report revolved around the newly constructed TowneBank Tower. A part of the southside renovation project to Dowdy-Ficklen Stadium, the tower opened prior to the 2019 football season. As part of the feasibility study completed in April 2018, it was concluded the tower would generate north of $40 million over the next 30 years, according to the report.
A new study completed in December of 2019 concluded the project would lose $6 million over the next 30 years, a difference of more than $48.5 million in revenue over the next three decades. The revised study used 2019 sales and repeated them over the remaining 29 years to come up with the figures listed by the working group in the report.
While the Founders Suites, Suites and Loge Boxes all gained revenue in 2019, the Scholarship Club and scrapped Field Level Club all represented heavy losses. The Trade Club, referred to in the report as the Williams-Clark Club, saw an $11 million drop in revenue in 2019 compared to projections because of donors retaining their lifetime seat rights, according to the report.
In other overarching recommendations, the working group wants leadership to “establish an overall reduction goal for FY 21 and assign differential cuts to achieve the goal.” Regional scheduling for non-revenue sports was also recommended in an effort to limit overall travel expenses in the future.
“We’ve talked to our coaches about a regional scheduling philosophy in the non-conference,” Gilbert said. “So as we go back and look at every sport that we have, I think we were able to eliminate flights in non-conference travel other than maybe two events that we were contractually obligated to do. Our non-conference schedule next year for all sports, other than the aforementioned two plane trips, we should do all of those by bus.”
While travel makes up for 10.5% of ECU’s athletics department expenses, per the report, salaries and benefits to employees account for 40%. Scholarships to student-athletes make up 21%, according to the report, and more and more of that cost has been shifted from the Pirate Club to the athletics department in recent years.
Before the COVID-19 virus shut down America, the group that compiled this report had already been at work for nearly two months. Moving forward, Mitchelson and Gilbert will decide what recommendations from the working group to adopt and put into action.
“In general, these recommendations make all kinds of sense to me. They flow directly from a very transparent version of the current financial situation in athletics,” Mitchelson said.
According to Mitchelson during the BOT meeting on Monday, that decision “will come in a matter of days, not weeks.”