By Laura Ulrich

Laura Ulrich is a contributing writer for Athletic Management. She can be reached at: laura@MomentumMedia.com.

Early last fall, the University of Arizona women's soccer team traveled to Lubbock, Texas, to take on Texas Tech University for its fifth game of the season. The Wildcats came home with a 2-1 win--and a $2,500 luggage bill.

Athletic Director Jim Livengood did a double take when he received the invoice. "When I saw that number, the full impact of the current financial crisis hit me for the first time," he says. "I did some calculations and realized it was going to cost us an additional $100,000 in luggage fees alone for all our teams this year."

David Secor, Senior Associate Athletic Director for Business and Finance at UCLA, had a similar moment at a budget meeting in mid-December. "We looked at the numbers we'd projected in August, and they didn't make sense anymore," he says. "Between August and December, the economy had tanked so much that the entire landscape looked different. I couldn't believe that where we were in December could be so far away from where we had been in August."

As athletic directors around the country enter the thick of budget season, we've asked some of the most experienced how they're handling the financial downturn. How are they making cuts that help the bottom line without hurting their programs? How are they pushing forward on development goals in a down economy? And how are they keeping staff morale high and providing leadership that gets everyone pulling together as a team?

UNCHARTED TERRITORY
Most athletic directors have confidence in their abilities to construct a balanced budget. They understand how to make cuts that don't bleed and how to move a few dollars to keep their programs moving ahead. But this year, even the savviest managers have had to come up with new strategies.

"None of us has ever been in this kind of financial environment before," says Livengood. "To compound the stock market crash and the jobless rate, almost every state is going through a financial crisis. State legislatures are reducing education spending and that is trickling down to athletics."

"I could develop two different budgets that would be millions of dollars apart based on the possible scenarios," says Secor. "We've definitely entered uncharted territory."

Another conundrum is the uncertainty about how long the downturn will last. "Most economists predict the recession is going to affect discretionary income for at least another couple of years, meaning we have more tough budget decisions ahead of us," Livengood says. "But we don't really know how many."

So how do you budget in these uncertain times? Julie Soriero, Athletic Director at the Massachusetts Institute of Technology, started this year's budgeting process with an unusual step. She called a meeting with her staff to talk about the department's philosophy.

"I knew we were going to have to make spending cuts," she says. "But before we did that, we needed to get very clear on what MIT athletics stands for. So we did some exercises looking at our core values and asking how each of them related to our budget decisions this year."

Livengood is taking the same approach. "At a time like this, the first place to go is back to your mission," he says. "Until we're all clear on what we're trying to accomplish, we can't begin to think about things we need to keep and things that might be expendable."

Athletic directors are also involving more voices in the budget process this year, starting with coaches. "Instead of telling coaches what I'm cutting from their programs, I've asked, 'Why don't you make suggestions to us?'" Soriero says.

Livengood is having similar discussions with his staff. "Before I start budgeting, I sit with each coach and department head and have a very structured conversation," he says. "First I ask where we are academically with their program. Next we discuss where we are competitively.

"In a typical year, my next question is, 'What else do you need to continue being successful?'" Livengood continues. "But this year, I asked, 'What could you do without and still continue this level of success?'"

He is also gathering input from student-athletes. "In my meetings with our student-athlete advisory committee and in exit interviews with seniors, I've asked, 'What could we stop doing without making a huge difference in your career here?'" he says. "Student-athletes have told me that their team could get by with less equipment, or that a locker room upgrade didn't really add much to their experience. As administrators, we might think something is very important, but we don't really know unless we ask."

Another way to approach cuts is to look at areas where spending has seen recent increases. "We're scrutinizing the places where spending has crept up over the past three to five years," Soriero says. "It could be out-of-region travel, cell phone usage, or recruiting dollars. We're asking, 'Were these increases really necessary, or can we cut back?'"

FINDING NEW DONORS
Cutting expenses is only one side of the budget equation. Keeping dollars flowing in is equally important, although it can be just as difficult.

Bobby Purcell, Executive Director of the Wolfpack Club at North Carolina State University, says the first step to successful development in a recession is tapping more donors. You can't count on even your most loyal donors to open their wallets wider, so the key is expanding your base.

The first place Purcell looks for more people is on his list of canceled or inactive members. "This is a great place to start, because these individuals have shown they have an interest," he says. "It just needs to be rekindled."

Purcell is also focusing on adding more recent N.C. State grads to the Wolfpack Club. "We're working harder to talk with seniors before they graduate," he says. "In the past, we've waited until after graduation to approach them, but there are two downsides to that. First, most of them move right away and it's hard to track them down. Second, other alumni groups are also approaching them after graduation. We want to talk to them before that barrage hits."

To make sure recent alums who wore the Wolfpack uniform stay involved as supporters, Purcell's staff works to make connections with current student-athletes. Staff members are assigned to each of the school's 23 sports and meet with their teams once each year. "We talk about where scholarships come from and who funds the facility improvements they're seeing around them," Purcell says. "We hope after four years of gaining that understanding, they'll feel it's important to join the Wolfpack Club when they graduate."

Fred McDaniel, District Athletic Director for Cumberland County Schools in Fayetteville, N.C., is involved in the same effort to expand donor numbers. "Not a lot of people are going to write big checks right now, but if you get lots of people to write small checks, the effect is the same," he says.

"I'm asking my athletic directors to work with their coaches to generate alumni lists for their programs," McDaniel continues. "We'll then use those lists to tap more donors."

At the same time, athletic administrators are focused on encouraging donors to continue giving, even if the check is smaller. "The typical approach is to ask people to match or surpass what they've given in the past, but that isn't a good idea right now," Soriero says. "We're telling people, 'We know you gave this much last time and we realize you might not be able to give that much this year, and that's okay. But please continue to be part of what we're trying to do at whatever level you can.'"

Livengood adds that the actual ask requires a different approach in a recession. "First of all, you have to articulate with absolute clarity what you need and why you need it," he explains. "Donors need to know exactly what their money would help you accomplish and why it's important for your student-athletes. Building a new stadium just because we want one is archaic thinking. We now have to demonstrate that we need a new facility for a very good reason.

"If you can't do that, you have no chance," he continues. "But if you can, you may strike a chord and the donor will respond by saying, 'I'm going through a tough time and money is tighter than it was, but I can see the difference my donation will make. I want to get involved with that.'"

Soriero is using what she calls the "targeted ask," identifying small, specific needs, like new video equipment, a travel opportunity, or a costly training device donors can fund. "I've asked coaches to come up with a list of items they're otherwise going to have to wait for because of the recession--not huge ticket items, but doable ones," she says. "Then we're asking donors to help with one piece at a time."

What about donors who have promised funds but are now having difficulty following through? Purcell believes it's far more important to focus on sustaining the relationship than collecting the money.

"Loyalty is a two-way street," he says. "It's important to work individually with each donor who is having problems and let them know that you're not going to abandon them. We've learned that if you work with people to come up with a contingency plan, they'll more than make up for it later on."

Staying in close contact with donors also takes on increased importance. Purcell used this year's renewal letter to urge donors to contact the Wolfpack Club if they were having trouble paying. He's also communicating this message through newsletters and his network of 500 volunteer representatives.

Finally, benefits must be carefully thought through when dealing with donors who cannot meet their commitments. "Being patient and protecting the relationship is the right thing to do," Livengood says. "But at the same time, you have to be very consistent in your handling of these situations. Will you still provide the same perks? Will you accept a lowered donation in place of the initial pledge? If you aren't consistent, you could end up with donors asking, 'You did this for them, so why didn't you do it for me?'"

REALIZING REVENUE
Along with making sure that donations continue to come in, there's no reason to not look for new revenue streams. Mark Kryka, Athletic Director at Verona (Wis.) Area High School, has been doing this for several budget cycles in a row.

In each of the past seven years, he's faced budget cuts or freezes, but has found ways to make up for lost income. In fact, Kryka has done it so successfully that he's actually grown his budget each year.

"The first thing we did was the most difficult, and that was to increase our participation fees," Kryka says. "It went from $40 to $125, with a $25 fee for a second sport and a $15 fee for a third sport, and we put safeguards in place for low-income families.

"To do this successfully, we communicated extensively about why the increase was needed," he continues. "We would have lost sports otherwise, and once parents understood that, they were supportive."

Kryka has also brought in a chunk of money by developing a special ticket package for students. For $35, students receive a pass that allows them into all home contests for the entire year. The simple idea was wildly successful, netting $18,000 worth of new revenue.

Kryka has also asked other departments to partner with him on revenue sharing. He has worked with his administration to keep more of the school's gate receipts in the athletics budget and reroute some of the money students pay in parking fees to athletics. "Some of these things were big revenue sources and some were small, but every dollar counts," Kryka says. "In this environment, you have to constantly think of new ideas."

At MIT, Soriero has been putting her athletic department facilities to work to make money. "We had capped the number of fitness facility memberships we were selling to faculty, staff, and students because we didn't want to overcrowd the space," she says. "But we conducted a capacity study and discovered that we can safely add more members. The most promising area for growth seems to be in corporate memberships, where employees of local companies can join through their jobs."

The school is also looking for new opportunities to rent its athletic facilities. "We're reaching out to local high school and club sports to see if they are interested," Soriero says. "The trick will be figuring out how to rent facility space without impinging on our own programs."

Ticket sales is another revenue source administrators are focusing on. "Looking around the country, we're seeing more empty seats in stadiums," Livengood says. "Families are having to make choices about where to spend their money, and that means we have to find ways to make our events more appealing.

"Today, a family is deciding whether to visit the Desert Museum or the zoo or come to a game, instead of going to all three," he continues. "So we have to make our event a draw for both adults and kids. We need to think outside the box--maybe add a jumping castle or a bounce tent for the kids to make it a family event."

SOS: SAVE OUR SPONSORS
In October, Chevrolet announced it would significantly reduce spending on sports sponsorships to offset falling sales and the economic slowdown. "The economy is making us re-look at everything we do," Philip Caruso, Chevrolet's National Promotions Manager, told the online publication Bloomberg.com. "[We're] cutting back mainly [on] spending in the sports area ... and reallocating in some of those areas that help grow our business."

What effect is the pulling back of corporate sponsors having on athletic programs? For those who outsource their media rights, the effect--so far--may be minimal, says Greg Brown, President of Learfield Sports, which administers multimedia rights for several university athletic programs. But it may not stay that way. And for those who use in-house staff to secure sponsors, some difficult discussions are looming.

That's why it's important to be talking to corporate sponsors right now, long before any contracts come up for renewal. "Athletic directors cannot simply sign a contract and walk away," Brown says. "Contact with a sponsor can be the most essential element of keeping the company on board."

And the emphasis, says Brown, should be on showing companies the financial value they get for their sponsorship. "Companies can no longer afford to look at sponsoring an athletic program as a gift," he says. "You must be able to demonstrate that it helps their bottom line."

That means really listening to the sponsor's needs. "In better times, schools have been able to go to corporate sponsors with a list of available benefits and say, 'Here's what we have--which ones do you want?'" says Brown. "That won't work now. It's imperative to ask intelligent questions and really understand what drives the business."

In particular, Brown believes it's important for athletic directors to look campus-wide when searching for value to offer corporate sponsors. "Consider whether you can offer them unique ways to connect with the entire student body or the alumni association," he says. "Try to expand the audience that could receive a message from a company that's sponsoring athletics. It's a very different challenge now."

BETTER THAN BEFORE
As McDaniel focuses on constructing a difficult budget, he has been thinking about the lessons good coaches teach their athletes. "We always tell athletes that adversity is an opportunity to make themselves stronger," he says. "That's the approach we have to take now. I'm not just looking for a way to make it through--I'm looking for a way to come out of this better than we were before."

He's also trying to be the best leader he can. "It's critical that your staff sees your optimism," McDaniel says. "Don't focus on what you can't do. Focus on what you can do. I've told my athletic directors, 'For every opportunity we have to forego, we're going to get creative and find a way to provide a different experience that we can afford.' With 10 athletic directors and 250 coaches thinking that way, the positive momentum is amazing."

Purcell is also someone who believes in the silver lining. "We can come out of this stronger, not weaker," he says. "The exercises we're being forced to do--examining our goals, getting down to what really matters, becoming more efficient--are the same things that build better athletic departments. And if we can do them in the bad times, just imagine what we'll be able to do when the good times come back around."

For Livengood, thriving means focusing on the value of athletics beyond the court or field. "We're in tougher times than we've ever faced, and we may not be able to do some of the things we've done in the past," he says. "If we only define success by wins and losses, championship banners, and big, new facilities, we're going to be in trouble. But if we measure our success by how we're shaping kids' lives beyond their time with us, we're going to be okay."

Sidebar: CUTS VS. ADDS
When a financial crisis hits hard enough, the possibility of cutting sports to balance the budget inevitably comes up. NCAA Division II Adams State College is turning that thinking on its head.

Instead of considering cuts, it has decided to add sports. By introducing five new sports over the next two years, the school believes it will realize enough new revenue through increased enrollment to shore up its existing programs and help the entire institution stay in the black.

Adams State will add men's golf, men's soccer, and women's swimming and diving in 2009-10. It will add women's lacrosse and men's swimming and diving in 2010-11.

"Over the past three years, we saw a three percent enrollment decrease," explains Larry Mortensen, Athletic Director at Adams State. "Add reductions in state aid, and we were looking at eliminating sports to make ends meet. We have a history of really strong, successful programs, and nobody wanted to lose any of them."

When Mortensen began looking for another solution, he discovered an NCAA report published in January 2008 suggesting that Division II schools offering more partial athletic scholarships could see significant increases in enrollment, retention, and graduation rates. "The Division II Values Study debunks the myth that athletics is a machine that eats money," Mortensen says. "It shows that at our level, having more sports can actually generate money."

Study in hand, Mortensen went to work convincing administrators to add instead of cut. Part of that work entailed calculating the expected new revenue and start-up costs for the programs. "For example, we anticipated a women's swimming roster of 20," Mortensen says. "Adjusting for the fact that some of those athletes may have enrolled here anyway, the administration came up with an amount it believed it could spend on the program.

"It was important to concentrate on being modest in what we spend on these sports so they'll realize the goal of producing revenue," he continues. "We're offering partial room waivers, not full ride scholarships. We believe we can still create a very high quality experience for our new student-athletes while keeping costs low."

Another part of making the plan come together was choosing the right sports. "We added teams that could use our existing facilities," Mortensen says. "We also focused on sports that are growing in popularity in our area."

The plan assumes that if you add sports, new student-athletes will come. But what if the sports simply draw on Adams State's current student population? "It's a risk, but it's a calculated risk," Mortensen says. "The administration understands that the risk of doing nothing is just as great. Cutting sports would produce another enrollment drop that would hurt the institution further."

Mortensen is extremely glad he took a proactive approach by pushing for the additions. "In this kind of economy, you can sit back and wait for something to happen to you, or you can do something about it," he says. "I've already had calls from a lot of my colleagues who want to give this idea a try."

To download the NCAA Division II Values Study, visit: www.ncaa.org/wps/ncaa?ContentID=41569 and click on "Division II Partial Athletics Scholarship Values Study."

Sidebar: TRAVEL WOES
With gas prices on a roller coaster ride, one of this year's biggest budgeting challenges involves containing travel costs. Athletic directors are responding with several solutions.

"We're coordinating schedules so teams can travel together whenever possible," says Fred McDaniel, District Athletic Director for Cumberland County Schools in Fayetteville, N.C. "We're also playing more doubleheaders and multiple games at one site."

At UCLA, the administration is looking at numbers in the travel party. "We're asking whether some teams can travel with fewer people and still remain competitive," says David Secor, Senior Associate Athletic Director for Business and Finance at UCLA.

Julie Soriero, Athletic Director at the Massachusetts Institute of Technology, is cultivating better relationships with the travel companies that serve her department. "We're trying to negotiate longer term agreements," she says. "That protects us a bit from price fluctuations.

"At the same time, we're trying to build relationships that are a two-way street," she continues. "We are willing to renegotiate contracts when prices become so high the travel companies are hurting, as long as they will revisit our contract when prices drop. If you have a history of loyalty and good communication with a company, those conversations are easier to have."

Jim Livengood, Athletic Director at the University of Arizona, believes travel is one area that could be deeply affected by the recession in the long run. "If the economy stays like this for any length of time, we could see whole conferences making travel and schedule adjustments," he says. "It's a difficult proposition, because we never want to lessen the student-athlete experience. But when you weigh it against keeping a team and a staff, losing some travel opportunities may be the least of the evils."

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To read thoughts from Livengood and Purcell on how the current economic downturn will affect the economic arms race in big time college athletics, check out our recent blog posting titled, End Of The Arms Race?