University of Houston Pours Millions into Sports
In recent years, the University of Houston has transferred more than $100 million from its academic side to athletics, aiming to shore up struggling athletic programs and enhance its bid to become a tier one university, and maybe a member of the Big 12.
Athletics continues to be a high-dollar enterprise for Texas colleges. The eight public Texas universities that play in the Football Bowl Subdivision — the top level of college football — spent more than $525 million on athletics in the 2014-15 school year. Football is consistently the top revenue-producing sport, followed by men’s basketball. This series looks at the finances of Texas universities’ athletic departments.More in this series
As classes wrap up at the University of Houston on Thursday, marching band members will fan out to perform at campus dorms and lead students to a pep rally at the school’s one-year-old, $128 million football stadium. There, administrators hope students will pick up free T-shirts, collect autographs and listen to a speech by the team’s much-hyped new football coach.
The rally, school officials say, is one way the university is trying to spark a new culture of support for its sports teams. Empty seats in the new stadium’s student section were far too common last year. If the Houston Cougars want to become a nationally competitive program, that needs to change, they say.
But while fan attendance may be lacking, the university's teams have received huge support in another way. To fund its ambitions, the University of Houston has transferred more than $100 million from its academic side to its sports programs in recent years, figures reviewed by The Texas Tribune show. Meanwhile, the university has launched or is planning a series of expensive sports construction projects, and the school's athletics department has struggled to stick to its annual budget.
Athletics departments at public universities are generally expected to pay their own bills, with schools usually chipping in to cover shortfalls. But Houston’s subsidies in recent years have grown beyond the norm. From 2008 to 2014, the school transferred $106 million to athletics, according to financial reports reviewed by the Tribune. The next highest spender among major public NCAA schools in Texas was the University of Texas at El Paso, which transferred $47 million.
Houston’s subsidy shows no sign of shrinking this year, even though administrators have told the department that they’d like it to become more self-sustaining. School leaders remain committed to making the teams more competitive. They see basketball and football success as a way to increase the school's visibility and strengthen student and alumni ties. To do so, administrators say, the school has to spend money.
“The athletic department is truly the front porch of the institution,” said Hunter Yurachek, vice president of intercollegiate athletics. “It is not the most important room in the house, but it is the most visible.”
Major conference ambitions
Lately, the University of Houston has tried to elevate itself in many areas. It has been the state's most aggressive school in striving for vaunted tier one university status. And it has worked hard to slough off its reputation as “Cougar High,” the derisive nickname rival fans pinned on it years ago for being perceived as a commuter school.
Since President Renu Khator took over in 2008, the school’s on-campus dorm capacity has nearly doubled to more than 8,000. And research funding has grown enough for the school to be named a tier one research institution by the Carnegie Foundation in 2011.
In sports, the investment has just begun. In the last two years, the school has signed new football and basketball coaches to multimillion-dollar contracts. After completing construction on the football stadium last year, the school began work on a $20 million basketball practice facility.
More projects are coming. Fundraising has begun to pay for a $25 million renovation to the basketball arena, and administrators hope to build an indoor football practice facility that will cost between $15 million and $20 million. Plans are also in the works for new or renovated baseball, tennis and track and field facilities.
The goal is to catch up after falling behind over the past few decades, athletic officials say. The school’s athletic success peaked in the 1980s, when Houston was a Southwest Conference power. But in 1996, the Southwest Conference dissolved. Many of Houston’s rivals moved on to the elite Big 12. Houston was left out, and since has bounced around between lesser conferences.
Fan support waned in those post-Southwest Conference years. Last year, home attendance for football and basketball games was less than half of that at Texas Tech, a school with similar enrollment and academics that's in the Big 12.
The possibility of joining the Big 12 has loomed over Houston's growth plans. Some Big 12 member schools have called for expansion. The Cougars missed out in 2012 when the Big 12 added two schools, Texas Christian University and West Virginia. School officials say they are happy with their current American Athletic Conference affiliation, but hope to position themselves as an attractive program if the conference landscape shifts again.
"Our goal is to compete on the highest level that we can," Khator said. "That is the nature of competition."
Tough to rein in costs
Houston's big spending goes beyond construction, however. The school mostly paid for its new stadium with revenue bonds and alumni donations; the university's cash transfers go toward day-t0-day expenses. Those costs are proving difficult to rein in.
The university transferred at least $12 million to athletics each year since at least 2008. That was true even after the 2011 legislative session, when state funding was cut by millions. The school transferred $17 million in 2012 and $18 million in 2013. Among top-level Division 1 universities, the next highest one-year transfer by a school in Texas was $8 million by UTEP in 2013.
Khator declined to discuss the institutional transfers. But in response to questions, the school provided three years worth of numbers of its own. Those indicated that the school considers total university support to include institutional transfers and student athletic fees. Both contribute to students' cost of attendance. And by the schools' numbers, Houston spent more than the rest of the state over the past three years, but it was much closer. Houston spent $69 million; the next highest was Texas State, which spent $64 million. And other non-Texas schools in Houston's conference spent more, the numbers indicated.
Student athletic fees are usually approved by a campus-wide election. And money generated by them is designated for a specific purpose. No student approval is needed for institutional transfers, however.
The financial data used by the Tribune in this report was collected directly from each Texas school through the Texas Public Information Act. According to those numbers, Houston reported to the NCAA that its athletics collected $144 million in student fees and institutional transfers from 2008 to 2014. Texas State collected $115 million, the next highest amount, during that time.
Either way, Khator defended the school's spending.
"People always have, and always will, raise questions about the cost of athletics, not just at UH but at most universities, and these are very valid questions," she said. "One has to find the right balance."
At times, Houston's balance has been called into question. In January, the school’s student senate passed a resolution calling for the resignation of Vice Chancellor and Vice President of Administration and Finance Carl Carlucci, saying among other things that the construction of the football stadium went over budget and past deadline, and that he’d hired an unqualified contractor to manage the new building's operations.
The school also recently launched an internal investigation into whether it illegally used $5 million reserved for academic purposes to help pay for the football stadium. The University of Houston System’s auditor eventually cleared the school, saying the money had been spent on the portion of the stadium used by the band, which technically isn't an athletic program.
Meanwhile, the school has missed financial targets. A 2015 audit of athletic department finances reported that spending on equipment, uniforms and supplies came in 88 percent over budget in the 2014 fiscal year, while travel expenses were 57 percent over their mark. Meanwhile, revenue from ticket sales came in 21 percent under budget.
Overall, the school had planned to reduce its athletic subsidy by $3.5 million for the 2014 fiscal year, according to the audit. It ended up increasing it by $700,000.
This year, Yurachek said the department expects a subsidy of about $16 million. The hope, he said, is to eventually lower that number to between $8 million and $10 million. That’s a fairly common amount, he said.
“There are very few athletic departments that survive without institutional support,” Yurachek said.
The best way to reduce that reliance is to win, Yurachek said, bringing more paying fans to the games and making the school more attractive to major conferences.
But even then challenges would exist. Big 12 member schools are publicly divided about adding more schools. And it’s no sure thing that Houston would be a top candidate if expansion were pursued. Previous conference growth has been driven largely by television revenue, and Big 12 teams already have a strong fan presence in the Houston market.
Right now, Houston has a hard time keeping up with those major conference teams. That's true across the country, said Amy Perko, executive director of the Knight Commission, which advocates for reasonable spending in college athletics.
"Schools may have to manage and to set more reasonable expectations," she said. Expectations at Houston remain high. But calls for adjustments could change if progress isn't seen soon.
“I believe students would say that they are in favor of a more robust athletic program,” said state Rep. Garnet Coleman, D-Houston, a vocal supporter of the school in the Legislature. “But I will say, I wish [the subsidy] was lower. That is a lot of money.”
Disclosure: Texas Tech University and Texas State University are corporate sponsors of The Texas Tribune. The University of Houston was a sponsor in 2013, and the University of Texas at El Paso was a sponsor in 2012. A complete list of Tribune donors and sponsors can be viewed here.
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