The financial penalties levied against Penn State on Monday morning are clear, but the true cost to the university and football program won’t be known for some time.
The NCAA penalized the school $60 million, among other sanctions. The Big 10 followed suit by announcing that it will donate Penn State’s portion of conference bowl revenue over the next four years to charity, which amounts to a projected $13 million.
On an annual basis, the school looks to lose about $15 million over the periods laid out in the NCAA (five years) and Big 10 penalties (four years). While that is a big number, it’s a number Penn State can absorb if the past is any indicator.
The athletic department had a surplus of $31.6 million in 2010-11, according to Penn State’s financial report filed with the Department of Education. For 2009-10, a surplus of $26.4 million was tallied; it was $19.5 million in 2008-09. Penn State is not subject to public disclosure laws with regards to its athletic department finances, so it’s tough to estimate how much the department has in reserve to assist in paying the penalty.
What we do know is that these reports often do not take into account capital debt service. In supplemental information provided to the Department of Education on Penn State’s 2010-11 report, the university listed $19.6 million in debt service and $15 million in capital expenditures not included in total expenses. It’s unknown if there was any revenue not included in the report, but schools often have to leave out auxiliary revenue such as that generated by a golf course because of reporting guidelines.
The Big 10 penalty is significant – and a first for the conference – but Penn State should still clear $20 million annually from conference distributions, despite the four-year hit it faces. (Last year, Penn State received approximately $24.6 million from the conference.)
But more important than conference distributions to an athletic department like Penn State are donations, the majority of which are tied to football tickets and suites. And that just might be the biggest unknown facing the university.
Penn State’s specific numbers are unavailable, but a look at comparable programs shows just how much of those contributions are attributable to football.
Ohio State attributed 86 percent of its total contributions in 2010-11 to football. For Michigan it was 80 percent. Other schools saw even higher totals, like Florida, which had 94 percent of its contributions come in through football.
“There will still be some concern about supporting the program,” said Harvey Schiller, commissioner of the Southeastern Conference from 1986-90. “People are going to ask questions, they’re going to ask, ‘How are you going to put us in a position to win in the next four to five years?’ It’ll be up to the incumbent athletic department to put a plan together so they have a rebuilding plan for the future.”
That being said, Schiller doesn’t think donors will abandon the athletic program at Penn State wholesale.
He believes about 50 percent of donors will rally around the program: “My experience in the SEC was someone like Alabama could do no wrong. As I would travel around, the anger these [booster] clubs would have against the NCAA for sanctions was unbelievable. It’s in their nature and their DNA.”
Jeff Schemmel, former athletic director at San Diego State University, agrees with Schiller.
“How Penn State handles its next steps from a donor perspective will be critical,” he said. “There’s clearly strong support for Penn State athletics and Penn State football and many of those people will remain on board. I think 50 percent would be a conservative number.”
Schools that have received sanctions have had varied impacts on their finances. USC, which received a bowl ban for the 2010 and 2011 seasons and lost 30 scholarships over three years, took a hit but quickly recovered. In 2008-09, football produced revenue of more than $35.2 million, and the athletic department posted revenue of more than $80.2 million, according to reports filed by the athletic department with the Department of Education. Football saw a sharp decline in 2009-10 to $29 million, which caused total athletic department revenue to fall to $75.7 million. However, football revenue rebounded some in 2010-11 to $31.1 million, the first year of the bowl ban.
Alabama had a bowl ban for the 2002 and 2003 seasons and a 21 scholarship reduction over three years. The financial result? The athletic department saw no decline in total athletic department revenue following its two-year bowl ban.
There’s reason to believe those around Penn State will rally around the program, as Schiller suggested.
Amid the Jerry Sandusky child sex abuse allegations last year, the university posted its second-highest level of donations in its history with more than $208 million in contributions. The only year that number was higher was in 2010 when the university received an $88 million gift to upgrade the hockey program to Division I and build a new arena.
by Kristi Dosh via ESPN
Just when things were settling down at Penn State University, the situation worsens. Details from the Freeh Report surfaced and emotions across the sports world and media are at an all time high. In what has become one of the worst crimes and scandals in the history of sports, all fingers are now being pointed at the University’s figurehead, the late Joe Paterno. The former head coach was said to have knowledge of Jerry Sandusky’s serial molestation and made efforts to cover up the vile acts to avoid bad publicity for the school.
“Penn State doesn’t care about anything but winning games. The most powerful men at Penn State failed to take any steps for 14 years to protect the children who Sandusky victimized. [Graham] Spanier, [Gary] Schultz, Paterno and [Tim] Curley never demonstrated, through actions or words, any concern for the safety and well-being of Sandusky’s victims until after Sandusky’s arrest”, stated former FBI director Louis Freeh in his report. Freeh was hired by university trustees to investigate the incidents of abuse at the onset of the police investigation and subsequent trial.
Freeh stated in his news conference that the officials’ complete disregard for the child victims was “callous and shocking” and that Paterno “was an integral part of this active decision to conceal."
Whether Paterno didn’t know how the situation was being mishandled or if he covered up for Sandusky directly, we will never know. However, Paterno’s legacy, as one of the greatest college football coaches, will forever be tainted as he now is viewed, by many, as the guy who was more focused on winnings games than protecting innocent children.
Penn State has the opportunity to move on from this. Joe Paterno’s legacy and the 60 years of service he dedicated to college football are uncertain. This scandal is a part of his biography. Those 60 years of service are minimized with one single line at the end of a storied career; Sandusky scandal and dismissal, evidenced on Wikipedia.
After hearing of Freeh’s findings Mark Parker, the president of Nike Inc. said he is changing the name of the Joe Paterno Child Development Center, a child care facility at the company's headquarters in Beaverton, Oregon.
From a PR perspective, Penn State should strongly consider removing Joe Pa’s statue from the university’s campus. Not in an attempt to undo his service to the university, but in an effort to help the university forward. There can be other ways to honor him through his success in the realm of football.
Is Joe Paterno the only college coach to do wrong? Definitely not. And although this is a more severe violation than extra phone calls to recruits, free tattoos, and even pays for play infractions, the aura surrounding a sports organization, especially on the collegiate level, is all about minimizing damage to the university. Universities regularly cover up cases of rape, racial prejudice, assault, and domestic abuse for the sake of their sports’ winning percentage. This case is no different. There’s a laundry list of people responsible for the cover-up and a longer list of things that could have been done to avoid the situation.
Since the incident, child abuse organizations now require college students and staff, who come in contact with children to become mandated reporters. They have to go through extensive training to recognize and report child abuse and are obligated to report it under law.
Why did this take so long to be in place?
It’s highly likely that there have been more incidents that have occurred in the past that were never reported. Although I condemn all the actions taken by its leaders, I’m doubtful Penn State is the only college or university to conceal crimes perpetrated by members of their institution. It will be interesting to see if more cases arise, or what steps Penn State and others will take to ensure that such heinous crimes do not occur on their campuses.