Athletic survival? Get well-endowed (Great Article)

[USFan]

Amazing what the "big" schools are doing to be successful (and financially sound) for EVER.

Athletic survival? Get well-endowed

Schools are finding revenue streams in private endowments of athletic scholarships

By Mike Fish

ESPN.com

The good-guy story begins with a big check, three years before Braylon Edwards, in a not-so-benevolent moment, allegedly decked a scrawny pal of NBA kingpin LeBron James outside a Cleveland nightclub in an early-morning incident in October that hastened Edwards' exodus from the Browns to the New York Jets.

To the bean counters at the University of Michigan, who have been the beneficiaries of Edwards' largesse since 2006, that little dustup on the banks of Lake Erie no doubt was just a case of some bad judgment. To them, Edwards is a fundraiser's dream, the best of guys.

After all, freshly minted millionaire jocks are often tight with a buck when it comes to the ol' alma mater. They labor for three or four years for a scholarship and little else, so can they be blamed if they're more inclined to sink their pro paychecks into fancy cribs and luxury rides?

Edwards, though, is an exception to that stereotype. The Wolverines' former star wide receiver and '04 team MVP is three years into a five-year funding plan that amounts to $500,000 in endowed scholarships at his alma mater -- $80,000 annually for the football program and a pair of $10,000 academic scholarships for bright and needy students from inner-city Detroit.

"First and foremost, my parents have always stressed to me the importance of giving back," says Edwards, whose father, Stanley Edwards, is a former Michigan fullback and NFL journeyman. "The big thing for me was once I made it into the NFL and was pretty comfortable, I wanted to give something back to the University of Michigan. The University of Michigan gave me a scholarship. They took a chance on a kid from inner-city Detroit. Gave me a chance to get an education as well as play football on a main stage. They also did it for my father as well. So the Edwards family was pretty happy to be a part of that Michigan tradition. To be able to give a scholarship back was definitely something we wanted to do."

The football endowment is meant to cover the scholarship cost for a wide receiver. The plan is to have the recipient wear Edwards' old, tradition-rich jersey, No. 1, though through the first three years of the scholarship, none of the designated players has yet been deemed worthy of donning it in games. Edwards told ESPN.com that he has no say over who gets to wear No. 1, but when he objected to the number being assigned to a freshman defensive back two seasons ago, then-first-year Michigan head coach Rich Rodriguez took the jersey back.

At Michigan, athletic department officials estimate that 130 scholarships across all sports are at least partially funded by private contributions such as the ones Edwards makes, a healthy endowment. In addition to Edwards, university officials identify three other former Wolverines football players who have written checks for at least $250,000, which is a big enough number to get the estimated 5.5 percent annual investment return to the point that it covers the cost of tuition. The other three are James Hall; Curtis Greer; and Jim Mandich, captain of Bo Schembechler's first Michigan team.

Across the NCAA, from Stanford to Boston College, high-end athletic programs are turning more than ever to affluent boosters to endow scholarships; and sometimes, those affluent boosters are ex-jocks. For decades, well-heeled alums have been recruited to endow things like professorships. Now, the hustle has picked up to endow collegiate athletic positions with money earmarked for the general athletic scholarship fund or, in some cases, for more specific purposes -- say, to fund the scholarship for the backup left tackle at Southern California or a chunk of the six-figure salary paid to Stanford athletic director Bob Bowlsby.

The pitch heard by potential donors, of course, is that their contribution could bring substantial tax advantages and, often, sweet perks such as tickets and access to the athletic program's heavy hitters. For example, a $1 million gift to the Duke Basketball Legacy Fund comes with an invitation to an annual dinner at head coach Mike Krzyzewski's home; tickets and seat location opportunities for all home, ACC tourney and NCAA tournament games; and use of the private Legacy Room in Cameron Indoor Stadium.

In the grand scheme, endowment dollars don't rival the huge amount of TV money filtering down to athletic departments from conference offices -- for example, the Southeastern Conference and its 15-year, $2.25 billion ESPN deal, which coincides with the SEC's 15-year, $825 million CBS contract -- or the other corporate partnerships that help keep big-time athletic programs afloat. But it's another revenue stream for the effort to keep athletic departments from sliding into the red.

It operates as simply as this. At Stanford, a private institution where the cost of an annual scholarship approaches $52,000, a present-day donation of $1 million is necessary, according to Bowlsby, to fully endow a scholarship in perpetuity. That's forever. Stanford invests the money in its endowment fund and anticipates a 5.5 percent annual return, which is enough each year to cover the cost of the scholarship.

Stanford's endowment portfolio for athletics, estimated by some of its rivals to approach $600 million, has long been the envy of athletic programs across the country. In general, schools are reluctant to divulge the value of their own athletic endowment funds, but as a comparison, a college administrator told ESPN.com that the three largest such portfolios in the Atlantic Coast Conference, based on 2008 figures, are thought to be North Carolina ($180 million), Duke ($150 million) and Boston College ($100 million).

"I haven't heard of one larger," Stanford's Bowlsby says of the Cardinal's athletic endowment fund.

Stanford's athletic endowment is flush enough to cover a majority of the 380 full and partial scholarships the school awards each year. Portions of the salaries for head football coach Jim Harbaugh and basketball coach Johnny Dawkins, as well as the salaries of the baseball and golf coaches, are endowed by individual gifts. Their boss, Bowlsby, even gets a portion of his salary from an endowment funded by a Lake Tahoe real estate development couple -- Gail Jaquish and Steve Kenninger, both alums.

By helping defray the cost of scholarships, the donors remove a financial burden, particularly at private universities such as Stanford. It frees up other revenues to pay for general operating costs as well as non-revenue sports, coaching salaries and facilities upgrades.

"The biggest advantage is we're able to use resources that come to us from revenue distribution from the [Pac-10] conference or NCAA and gate receipts and annual fundraising, and we're able to use the other money that we generate for things other than paying for scholarships," Bowlsby says. "We operate 35 sports. Ourselves and Ohio State are the two largest programs in terms of the number of sports offered. I think there are only 12 schools at I-A that have 25 sports or more. So we're a fair amount bigger in terms of the number of sports than the vast majority of schools. And we're able to compete at a very high level in all of them, so that isn't without its expense.

"So that [endowment] allows us to be able to do that, for sure."

As Bowlsby remembers it from four years ago, when he was hired away from Iowa, the Hawkeye athletic endowment hovered around $25 million -- a tiny fraction of what he inherited at Stanford. Yet wealthy donors still had 24 endowed starting positions on the Iowa football team, including both kickers, and a few positions on the men's and women's basketball teams.

At the University of Oklahoma, a public university where $250,000 fully funds an endowed scholarship in perpetuity, women's basketball coach Sherri Coale is credited with blazing the trail that has led to the endowment of all of her team's scholarships. The effort has also picked up with football and the men's basketball team.

It's nice to have millions stashed away in an endowment portfolio, even though the recent stock-market decline has been painful across college campuses, with funds on average thought to have absorbed a 25 percent hit. The athletic fund at Duke alone lost $40 million over the 12-month period beginning June 30, 2008, according to university officials.

"Right now is a perfect example of what an endowment [fund] can do for a program with budgets being cut and everybody obviously under financial burdens and constraints," says Matt Roberts, Oklahoma's assistant athletic director for development. "It sets up a perpetual funding source to be used for paying for academic scholarships. So it really helps out the athletic department as a whole because that frees up money."

And if things fall right, the financial safety net can keep a hot program on a winning track.

In the case of Duke basketball, supporters are hopeful a new endowment push will help sustain the program's successful legacy. Former Duke hoops great Grant Hill and his wife, the R&B singer Tamia, are among those who have contributed $1 million to endow one of 13 basketball-related scholarships. Former Blue Devils teammates Christian Laettner and Brian Davis fund another. And Krzyzewski, the longtime coach, also wrote a $1 million check to endow a scholarship in the name of his brother, Bill, a Chicago fire department captain, which is awarded annually to the Blue Devils' team captain.

Over this decade, aside from the athletic endowment currently valued at $110 million, the Legacy Fund at Duke has generated more than $50 million from 33 partners, each contributing a minimum of $1 million. That's resulted in renovations to Cameron Indoor Stadium and upgrades to other basketball facilities, as well endowment of the 11 basketball scholarships, an assistant coaching position and another for a team manager.

Still on the wish list is a $5 million gift to begin the process of endowing the Blue Devils head coaching position.

Out west, Southern California has a jump on paying for the compensation package of popular football coach Pete Carroll, which is estimated at $4 million-plus. In the late 1980s, Don Winston, a pioneer in the athletic endowment game, persuaded two donors -- the late Dr. Charles E. Elerding (an Orange County dermatologist) and his wife, Janet -- to pony up $1.5 million to endow USC's head football coaching position. That was huge money at the time, and the endowment's value has since grown to almost $5 million. But USC, too, is in need of another significant benefactor. With an average annual investment return of about 5.5 percent, the interest comes to little more than $250,000 -- less than what Carroll earns in a slow month.

"It doesn't cover his salary, because you'd have to have a helluva lot of money at 5 percent [return]," Winston says, laughing. "But this whole idea is to help defray cost."

No one has been more creative than Winston through the years in selling the old school spirit. The Trojan football team is a work of art when it comes to development genius. Before the 2009 season kicked off, Winston, USC's senior associate athletic director, had every starting position endowed in perpetuity. That's all 22 on offense and defense, plus the punter, the place-kicker and a special-teams player.

In fact, 70 of the NCAA-allowable 85 football scholarships at USC are endowed forever. The school won't ever have to cough up a dime for any of them. It has been able to endow almost 20 other sports scholarships, too, including the starting five in men's basketball.

Two decades ago, then-athletic director Mike McGee and Winston, whose roots are in academic fundraising, first put an emphasis on endowing football scholarships that continues today. In 2007, longtime friends put up money for the inaugural Frank Gifford Endowed Football Scholarship (first awarded to tailback Joe McKnight); an earlier scholarship is named in honor of the late Trojans tailback Ricky Bell. But according to Winston, the money in the endowment program generally doesn't come from recognizable former athletes. The few athletes involved are one-time fringe players who amassed fortunes outside of sports.

Winston says that the endowment program closely follows NCAA guidelines and that the school is careful to ensure that the awarding of a scholarship named after a prominent former athlete is not used as an inducement during the recruiting process. In fact, he says, the scholarship recipients are designated after the start of each season based on the players at the various positions.

"It is earmarked 'linebackers, tackles,' whoever is playing the position," he says. "That is just for donor recognition. The money goes into the scholarship pot for football. And it all goes in to help defray the cost of our scholarships. We don't identify that next year there is a Junior Seau [as a top high school recruit] out there and say, 'You're going to be in the Don Winston endowed linebacker position.' We don't do that. We stay away from that, because it can cause definite problems."

Very few donor names would impress teenage recruits anyway, he says.

"The [scholarship for the starting] center was named after a third-string center in the '50s," Winston says. "So the names are not household names. They're not the Marcus Allens or the [O.J. Simpsons] or those people, unfortunately. It is the second- and third-teamers. The guys who went out in business and made money."

When the endowment plan kicked off, Winston required a $250,000 contribution to fully endow a scholarship, which was then worth $10,000. Each of those endowments has matured in value to almost $1 million over the two decades. So again, the projected annual 5 to 7 percent return on investment covers the present-day $50,000-per-scholarship tab.

Today, the price to jump in and fully endow a scholarship at USC has spiked to $500,000.

"I came from academic fundraising, and I couldn't figure out why people never endowed positions on the team," says Winston, who joined the USC athletic department in 1983. "So I took the endowed-chair concept: OK, why not endow the quarterback and the tight ends and the running backs and so forth in perpetuity? Well, it took off, and we have added to it. If you endowed a position, you are there forever. It is not going to change. That tackle position is in your name forever.

"I can tell you, it has really been a godsend to the department because we don't have to raise that money [for scholarships]."

These days, around a lot of campuses, the thought of a scholarship endowed until the end of time has never sounded better.

http://sports.espn.go.com/espn/otl/news/story?page=fish/091223

[SRQ]

You read that and you wonder how lil' old USF competes as well as they do.  just WOW!

[SANJAY]

$600million at 5.5% is $33million a year.  Or USF's total athletics budget in 2009.