Iowa State's 2014 Financials Paint a Mixed Picture

Like a reliable old car, USA Today has updated their database of athletic department financials through the 2014 calendar year. The whole sortable table can be found here. We'll get to Iowa State and the Big 12 in a second, but first let's define what we're looking at.

How USA Today Classifies Finances

USA Today explains how they arrived at their published numbers here. A lot of these are pretty straightforward, but it never hurts to define these so we're all looking at the same numbers. One thing to note is how scholarships are counted as expenses towards an athletic department.

From an internal accounting standpoint, this isn't untrue. However, the study that said UAB football should have never been cut made one thing very clear: the cost of tuition for an athlete on scholarship doesn't change the overall costs to the university. In a sense, that "full cost" of a student on scholarship really isn't a full cost. Or more cynically, the mark up that a university charges you or me is revenue, and that same mark up should not be applied to an athletic department's external financial statements. If you wonder why some of these schools in the Power 5 conferences are barely turning a profit, that's why, and it's incredibly misleading.

Another item to note: subsidies. Most of the time we view subsidies as money provided by a state government to the university, but USA Today also lumps Student Fees in to these amounts. It's probably a fair conclusion as more schools are assessing fees to their students to support their athletic departments, and then still charging them for tickets to attend the very events their fees are supporting.

Iowa State: A History

If you go to the interactive chart you'll find the ability to see a school's historical numbers back to 2005. We'll spare you the extra click and provide Iowa State's information right here.

Revenue

There is a convenient luxury in these numbers: they happen to show the entirety of Jamie Pollard's tenure, and it's a great set of numbers for an AD who could be facing the hot seat in the near future.

Ticket sales are up 58% since Pollard took over, donations up 294%, rights & licensing up 223%, the funds from the school disappeared three years ago, and overall revenues are up 136%. The hidden number in the rights & licensing is that USA Today lumped TV and NCAA revenues in to that category. So if you were wondering where that massive contract the Big 12 signed a few years back is hiding, there you have it.

Expenses

This is where you really see Pollard's initiatives to make Iowa State competitive in the Big 12 and across the general college landscape. Coaching salaries have increased 92% since 2005 and are buoyed by the long-term extensions to Paul Rhoads and Fred Hoiberg the past few seasons.

Facilities have increased a whopping 455% since 2005 and only recently have you seen the impacts of the debt servicing for the Bergstrom Indoor Training Facility and the Sukup Basketball Facility. Although the Reimans donated the majority of the costs to the South End Zone expansion this number will only continue to grow over the next decade.

Net Income

USA Today didn't publish this but a quick Revenues - Expenses = Net Income calculation yields the above result. As a whole the athletic department is healthy by a lot of standards. Not a lot of room for error, but with all of the activities going on with coaching salaries and facilities this is not a bad position to be in. If Iowa State was still lagging the conference in facilities and only had this much wiggle room we'd be having a much different conversation.

The $9.5M bad guy in 2007 is partially driven by the beginning of debt service on the original Bergstrom Indoor Facility building and the payout of Dan McCarney's contract; although there's some conflict to how much he was paid. This press release from Iowa State said his salary was guaranteed at $1.1M each year for three years, but an ESPN article about his resignation specifically mentions his base of $225K annually. In the grand scheme of things this is water under the bridge, but the curious jump in Other Expenses in 2007 is noticeable.

Iowa State: Once Again in the Big 8

Here is where the ship runs aground as far as comparing all teams equally. Private schools are typically exempted at the state level and don't have the same reporting requirements as public schools. So for the Big 12 that means no Baylor and no TCU in these numbers. Still, we can glean a lot from the eight schools whose data are presented. First, the raw data, sorted by revenue:

And for you visual folks, a chart that sums it all up.

Three tiers exist in this chart. The top tier of Texas, Oklahoma, and Oklahoma State, Kansas in the middle , and the remaining four schools of West Virginia, Texas Tech, Kansas State, and Iowa State. On this chart alone things appear about where we expect them. The top schools are obvious and everyone else is fighting for smaller pieces of the pie. Oklahoma State would be in that mid-tier had it not been for an $11M increase in contributions this past season. Additionally, Oklahoma State's $7.5M subsidy is the largest in the conference and over half of that comes directly from the school.

However, corporations (and make no mistake, this is a profitable venture) are judged on their bottom line performance. With that in mind we look at Net Income around the conference.

Iowa State is the only school that didn't have a profit over $1M last year, and has never exceeded $1M in profit under Pollard's watch. It's hard to say that's a bad thing, as Pollard has routinely matched his revenues and expenses pretty closely. Yet with the debt service load that is already on the books, combined with the expenses that have yet to be recognized, things could turn south in a hurry. As a matter of fact, look no further than our closest peer, Kansas State, to see the stark contrast between the two programs.

HOLY SHIT KANSAS STATE, WHAT IS GOING ON WITH YOUR WIZARDRY? A land grant school in the middle of nowhere is going through massive facility overhauls and is second in the conference in Net Income with $10.3M to the bottom line. You thought we were doing great, but look down south and realize Bill Snyder taught John Currie some black magic with his numbers. Logic dictates this number should come down as the debt service of those expansions make their way on to the books, but people always thought Bill Snyder's teams would be in for letdown seasons, and THAT HASN'T HAPPENED YET.

The rest shouldn't be a surprise. Oklahoma's stable coaching situations have kept them from having to pay large buyouts, and Texas took a noticeable dip in their Net Income last year with the swapping of Mack Brown's staff for Charlie Strong's.

What It All Means

As I said above, there are accounting tricks that go in to these numbers. Seldom in the real world do you see expenses so closely match revenues, and you never see it match so closely over a 10 year period. It's a cycle that involves paying coaches more, upgrading facilities, asking for donations to cover those upgrades, and raising ticket prices. The cycle repeats every few years and as one side of the books ticks up, so does the other.

It also becomes a zero sum game as the schools like Iowa State try to compete by doing everything mentioned above, but going against schools that all but print money like Texas and Oklahoma. As Iowa State increases their load to compete, the schools with more built in resources increase their load to keep the gap as wide as it was before.

That's not to say that Iowa State will go broke tomorrow, far from it, but in an era of "keeping up with the Joneses" it's possible to leverage yourself so much that all your efforts to be competitive end up being the very thing that slits your throat.

Iowa State has put a lot of resources in to their facilities and coaches. Now a south end zone expansion will get added to the books, a possible $5M buyout of Paul Rhoads could be paid within the next nine months, and if Fred Hoiberg leaves he does so with hardly any money to fund a replacement. Suddenly that $200K profit looks smaller and we're left with one question to answer.

How long can Jamie Pollard keep this up?