The Terp Who Cried Foul: Why One UMd. Regent Wouldn’t Ignore Athletic Department Red Ink
Tom McMillen's five-year term on the University of Maryland Board of Regents expires in June. He hasn't spoken to Gov. Larry Hogan yet, but he would be interested in being reappointed. - Joanne S. Lawton
Tom McMillen remembers when the University of Maryland signed football coach Randy Edsall and men’s basketball coach Mark Turgeon to long-term contracts in 2011.
McMillen, a former Maryland basketball star and Rhodes Scholar who later played in the NBA and got elected to Congress, asked his fellow regents at the University System of Maryland whether they knew the total liability of the two contracts?
“Five million?”
Shrugs.
“Ten million?”
A few reluctant nods.
Nobody really knew, McMillen said. But his colleagues were shocked when he told them the liability was $27 million. (Maryland’s athletic department could not immediately confirm the figure.)
“As fiduciaries we need to pay attention,” McMillen told me during a recent visit to the Washington Business Journal. “Athletics are like the front porch on a house. When they start cracking and falling it hurts the whole university. Athletic programs are supposed to be self-sustaining, but most of them are not.”
Maryland hopes that will change by 2018. That’s when the flagship College Park program projects a string of annual operating shortfalls dating to 2010 turning into at least a $3 million to $4 million surplus, said Damon Evans, CFO and associate athletic director for Maryland’s athletics department.
As I reported last month, Maryland’s athletics program had a $3.5 million operating loss in fiscal 2014, up from $1.2 million in 2013. It’s part of an estimated $95 million in debt that’s been accumulated over the years. That includes a $31 million settlement for leaving the Atlantic Coast Conference for the Big Ten Conference.
Last year’s operating loss in the program’s $67 million budget was driven by transitional and investment costs associated with joining the new conference, Evans said. That included new equipment, supplies, recruiting and travel costs. The loss was expected, he said.
“There is a plan in place that’s going to allow us to get to where we want to be,” Evans added. “Our goal is to stick to the plan that’s outlined and pay back the debt sooner if possible.”
I asked Evans if there was a publicly available copy of the plan. He said no. McMillen also said that a lot of financial information associated with Maryland’s deal to join the Big Ten is shielded by confidentiality agreements. The regents get to see it. The rest of us don’t.
But the Big Ten is expected to pump some $35 million into Maryland this year alone, far more than would have been collected had it remained in the ACC. That’s what’s driving the anticipated turnaround.
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I reached out to McMillen following the regent’s Jan. 29 Finance Committee meeting, where Maryland’s 2014 operational loss was revealed on the agenda. He missed the meeting due to another obligation out of state.
As a Democratic congressman representing Maryland’s 4th district in the early 1990s, McMillen introduced a bill to reform the financial transparency and academic rigor of college athletics. It didn’t pass, but those issues have gained attention every year since. McMillen detailed his concerns in a 2011 op-ed for The New York Times as Maryland athletics began cutting teams due to red ink.
A year later when Maryland announced it was leaving the ACC for the Big Ten, school President Wallace Loh formed a special commission to look at the problems and in the context of the conference change. About the same time McMillen was appointed to chair a board subcommittee charged with exploring the financial and academic impact of sports at his alma mater. It’s known as the Intercollegiate Athletics Workgroup, or ICA Workgroup.
For example, last fall McMillen successfully pushed for new rules that prevent Maryland coaches from receiving bonus money from outside sources for their success on the field if student-athletes on their teams don’t meet minimum academic thresholds.
“It’s a small step,” McMillen said.
He pointed to the recent academic scandal at the University of North Carolina, where football and basketball players were enrolled in bogus “GPA-booster” classes to keep the eligible for games.
McMillen emphasized he was a critic of the way Maryland joined the Big Ten — in what he felt was a hurry-up, behind-closed-doors fashion. But he added “the financials [of joining] were irrefutable.”
“The dollars are very strong, but it still bears watching,” he said. Maryland athletics “are on a strong, sustainable plane right now. … The academics are good. Overall, I give them good marks.”
McMillen’s term on the board of regents expires in June. He said he would welcome a second five-year term, but hasn’t spoken to Maryland Gov. Larry Hogan, the newly elected Republican who holds appointment powers.
“The ICA oversight is important regardless of whether I’m on the board or not,” he said. “Maryland is one of the few universities doing this, though a host of them are looking at it.”
Mark Holan covers the economy and money — banking, finance, private equity, corporate accountability and professional services.
