FanPost

How much money does FSU need to support an elite football program?

[Featured guest post. TN loves to feature well-written Fanposts.]

I've been mulling over this question for a few weeks, and I suspect some of you may have thought of similar questions during the conference expansion charade. In fact, just a few days ago Nattylite wrote a great article about how FSU's athletic department has managed to accomplish significant achievements despite its financial disadvantages.

In case you haven't been paying attention, FSU brings in a lot less revenue/profit than many of its competitors. I should note upfront, however, that schools have significant leeway in how they report revenues and expenses, so it's always difficult to make a true comparison between programs. Suffice to say, however, FSU trails well behind many of its geographic competitors (UF, UGA, Bama, Auburn) both in terms of revenue and profit. This, of course, has been the main driver behind the Big XII expansion rumors and tensions within the ACC over TV rights.

If you're in the mood for some data, tables, and charts - click for the jump.

In a perfect world we'd all like for FSU football to be wildly profitable. The money could be used to subsidize other sports, give back to the school's academic budget, build nicer facilities, or reward coaches with bigger contracts. Given where FSU actually stands with its athletic budget, however, it doesn't look like this will happen any time soon - even if FSU leaves for the Big XII. Many factors are working against FSU's ability to bring in the same type of revenue as SEC programs (TV contracts, geography, a weak Florida housing market, a young alumni base, poor conference scheduling, etc.) so it's unlikely that this gap will shrink significantly in the next couple of years regardless of FSU's conference affiliation.

Therefore, the question that I'd like to understand is: how much money does FSU really need to ensure that it can sustain an elite college football program?

By answering that question, it could help to outline how important a move to the Big XII could be or whether FSU needs to aggressively lobby the ACC for additional revenue through some sort of revenue-sharing deal. For those of you who aren't yet tired of realignment clichés you can think of this as trying to determine whether FSU really needs to ‘keep up with the Joneses' (i.e. the SEC) from a revenue standpoint in order to field an elite football program.

Like last time, I'd like to highlight how I put together the data and inherent shortcomings it may have.

  • The data for program expenses was downloaded from the US Department of Education and you can find more information here. I think this is the best dataset available, but there are still some problems because data is self-reported by institutions, and they can vary in how they categorize their expenses / revenues / budgets.
  • Football-specific data wasn't available for all categories, so in some instances I had to estimate the football share of the budget by allocating expenses based on revenue splits. I think this is a pretty good estimate, and the process was consistently applied across schools. It's not perfect, but it should be good enough to provide a rough analysis.
  • I also need to send a huge ‘thank you' to Outer Monvolia for their help with the Rivals Ranking database. (http://outermonvolia.net/board/content.php) They probably saved me a weekend of copying and pasting data. Thanks again.

OK - so how can we actually determine the amount of money that is required to sustain an elite football program? I'd argue that there are a few expense categories that are highly important for long-term success.

  1. Recruiting Budget: bringing in top football recruits is essential for long-term success; you can't build an elite program without elite players.
  2. Head Coach Salary: once you bring in the top recruits, you need to have a Head Coach that can build the program around the talent to maximize its ability to win games.
  3. Assistant Coach Salaries: a Head Coach can only do so much. He must have the funds available to bring in all the support that he needs to help build the program. Guys like Mark Stoops are really important.
  4. Operating Expenses: this cost category includes all the money that goes towards funding game day expenses and maintaining football facilities. It's a way of measuring the infrastructure that programs have invested in to support their teams.

Other expense categories such as administrative expenses, scholarship budgets, meals, and travel expenses are excluded because I think they are less important for building elite programs. They are fairly undifferentiated across programs, but I'll come back to them at the end of the analysis. I'll also try to look at some recent growth trends to try to predict the total budget required to maintain an elite football program, as of 2015.

Part I: Required FSU Recruiting Budget

In order to determine how much money FSU needs to put towards its recruiting budget, it's important to understand the level of talent that is required to maintain consistently elite football programs. There are a couple of ways to answer this question, but I decided to look at historical F/+ Rankings and how they correlate with Rivals recruiting rankings.

I looked at all of the teams that have finished in the Top 15 of the F/+ Rankings for each year between 2005 and 2010. I then looked at their average recruiting rankings over the two prior years. (Example: in 2006 LSU finished second in the F/+ Rankings; in 2004 their recruiting class was ranked #2 according to Rivals, and in 2005 their recruiting class was ranked #22 so their blended average was #12). I replicated this for each of the top 15 teams over the same time frame to try to determine the average talent required to field an elite team.

The chart below shows some interesting data, but the main take-away is that a top team needs to consistently recruit in the top 25 in the nation. No big surprise right? I agree, but it's actually lower than I thought it would be. I assumed that a team needed to bring in a top 5-10 recruiting class each year, but that's not really the case. Remember, for every recruiting juggernaut like USCw that finishes in the top 15 F/+, there's a Boise State or Virginia Tech that finds its way in each year, too.

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So, from that part of the analysis we can conclude that FSU needs to devote enough money to its recruiting budget to consistently achieve a top 25 recruiting class. As any casual fan will realize, FSU has pretty much always finished in the top 25 of national recruiting rankings. In fact, here's a table that shows just how well FSU has recruited since 2005:

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What can we take away from this chart?

  1. Even during the Lost Decade, FSU has recruited talent that is basically equivalent to the top SEC teams (Alabama, Auburn, Florida, Georgia, LSU).
  2. FSU is much more efficient with its recruiting budget than the SEC schools it competes against. The column called ‘Dollars per Point' essentially measures how effective teams are at bringing in talent given their recruiting expenditures. A lower number is better. It also shouldn't surprise anyone that Auburn pays heavily for its recruits.... (that's my attempt at humor, by the way).
  3. The last column called ‘Rank' is a national ranking of recruiting budget efficiency. Again, lower is better. MSU is slightly better at getting ‘bang for its buck' than FSU, but overall, FSU does a better job of bringing in elite talent than most of its SEC peers - even with a smaller average recruiting budget.
  4. My main takeaway, however, is simply that FSU doesn't need to spend much more on recruiting than it is already. It will need to grow its budget over time to keep pace with inflation trends, but FSU does not need to worry about spending lots of money to attract the talent required to field consistent top 15/+ teams. Being in Florida and having a rich tradition seems to be an advantage that leads to lower recruiting expenditures compared to other SEC teams.

The quick follow-up question is: how much should FSU spend on football recruiting in three years (2015) to ensure that it can keep pace with the SEC arms race?

Let's take a look at the historical growth rate and apply it forward:

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Based on the historical data that I have available, I'd say it's likely that peer schools will increase recruiting expenses by around 6% per year going forward. In order to compete with that level, FSU would need to allocate approximately $660k per year to the football recruiting budget in 2015 to sustain its historical level of success. This seems well within reason, and I think it's safe to say that FSU will be able to attract top-flight talent without making substantial changes to its recruiting budget.

Conclusion One: No Immediate Need for Substantial Increase to Football Recruiting Budget

Part II: Required FSU Head Coaching Budget

As everyone at TN knows, head coaching matters. A lot. Remember how worried everyone got when we thought UAB might be able to pull Jimbo from the staff? Obviously, we don't want that to happen and we certainly don't want to worry about losing a head coach to a program like Mississippi State or Arkansas.

Therefore, the second question is: how much money does FSU need to pay its head coach to ensure that he will stick around if/when the program returns to an elite level?

In 2011, Florida State paid Jimbo Fisher $2.75m according to a report by USA Today. While that might sound like a lot, it is actually considerably lower than the peer set that I would consider to be most relevant (top SEC and ACC). The table below summarizes both historical data and projected figures to show where FSU stands relative to teams that would be poised to poach elite coaching talent:

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What do I take away from this chart? A few things:

  1. Jimbo is probably a bit underpaid right now, and I'd expect things to heat up for him pretty quickly if FSU does, in fact, get the 10+ win season we'd all like to see.
  2. There is a coaching arms-race in the SEC, and it looks like this trend will probably continue. In fact, given historical growth rates it is likely that the median salary for the peer-group of schools will be almost $5.0m per year by 2015.
  3. FSU is going to have to find ways to increase the HC salary in order to attract/maintain elite coaching talent. I personally believe that FSU can probably afford to pay slightly less than SEC programs, mainly because the weekly competition is less severe and the fans aren't quite as bat-shit crazy. Given the assumptions shown in the table, however, FSU will need to increase its HC budget by almost 75% in order to effectively compete for elite coaching talent by 2015.

Conclusion Two: HC Salary Will Need to Increase 75% by 2015 to Compete with Coaching Arms Race

Part III: Required FSU Assistant Coaching Budget

The same data/process was used to determine how FSU stacks up relative to peer SEC and ACC schools in terms of AC salaries. Again, the story is similar. FSU currently ranks right near the median in terms of AC salaries (6/13) but the SEC arms race is again evident for Assistant Coaching talent. Three teams (Auburn, Clemson, Florida) have increased their AC budgets by an average of almost 25% per year since 2009!

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My key takeaways:

  1. Jimbo fought hard to get increases for his assistants, and I think the results have been evident on the field. FSU currently ranks near the middle of the pack and should be able to go toe-toe on spending with other programs in the short-term to retain coaches.
  2. The peer group of schools has been increasing AC salaries at an average rate of 14.1% per year, which is much higher than FSU's rate of 8.6%. Even if you're not a math whiz, you should realize that the gap is going to grow over the next few years.
  3. Like the HC salary, FSU will need to increase the salaries it pays to Assistant Coaches by almost 70% over the next three years. Given the current budgetary pressures, this is unlikely to be a popular move.

Conclusion Three: AC Salaries Will Need to Increase 70% by 2015 to Compete with Peer Schools

Part IV: Required FSU OPEX Budget

This is the part of the budget that is allocated to game day expenses and facility maintenance. Fans and recruits both care about game day atmosphere and the quality of facilities, so it's important to maintain a competitive standard of care.

Let's all be honest with ourselves though - the ACC is not the SEC and the game day atmosphere is not the same. Granted, Doak can get rocking (OU last year looked incredible on TV) but attendance and general fan craziness is not quite at the SEC level. Therefore, it's better to compare FSU's spending to the historical average of the Top 15 F/+ teams. This should provide a better perspective on the amount of spending that is required to support an elite program (not just an elite SEC program). Here's the data:

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What do I take away from this?

  1. FSU spends enough money on OPEX to compete at an elite national level. Is the game day experience quite as good as the top-tier SEC programs? Probably not. But it's good enough as long as the coaching and talent remains strong. Same goes for the football facilities. FSU doesn't need to compete head to head with Oregon's facilities to bring in elite talent.
  2. The projected OPEX growth rate for top national programs is about 7.7% per year. FSU does not need to grow OPEX at a faster pace than this average. Therefore, there is no pressing need for increases to the projected the OPEX budget beyond typical inflation.

Conclusion Four: The OPEX Budget Should Increase In-Line with Peers at Around 7.7% per Year

Part V: All Other Expense Categories

If you're still reading at this point - congratulations. That was a lot of data, and you're probably hoping for some summary chart that just pulls everything together to answer the question. We'll get there soon. One last step, though.

We've already looked at how much money FSU should put towards recruiting, HC salaries, AC salaries, and OPEX - now we just need to determine how much they should allocate towards all other expenses. To do this, we'll again look at the data for the Top 15 F/+ teams over time, and how they spend their money relative to the four outlined cost buckets.

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What do I take away from this?

  1. FSU currently allocates about 53.1% of its total football budget to what I'll call Other Expenses. This is generally consistent with other top programs, so there's no pressing need to change the allocation of expenses.
  2. Based on historical growth trends, it looks like overall football athletic budgets for top teams will grow at around 3.5% over the next few years. This tells me that FSU doesn't need to worry about making major changes to Other Expenses, but should just grow them in-line with general inflation.

Conclusion Five: FSU Does Not Need to Adjust Expenses Towards Other Areas but Should Grow Them In-Line with Inflation at About 3.5% per Year

Part VI: Putting it All Together

Take a deep breath. You've made it. This is the summary chart you've been waiting for:

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So, what are my final takeaways?

  1. FSU will likely need to increase its overall football budget by 8.6% per year through 2015 to compete with the elite national and regional (SEC) programs. This represents a fairly significant strain on FSU's athletic budget, as it appears that historical increases have been about 5.8% since 2008. There was one very large increase between 2007 and 2008, but the growth rate has slowed since then.
  2. FSU will also need to make changes in how it allocates its football budget, as the arms-race for both Head Coaches and Assistant Coaches will require a greater proportion of the ongoing expenses.
  3. The total projected required football budget in 2015 is $27.1m, which would put FSU in line with the current (2010) budget for schools like Texas, Arkansas, Florida, and Notre Dame. Obviously, those schools will continue to grow their budgets, so FSU will definitely not keep pace from an expense perspective.
  4. The good news, however, is that FSU's football revenue in 2010 was $35.8m. It seems logical to assume that the revenue number will continue to grow, and hopefully by 2015 FSU will be up in the $40-$45m range - regardless of whether FSU is in the ACC, Big XII, or anything else.
  5. In order to maintain its 2010 profit margin of 47.9%, FSU would need to generate approximately $52m in 2015 football revenue. Frankly, that's probably out of reach in the ACC. Perhaps it could be achieved in the Big XII, though.

My main conclusion, though, is that FSU can maintain an elite football program that is capable of competing directly with the Top 15 teams (and the SEC) without making huge strategic changes like shifting conferences. Obviously, more revenue means more profit (which benefits other sports and the broader university) but even with a relatively modest budget, FSU should be able to maintain an elite football program with the revenue that is being generated. This assumes, of course, that the FSU athletics department is comfortable with allocating more funds to the FSU football program, which would probably come at the expense of other FSU sports.

Shifting conferences would likely benefit the broader athletic department, but I'd venture to guess that we'll continue to put the required funds towards the football budget - regardless of conference affiliation and the revenue that is being generated.

What do you guys think? Do you agree with this approach? Do you have questions about the process? How would you do it differently? Also, if anyone is reading this and has better data available (I had to estimate some of the numbers) please let me know. Does this at all impact your thoughts on the timing or necessity of conference realignment?

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