Philanthropy and Penn State Intercollegiate Athletics

Penn State alumni and supporters have been very generous in the distant past and might be convinced to be so again.

Since the Penn State Board of Trustees meeting last Friday I’ve received questions from alumni who are confused about Action Item 3, Proposed Authorization to Expend Funds, ICA Facility Investments, University Park. (read my comments on the meeting here, watch video of the public meeting here).

The questions boil down to: “Why do they have to borrow $7.5 million to pay for this? Can’t Penn State alumni and supporters just write a check?”

I wish I had a good answer. Here’s what I do know.

This action item asked for authorization for Intercollegiate Athletics (ICA) to spend $7.5 million, financed by debt, to add ancillary items to the football practice fields at University Park. Holuba Hall and the practice fields behind it are categorized as Intercollegiate Athletic facilities (as opposed to intramural) and are used primarily by the football team but share with 16 other sports.

The improvements include a new sound system and video board for Holuba Hall and a permanent video board, play clocks and speaker poles, and end-zone upgrades to the outdoor space. This is a capital improvement project that will be paid for by debt financing, and as such requires Board approval.

Big10 intercollegiate athletic departments, generally speaking, have three main revenue streams: their annual cut of the Big10 Conference and NCAA media-rights deals, revenue from ticket sales, and philanthropy. Remember, universities are not to be a party to Name/Image/Likeness (NIL) contracts. 

The income from media-rights deals are negotiated years ahead and relatively fixed for several years, and schools can reliably forecast which events will be sell-outs. Philanthropy, on the other hand, reflects the value alumni and supporters put on a university and its programs. It takes a lot of hard work and dedication to attract and retain the goodwill of donors, and for some of our NCAA Division One competition that work has paid off.

Here’s a closer look at philanthropic donations to Penn State Intercollegiate Athletics over the last ten years. Please note that philanthropy is recorded in the year received, which can be one or more years after the initial pledge.  

*2020-21 does not include the reclassification of STEP Fees (football seat licenses) as philanthropy by former Athletics Director Sandy Barbour.

At the Friday Board meeting, Dr Bendapudi announced that Penn State will be renovating Beaver Stadium. It’s too early in the process to have details, but a wild guess of cost in excess of $750 million dollars would be in keeping with recent ICA projects at other universities** across the nation. I applaud Dr Bendapudi for her assurances that “no part of this project will be funded by tuition, student fees or any of our educational budget”.

Action Item 3 passed—Yea: 32, Nay: 1 (Fenchak)—the project was approved, and $7.5 million dollars will be added to Penn State’s debt. I voted NO because I believe Penn State, in good conscience, cannot add to its current debt load whose service comes from operating budgets ($3.7 billion in 2022, a 12%  increase from 2021) unless the money is being used to fund the core priorities of the University. To me, those core priorities are to provide a quality, affordable education; underwrite meaningful research; and engage in outreach.

I want Penn State Athletics to enjoy consistent, long-term success. That is one of my responsibilities as a Trustee and my desire as a fan. The University must figure out a way to get donors to show their support, and I am happy to help. Penn State alumni and supporters have been very generous in the distant past and might be convinced to be so again. But they have to feel like someone is listening.

---

** Paid for via philanthropy, not debt: Ohio State has recently built a $50M wrestling/gymnastics/volleyball facility and a $20M lacrosse stadium. Georgia spent $86M on a new football facility and renovations to their stadium, while Michigan raised $220M to finance athletics facilities and $110M to endow athletic scholarships. Alabama has raised nearly $500M in recent years and is considering building a new on-campus basketball arena.

As a member of the Penn State Board of Trustees, I will from time to time be made aware of certain confidential information.  I will also engage with Trustees and administrators in private, off-the-record conversations, with the expectation of privacy on both parties. I take these expectations seriously, as they are required in order to catalyze important discussions.

As a fiduciary, it is also important that I engage in conversations with all stakeholders of the University. Stakeholders like you.  Discussions will involve publicly available information and issues before the Board, as well as my personal thoughts, concerns, and ideas. I also will continue to solicit your thoughts, concerns, and ideas, and plan to engage in meaningful conversations with you on those topics. I hope that you will continue to share your concerns and ideas with me.