The Future of Small College Athletics

Just like a big box store, higher education is a business. For years the world has looked at colleges and universities as non-profit entities that serve the higher purpose of educating young people, conducting research, and providing a positive impact on society. While each of these priorities can commonly be found in higher education strategic plans, the fact is that plans require funding.

Colleges and universities generate revenue in a variety of ways including charitable gifts, federal grants, state funding, and enrollment. Without fail, for most institutions, enrollment revenue (tuition, fees, room/board) is the critical component on the balance sheet. For years, enrollment at colleges and universities has been declining. While there are outlier schools that have maintained or increased their enrollment, there are far more that have seen precipitous drops. Lower enrollment means less revenue and less revenue means smaller operating budgets, deferred maintenance, and difficult decisions.

This is a reality for many small colleges and universities who have faced these challenges for the past several years. During this time, athletic departments at these schools have seen their roles change dramatically. 25-30 years ago, athletic departments at NCAA D2 and D3 schools, as well as NAIA and 2-year schools primarily existed to bolster school and community pride, enhance campus life, and increase the visibility (think “front porch) of the university.

More recently, athletic departments have been asked to play a more significant role in the business enterprise of the institution. Virtually every small college has added sports in the past 10-20 years (989 new teams since 2020 in D2, D3, and NAIA alone). Small colleges have seen growth in traditional sports like football and also the advent of sports such as women’s wrestling, bowling, and cheer and dance to name a few. For a brief period, virtually every college was frantically working to create an Esports program, all with the idea that team rosters bring paying students. In many cases, small college athletic departments grew from 200 or so student-athletes to 500-600. 

One of the first meetings that I had with the university cabinet when I became athletic director at Oklahoma City University was focused on enrollment. Everyone at the table was asked for ideas and I sheepishly (I was new and naïve) suggested that we could consider adding some teams or junior varsity sports. Over the next decade, we added 12 sports and more than doubled the size of our athletic department.

For many small colleges, adding sports offered temporary respite to revenue challenges. A new team brought new students and new revenue. Keep in mind that each new team also had expenses including coaching salaries, scholarships (or institutional discount), and operating expenses. However, at the same time that athletic departments were growing, schools were still losing traditional (non-athletes) student enrollment. In many cases, a school might add 200 students through athletics but still have lower overall enrollment. For many, flat enrollment from year to year was a success.

It has been commonplace over the past few years to see small colleges shutting down due to financial challenges. Flat or decreasing enrollment doesn’t provide the money necessary to maintain buildings and pay staff. Interestingly, few of these schools have challenges maintaining athletic rosters. Birmingham Southern, for example, had a great run in the NCAA D3 baseball world series even though the institution was closing. All of this to say, that full rosters do not guarantee institutional financial stability.

More recently, we’ve seen schools eliminate athletic programs to save money. Sonoma State, Bryn Athyn, and others have all decided that athletics doesn’t play a significant role in their institutional mission and as a result of financial pressures they are cutting all programs. On the other end of the spectrum, schools like Hartford and St. Francis, who formerly competed in NCAA Division 1, have (or will) transitioned to D3 in an effort to save on expenses and compete at a level that they feel best serves their mission.

It seems unlikely that there will be a significant number of schools that drop athletics entirely. On the contrary, many schools rely on athletics, perhaps overly so, to build enrollment and contribute to the bottom line. In some cases, athletics makes up more than 60% of the total student population on campuses.

On the other hand, it seems entirely likely that we will see a migration of schools from Division I as a result of the disparity in which these schools approach NIL and the pending House settlement that requires schools to cap roster sizes and commit to compensate student athletes. The two schools mentioned above (Hartford and St. Francis) chose to reclassify to Division III but it’s just a matter of time before we see other schools transitioning to Division II or creating reimagined levels and conferences within Division 1.

Understanding this history and the challenges that many schools face is important as we consider what the future of small college athletics might look like. But the real key, in my opinion, is what happens with the NCAA.

At a time when the business of higher education is immensely challenging, the financial contribution that the NCAA makes to its conferences and member schools is more important than ever. While the NCAA only allots a little over 4% to Division 2 and 3% to Division 3 these funds provide significant support to conference offices and cover most expenses for post-season competition. So, what happens if this money goes away or is significantly reduced?

It's not a stretch to think that the NCAA will continue to have significant challenges and changes. The organization faces hundreds of lawsuits with more added every week. More importantly, the large institutions, that already take the lion’s share of the NCAA’s revenues are making significant changes in the way they operate…most notably by paying millions of dollars to student-athletes. More than ever, competitive success at the highest level of college athletics is tied directly to payroll. 

As the Power 4 schools continue to spend more, they are forced to look at ways to generate more revenue. Look no further than the fact that USC purposefully joined the same conference as Rutgers and Stanford now competes in the same league as Miami. None of this makes common sense but, I suppose, it does make financial sense. Why else would you fly 3,000 miles for a volleyball match? These examples and the resulting impact on the Pac-12 should serve as a warning and reminder that things can change and they can change very quickly. 

Imagine if Power 4 schools, in their quest to find more and more revenue to fund their programs, decided to create their own basketball championship tournaments? The result would be a windfall of hundreds of millions of dollars for these schools all at the expense of smaller schools including every mid-major or non-football playing institution in the country that relies on the NCAA (which is funded primarily by the basketball tournament) for funding. It’s not hard to envision when you consider the recent NCAA governance proposal that seeks even more control for the Power 4.

Small college athletic leaders should be contemplating this scenario now. What would happen if the funding from the NCAA stopped or was dramatically reduced when the NCAA’s current television agreement expires in 2032? For Division 2 and 3 schools this would likely require an increase in the amount of conference dues paid (or a decrease in services provided for the conference) and additional budget dollars available for post-season travel. In short, the cost of doing business would increase significantly for schools that are already facing enrollment drops and budget cuts. For the most successful schools, post-season travel alone could become a $500,000 or more annual expense.

Many small college athletic departments are already underfunded. It’s not uncommon for a coach to face the reality of having to raise funds (in some cases 50%-60%) just to cover the operating costs of their program. Even the best funded programs face the challenge of maintaining their current operating levels while trying to figure out how to recruit student-athletes in the “pay for play” era. Something has to give.

Imagine sitting at the table for your annual budget committee meeting and telling the CFO (who has already asked you to cut 8% from your budget) that you need an increase of $10,000-$20,000 for conference and national dues and $300,000 for post-season travel. You’ll find out very quickly how much importance your institution places on competitive success because the reality is that virtually none of our institutions is prepared or even able to fork over that kind of money.

Whether there is a precipitous drop in the NCAA funding model or not there is no denying that significant changes are on the horizon for small college athletics. The question is, should you wait until your circumstances force you to address this or should you be planning for this eventuality now? 

In addition to Hartford and St. Francis, a recent example of a proactive approach can be found at Azusa Pacific University. APU has a long and storied athletic history, having won 48 team national championships and 8 Directors’ Cups. The school recently announced that they are moving from Division 2 to Division 3. This decision will provide a revenue windfall for the school in that they are moving to a more geographically centered conference (no more trips to Hawaii for conference games) and to a conference that sponsors football. As a result, APU will save tens of thousands of dollars on team travel and generate new revenue by bringing back their football program.

Ego is the biggest challenge in making a decision like this. It’s rare to see schools like APU (or Hartford and St. Francis) make a decision that is perceived as moving down. That having been said, do your alumni really differentiate a victory over Occidental College as opposed to Biola University? The answer is unequivocally no. 

The schools that you compete against and the “division” that you compete in does not enhance the value of your institution. As mentioned above, a successful athletic department does not guarantee or even significantly impact the financial stability of the institution. In small college athletics, success often just means “more expensive,” at a time when very few schools can afford it.

40 years ago, 25 institutions in Oklahoma were all members of the NAIA and competed against one another. While some of these schools have remained in the NAIA, others have transitioned to D2 and compete in the MIAA (Missouri), the GAC (Arkansas), and the Lone Star Conference (Texas). The result for all is significantly increased travel expenses with every school travelling out of state multiple times a year to compete. At the same time, each of these institutions has faced declining enrollment and for the public institutions, reduced state funding. This approach is not unique to Oklahoma nor is it sustainable in the long-term.

This year, a bill was proposed in the Oklahoma State Senate to create a new “Oklahoma based” Division 2 conference. The bill passed and currently sits on the Governor’s desk for signature. While it seems odd for a collection of state funded and private universities to rely on a political measure to help bring them back to the same grouping that they enjoyed years ago in the NAIA…it does make a lot of sense.  What's also interesting is that this group of schools could create an NAIA conference without any political influence and begin competing for championships within a year.  Doing so would require significant exit fees from their current conferences...something we'll discuss more later in this post.

When I contemplate the future of small college higher education I believe more resolutely than ever that athletics will continue to be an important part of campus. That having been said, it must be reimagined in a way that allows the institutions to sustainably support it. Most likely this will mean a reorganization of schools to create more geographically centered conferences with like-minded and similarly funded missions. 

In a recent conversation on this topic with a collegiate athletic administrator, he described this as a “re-shuffling” of the deck. This might result in the lower 3^rd of Division I aligning with the upper two thirds of Division 2, and the lower third of Division 2 and the top third of Division 3 aligning with the NAIA. To a great extent, this might take schools back to the same athletic configurations that they competed in 30 years ago. Let’s face it, many of these schools have already switched conferences multiple times in the past few decades, what’s one more change going to hurt?

There are two immediate challenges that stand in the way of this approach. One, I’ve already mentioned…ego. Virtually every school that has transitioned to a different division or changed conferences sold it as a move up. “A school of our significance aspires to be the best; therefore, we are moving.” It takes a lot of guts to evaluate your athletic affiliations, and more importantly the financial health of your institution, and make a change based more on common sense than appearances (see Hartford, St. Francis, and Azusa Pacific). Why drive the Chevrolet that you can afford when everyone is impressed by your BMW? Not to mention, the contention a move of this nature might create among alumni and other individuals affiliated with the institution. The reality is that for many schools the environment that led them to transition year’s ago has now changed (or the makeup of the league they moved to has changed) and as a result what seemed like a logical decision at the time isn’t so obvious anymore.

The other big challenge is the conferences themselves. There has been so much conference movement over the years that conferences have built in punitive damages/buyouts for any school that wants to leave. Look no further than the ACC which recently quashed Florida State’s and Clemson’s efforts to leave (neither school could afford the buyout). The same issues exist now in small college athletic conferences where exit fees range from $25,000 to $250,000 in some cases. When you multiply this by the number of schools that would have to move to “reshuffle” the small college landscape the amount is staggering. Schools no longer have the freedom and flexibility to choose what’s right for them, unless they are willing to pay the fee that they willingly locked themselves in to.

As we look to determine the future of small college athletics, the only certainty is that there will continue to be changes. Much like we have continued to see again this year, colleges and universities will continue to close, enrollment is predicted to continue to drop, and the financial pressures will continue to mount. The future for those schools that survive and the ones that thrive most likely will have very little to do with athletics. Here’s hoping that small college leaders come together now with some of their peers in Division 1 to start envisioning a strategy that helps as many schools navigate the coming storm as safely and proactively as possible.