Sports outsourcing
Military academies turn to private entities to run their athletics business operations
Army and Air Force didn’t think they had much of a chance.
As costs kept escalating in major-college sports, both federal service academies couldn’t keep up with their civilian competition. They couldn’t afford it, not without some kind of help.
So they went to Congress. Since 2009, each got legislation that au- thorized their athletics business operations to be outsourced to separate, private entities — moves that drew little notice but were driven by one big reason:
They had been sucked into the high-cost funnel cloud of majorcollege football and basketball.
“With the cost of athletics increasing the way it had been, something had to be done,” Air Force ath-
letics director Jim Knowlton told USA TODAY Sports.
Both academies followed a similar path forged by Navy athletics, which has operated as a separate non-profit for decades.
The most recent conversion came at Army. Athletics business operations there transitioned this year into a 501
c-3 non-profit called the Army West Point Athletic Association — a change that follows legislation that authorized it in the 2016 National Defense Authorization Act.
Each realized there was a limit to government support of their programs and wanted more freedom to make and spend money as outside businesses.
“Leaders at the academy realized if we continue on the path we’re on, we won’t be able to support a Division I athletic program,” Knowlton said.
It’s a choice. If they wanted to, Air Force, Navy and Army all could get out of the Division I sports spending race and compete in NCAA Division III, where expenses are dramatically lower and where there are no scholarship players. Another federal service academy, the U.S. Coast Guard Academy, competes in Division III with revenue of about $3 million, compared to about
$42 million to $50 million at the Division I service academies, according to records from recent years.
Those budgets aren’t saddled with the big expense of athletic scholarships, unlike at other universities. That’s because the academies don’t have athletic scholarships. But the academies do have considerably more teams in more sports than other schools — about 30 teams each. They also want to win in the big revenue sports of basketball and football, where the market for coaches’ pay, administrative support and facility expenses keep rising.
Navy football coach Ken Niumatalolo makes $2 million and is by far the highest-paid coach at all three academies, according to recent records. He has also been mentioned as a candidate for other jobs and could make more money elsewhere. This year, 39 schools are paying their football coach $3 million, up from nine in 2011.
“There was a judgment made that the ability of the athletic programs writ large … to compete effectively against other similarly positioned colleges, was important, both as a recruiting tool for the individual academies and also a recruiting tool, quite frankly, for the services writ large,” said John McHugh, a former U.S. Army Secretary and congressman who co-sponsored the Air Force athletics legislation in 2009. “So those new structures allowed, for example, competitive payment for coaches and such, so that ability to compete was sustained or actually enhanced.”
The outsource movement
Navy athletics led the academy outsourcing movement through the Naval Academy Athletic Association, founded in 1891. Federal legislation in 2013 essentially ratified the NAAA’s longstanding operation of Navy athletics, athletics director Chet Gladchuk said.
By operating as separate non-profits, they all can make and spend money more like normal athletics departments. It helps untangle them from government rules that otherwise restrict federal academy fundraising and contracting.
For example, Tim Fitzpatrick, the athletics director at the Coast Guard Academy in Connecticut, is a federal employee and is not allowed to fundraise in his official capacity. He’s been advised to work around it when he goes to meetings with potential donors.
“I’m like a starting pitcher in baseball,” said Fitzpatrick, whose department is part of the federal academy and is not run by an outside organization. “I pitch seven or eight innings, give the case for support, tell (potential donors) nice stories about how things are operating in athletics, and then a development officer takes over and makes the ask.”
The development officer is part of an outside support organization, not subject to stricter federal rules designed to protect against government abuse, waste and fraud. Likewise, the athletics department non-profits serving the Division I academies are private entities.
Another example came in 2013, when a report by the inspector general of the Department of Defense criticized personnel of Air Force Academy Athletic Association for actions that came before Air Force’s restructuring in athletics.
The report said they “inappropriately solicited, accepted, recorded, and reported over $532,000 in monetary gifts.” This wasn’t a criminal scandal. It was more like an internal government rules issue and happened because these athletics personnel “were not familiar with DoD and Air Force requirements prohibiting the solicitation of gifts,” according to the report.
In reply, the academy superintendent noted the athletics association recently had been converted into a new nonprofit organization in 2013. He said, “This restructuring minimizes risk and the type of solicitations identified in this audit.”
‘Earn market rates’
Army and Air Force athletics previously were supported by academy athletics associations known as “non-appropriated fund instrumentalities” of the Department of Defense. The recent legislation gives their athletics operations more autonomy as private nonprofits — a structure that also appears to shield them from open records laws much like private businesses.
“The addition of the Army West Point Athletic Association (AWPAA) … allows Army Athletics to manage personnel actions, negotiate contracts, and engage in sponsorship agreement opportunities in the most efficient way possible,” Army athletics director Boo Corrigan said in an email.
At Air Force, the Air Force Academy Athletic Corporation (AFAAC) opened for business in 2013, following legislation authorizing it in 2009.
Each private athletics entity has a cooperative agreement with its academy and is overseen by it, pursuant to NCAA rules for institutional control. This set- up is similar to some other public school athletics departments being operated as separate non-profits, including at Kansas and Florida, where they’ve been in place since the 1920s.
Since the change, Air Force athletics has increased annual fundraising from less than $500,000 to about $2 million, said Nancy Hixson, chief executive of the AFAAC.
But they still have disadvantages compared to other schools.
Unlike presidents at other universities, the superintendents at the academies aren’t allowed to fund-raise in their official capacities as federal employees. Air Force also can’t just sell naming rights to government property at the academy.
“Legislation would have to change in order for that to happen,” Hixson said.
Army and Air Force athletics programs still have been reliant on government or academy support in recent years, though Gladchuk said Navy’s is only about 1% of its athletics budget. At Air Force, athletics got $31 million of its $50 million from state or other government support for 2015-16, according to a document filed with the NCAA.
Academy athletes also are government employees. Congress wanted to help them compete.
The restructuring “would allow (Army’s) coaches and leadership within the (the athletics department) to earn market rates and raise revenue, and would allow the coaches’ children’s attendance in on-post schools,” a recent Army Board of Visitors report said.