After it was revealed that KU’s 2005-06 fiscal-year budget was projected to surpass $40 million — about $13 million more than when Lew Perkins took over as athletic director in 2003 — board chair Maddox was in a jovial mood.

“You can’t rest until you get $50 million,” Maddox quipped to Perkins. “But once you get there, we can talk about a vacation.”

Scattered chuckles ensued, but, really, how ridiculous was it? In 2000, when KU dropped men’s tennis and swimming, the projected budget for the next six years was full of doom and gloom.

In fact, the FY 2005-06 budget was projected at $26.9.

Scott McClurg/Journal-World Photo

Obviously, the KU athletic department has come a long way financially since Perkins’ arrival in the summer of 2003, allowing for the building of new facilities, the expanding of the KUAC staff by seven employees this year alone and the comfort to run an athletic department with well-compensated workers.

“We’re finally doing business the way it should be done,” said associate athletic director Sean Lester, who oversees the budget.

Still, it’s worth examining closer, with a magnifying glass, to see what the figures really mean.

What shot the budget up 48 percent in three short years? How much of it was Perkins’ proven track record at bringing in funds, and how much was inevitable, considering the (dollar) sign of the times and on-field success of KU athletics since the turn of the century?

And, in an even larger scope, is Kansas becoming part of a bigger problem, a crisis where amateur athletics has become so emphatically money-driven?

The latest bulges

Analysis of budget breakdowns of the past three years shows three categories have ballooned significantly at Kansas — contributions, apparel and ESPN Regional Television income.

All three are well documented. Contributions have skyrocketed since Perkins implemented the priority-points system for men’s basketball seating at Allen Fieldhouse, a plan that is carrying over to football. The 2003-04 budget lists contributions at $4.5 million. The proposed budget for 2005-06 expects contributions to be around $7.8 million.

Lester credits Williams Fund donors, but admits that almost 80 percent of the increase is related to the priority-points setup. Since the plan was made public last year, fans have donated arms and legs to increase their point total, which, in turn, increases the quality of their seat at Allen Fieldhouse. The system continues to be debated fiercely among KU faithful, but the bottom line is that revenue has increased.

As for the other two, the finalization of new contracts in the last eight weeks has assured elevation in those categories. Within the last 60 days, KU announced a seven-year, $40.2 million deal with ESPN Regional, as well as an eight-year, $26.67 million agreement with adidas for exclusive apparel rights.

Both of the deals dwarf most agreements universities are able to negotiate and certainly are much larger than the deals they replaced at KU. The ESPN contract will bring in an average of $5.7 million per year, compared to $1.86 million under the old contract, which was signed in 1999. The adidas deal, which evens out to $3.3 million a year, is much higher than the $600,000 listed as Nike income in past budgets.

But the amount of money Kansas was set to receive with the new deals was guaranteed to be much higher than it was under the old contracts, for two reasons: 1) inflation brought on by the athletic arms race, which has exploded this decade; and 2) the unparalleled recent success of KU athletics, which has included two men’s basketball Final Fours, a football bowl game and three Big 12 Conference men’s basketball titles since 2002.

Kansas’ goal: to get in ‘upper half’ of league (05-31-05)

“The past agreements were basically eight years old,” a source close to the athletic department said. “The dynamics have improved.”

Still, the two deals brought in a substantial amount of money that other schools couldn’t match. Nebraska recently signed an apparel deal with adidas for eight years at $22.7 million. Pittsburgh, according to the Pittsburgh Post-Gazette, received $5 million in cash and apparel for inking a five-year deal with adidas last year.

Other increases

There are other, smaller increases up and down the detailed budget.

An intriguing one is kustore.com earnings. In the FY 2004 budget, the unrestricted income for the KU Store is listed at $150,000 in net revenue. After ’04, though, the KUAC started figuring in gross revenue, listing the income at $1.1 million in ’05 and leaving the cost of running the store out until expenditures, after the operating budget already is calculated.

So, while income jumped from $150,000 to $1.1 million, expenditures for the KU Store jumped from nothing to $600,000. Right or wrong, the operating budget looks a little rosier as a result of the money moved on paper.

Regardless, the revenue stream is increasing through merchandise sales, just like in most other categories. Football is expected to bring in about $1 million more in FY 2005 than it did in 2004. Men’s basketball will increase $2.1 million in unrestricted income from ’04 to ’05, now up to about $7.4 million — due in large part to extra home games on the schedule, as well as an increase in ticket prices after the 2003-04 season.

Other notable increases are a $1 million surge in Big 12 income, a $400,000 boost in interest on endowment and a projected increase from $190,000 to $365,000 in the “miscellaneous” category, which includes Olympic sports concessions, the University’s contract with Coke and other minor sponsorships.

In all, of the 15 categories listed on the expense summary for unrestricted income, 10 have had significant increases since FY 2003-04, and none has seen significant decreases.

“We’ve seen a lot of growth,” Lester said. “Did I expect it to grow this fast and furious? You hope that’s the case, but you have to be very conservative.”

Why is it happening?

So is there a downside to getting the engine fixed and roaring back into the middle of the athletic arms race?

Can anyone blame Kansas for becoming this aggressive with budget-building?

“No way,” said Michael Granof, an accounting professor at Texas who actively dissects college athletics. “What’s the point? What good will it do to save a few million bucks and have a lousy team every year?”

Granof is on the steering committee for the Coalition on Intercollegiate Athletics, a three-year-old alliance of university faculty members that examines the future of college sports.

Like many, Granof sees hard-to-solve problems in the dollar sign becoming too powerful in college athletics, but he understands why schools like Kansas feel pressured to ditch the conservative ways and get serious about raising money — exactly the reason Perkins was hired in 2003.

“The school has opted to not be the doormat of the league anymore,” Granof said.

The problem, Granof says, is much larger than Kansas following the leader. Salaries for coaches — even assistants in the revenue sports — are getting high enough to put tremendous space between the major schools (like Texas) and the smaller schools that can’t afford six-figure salaries for everyone.

But without congressional legislation, nothing can be done to control it.

Big-time universities can afford it because nothing, it seems, will slow down the money coming in from donors feeling their cash can help their school cut down the nets or hoist the BCS trophy.

“The underlying problem that makes it so difficult of an issue is the value of athletics in our society,” Granof said. “Let’s face it: Sports are big.”

Will it help?

So do all the dollars donated to athletic departments — like KU’s — actually help the on-field success?

Perkins, for one, thinks so.

“As our revenue is going up, we’re seeing the success on the field going up,” he said. “I think there is a correlation between finances and success.”

Perkins’ claim isn’t a law, but there is evidence to support it. Texas likely once again will have the grandest budget in the Big 12 — thought to be more than $70 million — and for years it has been the best in on-field performance, too.

There are more examples out there — enough to make many believers in the correlation theory. But does more money mean more problems? Is this what’s best for amateur athletics in this day and age?

“Several years ago, when I first got involved in this, I had all the answers as to what you should do,” Granof said. “Now I don’t have any. It’s a very complex issue.”

Until anything clear-cut is decided, KU will play along with the rules in place. That means one thing — push that operating budget higher and higher, and ask questions later.