OVERVIEW

In November the University reported to the Regents that the Designated account for its Athletics program recorded a FYE01 deficit of $543,015.� For that same period, the State General Operating account for the Athletics program recorded a FYE deficit of $493,828, creating a total FYE deficit of $1,036,843.

Several months prior to the Board of Regents meeting in November, the University had initiated an aggressive process of analysis and planning with the dual objectives of eliminating the FYE01 deficit and developing a plan to establish and sustain an Athletics budget that maintains a positive balance on an annual basis.� During the initial stage of this process, the University hired an independent consultant to review the budget and the operations of the Athletics program.� Then, for the past several months, the Athletic Director and the Vice President for Student Affairs have been collaborating with the leadership of the University, the Bobcat Boosters, and ASMSU to construct a multifaceted, balanced budget plan.� This has now been accomplished, and the plan has been endorsed by all involved, including the University Planning, Budget & Analysis Committee (UPBAC).

The Athletics program has been operating in a deficit status since FY98.� However, at this time the University is confident that the Athletics Director and the Vice President for Student Affairs have developed a plan to successfully eliminate the FYE01 deficit and establish an Athletics budget that maintains a positive balance on an annual basis.

ELIMINATION OF DEFICIT

The $1,036,843 deficit will be eliminated during the current fiscal year, with a one-time transfer of Other Lawful Purpose (OLP) funds.� These funds are available because when the Phase I Stadium & Fieldhouse Bond Fund was closed, it contained a $1.8 million balance of unexpended investment earnings that were generated during the course of the project.� Under the term of the indenture, these funds can be used to fund the $2.2 million Fieldhouse re-roof project � and a similar amount of (OLP) funds originally accumulated for the Fieldhouse re-roof project can be released for other purposes, including the elimination of the Athletics program deficit.

In addition to the $1,036,843 transfer, OLP funds will also be used in two other ways to support the Athletics program budget.� A total of $344,006 will be used to pay the remaining debt on the Stadium scoreboard and sound system, which will relieve the operations budget from loan payments in FY 2002, 2003, 2004 and 2005.� Also, $100,000 will be earmarked for a construction project to create up to four additional Stadium skyboxes, which will generate $24,000 annually in additional lease revenue.

SUSTAINABLE POSITIVE BUDGET BALANCE

Developing a plan to establish a budget with a sustainable positive balance was much more challenging than finding a solution for eliminating the current deficit.� The key characteristic of the University�s plan is that it is a broad-based solution which includes a Base reduction of $171,000 in operations expenditures, and depends upon the enhancement of revenues from numerous sources.

The planned annual revenue enhancements include $24,000 from the added skyboxes; $16,000 from lease increases on existing skyboxes; $105,000 from a $1.00 surcharge on all athletic tickets; $120,000 from University General Operations, to fund the costs of central services (security, snow removal, building insurance, etc.) that Athletics has had to pay for in the past; $50,000 to $100,000 in additional Major Gifts revenue; $60,000 from major concerts or other entertainment events; $33,000 in added concession sales; $20,000 in added Corporate Sponsorships; $58,000 in added Booster support; and, $195,000 in increased Student Athletic Fees.

The current student fee is $31.75 per semester.� Except for a $1.75 adjustment in August 2001, the fee has remained constant since its inception in 1993.� Under this plan, the fee will increase by $10.00 per semester in FY 2003, and then $7.50 per semester in FY 2004, 2005 and 2006.

Even after these proposed increases, the MSU Athletic Fee will still be less than the current fees at many other Big Sky Conference campuses.� In FY 2006 the MSU annual fee will be $128.50.� This is in comparison to the following FY 2002 fees: $144.00 at EWU, $198.00 at ISU, $141.00 at PSU, $103.00 at Sacramento State, and $79.00 at Weber State.� NAU does not have a student fee, but their Athletics program receives �discretionary funds� from the University President.

As per the University�s pledge to ASMSU, the revenue from this increase will be expended for athletic scholarships, academic center support and preseason room and board costs.� Since its inception, all revenue from this Student Fee has been transferred into the Athletics operations account.� None of this revenue has ever been used to cover debt service payments.