KNOXVILLE - The University of Tennessee's athletic department reported a $3.98 million deficit for the 2011-12 fiscal year, and the department's reserve fund has dropped to less than $2 million.
According to a university release, the financial model currently in place for the athletic department is "not sustainable long-term."
"It is critical that our athletics program be financially healthy and that its budget is sustainable," Tennessee chancellor Jimmy Cheek said in the release. "We are committed to having premier athletics programs at the University of Tennessee, and to do that we must develop a financial model that pays for these programs while also building up the necessary reserve funds. I support [athletic director] Dave Hart's efforts and commend him for the work that has already been done to get us on more sound footing."
The university release detailed some components that contributed to the fiscal deficit. Due to prior agreements, a $21 million gift from the department went to the university for various purposes, and the cost of payments for former Vols coaches was high. In addition, the department's outstanding debt for facilities upgrades is more than $200 million, out-of-state tuition costs continue to rise and Tennessee had a $4.6 million tax bill due to a heavy rate of state taxation for tickets.
The athletic department is addressing its budget and low reserve fund, and the biggest way is the merger of the once separate men's and women's athletic departments, most notably the elimination of "duplicate expenses" to streamline operations and increase efficiency. The athletic department also will use any Southeastern Conference distributions for its athletic budget, evaluate its commitment to non-athletic scholarships for the university and how it gives money to the university and increase allocation percentage from licensing revenues.
"A more fiscally sound model," the release stated, "is essential to provide for the long-term health of the athletics program."