PIERRE — The start of a new school year means the beginning of winter high school sports. It won’t take long before those sports are culminating in tournaments.
October will see tournaments for boys’ and girls’ soccer, boys’ golf, girls’ tennis and competitive dance and cheer. In November the seasons will end for volleyball and football.
Before the new school year even began, the South Dakota High School Activities Association budgeted for those events and more—tallying expenses and projecting revenues. Personnel in the Pierre-based office made those decisions without knowing which teams would be participating in the tournaments and, perhaps more importantly, what the weather will be like at tournament time.
Ticket sales key to funding
Dan Swartos, executive director of the activities association, estimates that 70% of the association’s $2.8 million in operating income is generated by ticket sales to state and regional tournaments.
A former school superintendent, Swartos was accustomed to a creating a school budget with a set revenue base of taxes and state aid. He controlled the budget by getting a handle on expenses.
At the association, many expenditures, like how much it costs to rent the Sanford Premiere Center or Rapid City Arena, are set.
“We don’t have a lot of wiggle room in terms of our expenditures,” Swartos said. “So how we control our budget is through controlling revenues.”
About 7% of the association’s budget comes from dues from member schools as well as a $60 fee for each SDHSAA-sanctioned sport or activity the school sponsors. As the association hunts for ways to increase revenues, Swartos doesn’t want to increase school dues or fees or the price of admission to state tournaments.
“We kind of hang our hat on collecting as little as we can from the schools because we know they’re in tight budgetary situations as well,” Swartos said.
Cash doesn’t flow easily
In an effort to be transparent and user-friendly, the association recently gathered its financial information into one section on its website, sdhsaa.com, under the About Us tab.
Listed there are balance sheets, audits, income statements and event financials. The association’s cash flow chart, found in each board meeting agenda on the website, shows how difficult it is to keep the association operating when revenues come in so sporadically.
During the 2018-19 school year, the association had a positive cash flow—more revenue than expenses—in only four of the 12 months. In the prior year, there were three months of positive cash flow.
“We get our income just a few times a year,” Swartos explained, as revenue comes in from state tournaments. “In between we have an investment/reserve account where we sweep money over and then replace that money once we receive income again.”
Budgeting for state tournaments
Some aspects of budgeting for a state tournament—projecting expenses and revenues—are easier than others.
“If 10 people show up, or if 10,000 people show up, it’s going to cost us the same to run that tournament,” said Isaac Jahn, the association’s financial director.
In addition to paying for the venue and reimbursing team expenses, tournament costs include paying for officials, custodians, bands, supplies, awards and tickets.
Revenue projections are based on prior years’ events at the same location.
“When’s the last time we hosted this event at this site? What did the attendance look like? That’s what we go off,” Jahn said.
Geography can also play a part in budget projections.
“At Rapid City, we generally get less in terms of attendance and revenue because you’re going to get fewer casual fans from the east side of the state that are going to drive all the way out there,” Swartos said. “But the expenses, generally, in terms of venues, are less.”
Swartos admits that there’s some guesswork that goes on when it comes to projecting revenue. Ticket sales can get an unexpected boost from an acclaimed player in his last tournament or the qualification of two teams located close to the host site, making it easier for more of their fans to attend.
According to Swartos, the association takes a conservative approach when it budgets for state events.
“We’re going to err on the high side in terms of expenses when it comes to budgeting,” Swartos said. “We’ll err on the lower side in terms of income.”
The last school year proved that even the best budget projections can’t predict the weather.
“The last year was a tough one,” Swartos said. “We had a blizzard in soccer and it felt like we had snow events every event from there on out.”
Even with the rough winter, the association came within about $4,000 on a $2.8 million budget.
Unique situation in football
Due to the renovation of the Dakota Dome at the University of South Dakota, this year’s football championship games will be held in Brookings on the campus of South Dakota State University.
Moving such a big, popular event to a new venue could have been a budgeting nightmare. The association’s projections were helped along by a disparity in venue prices.
The usual cost for the association’s three-day rental of the Dome is $50,000. This year’s championships will be played over two days because the SDSU Jackrabbits have a home game on the Saturday of the high school championships. SDSU is charging $12,000 for the use of Dana J. Dykhouse Stadium.
Holding to its conservative principles on budgeting, with less in expenses, the association also budgeted for less in revenue. The conditions for outdoor football in November are hard to predict.
“It could be a snowstorm and we could have a bad attendance,” Swartos said. “It could be a 70-degree day and we could have great attendance. We’re hoping that the difference in the venue cost will help offset ticket sales quite a bit.”
The search for new revenue
This past year the association polled member schools that hosted state tournaments about their costs. The results varied wildly. Some schools invested in hospitality rooms. Other did not. Some schools counted the cost of hiring substitute teachers to fill in for personnel who had to work at the state event. Others didn’t count that cost.
Even with just one year of data, it became apparent that some schools are losing money when they host state events.
“We have a prescribed amount that we give them to host an event. A lot of times that doesn’t cover all their costs,” Swartos said. “Our focus has been on looking for ways to make sure that a school isn’t losing money by hosting a state event.”
One way to raise revenue would be to bid out a merchandise contract for state events. Currently host schools are allowed to sell T-shirts at the tournament and keep the revenue for their student council or booster club.
Based on past interest from merchandise companies, Swartos knows a bidder would pay more for the T-shirt business than host sites are currently earning.
“If we were to get a centralized contract, we would probably get quite a bit larger dollar amount guaranteed in revenue from that merchandise supplier,” Swartos said, “and then we could pass that money on to the schools in terms of higher payouts that we give them for hosting to help cover their costs.”
Early discussions on bidding tournaments
Another way to raise revenue and help allay the costs to host schools would be initiating a bid process for state tournaments.
“It would be looking at communities themselves to recognize that this is a pretty big boon to their community, to get their chambers of commerce involved and help offset the costs to the schools as well,” Swartos said.
Currently the association’s tournaments and activities are scheduled on a rotation of sites. Communities know when they’re getting a tournament so they have no incentive to invest in it.
“Even if we were able to throw a process together, we’d be starting with contracts in the 2023-24 school year,” Swartos said. “We’re just sort of starting to look into that right now.”
This fall Swartos will attend a meeting with his counterparts from surrounding states. Some of them have bid processes for state tournaments and he plans to quiz them about how that works.
“The costs for holding state tournaments goes up every year, just like the cost for everything else in life,” Swartos said. “We’re trying to control those costs and this would potentially be a way to do it.”
Sponsors play important funding role
About 15% to 20% of the association’s revenue budget comes from sponsorships. Its corporate contributors—Sanford Health, Dakota Bank, Farmers Union Insurance, the South Dakota Army National Guard and Billion Auto—play a key role in keeping costs down for schools.
Corporate contributions are used to pay for catastrophic insurance. At $7.65 per high school participant, the insurance provides each student with $1 million in coverage.
“That helps us insure that every kid that participates in one of our events, whether they’re from Buffalo or whether they’re from Harrisburg, if something terrible happens, they’re going to be covered up to $1 million,” Swartos said.
The cost of catastrophic insurance, $180,000, used to be billed back to the schools.
Helping schools absorb costs
As a nonprofit organization, the association works to make sure that any extra funds find their way back to member schools.
“The more net profit we have at the end of the year, the more money we give back to schools,” said Jahn, the finance director.
As an example, Jahn notes that the association, through dues and fees takes in $190,000 annually from member schools. In the 2017-18 school year the association paid back to schools $226,000. In the 2018-19 school year weather lowered the schools’ return to $205,000.
“The more income we have, the more we give back to schools,” Jahn said. “We’re not just stockpiling that cash.”