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Messages - jknezek

#1
Quote from: Ralph Turner on February 27, 2024, 12:00:32 PMI am glad that Ron opened up a board on which we can discuss this.

I have plenty of questions about how and why it should/not apply to D-3.
How many D-3 colleges will close if athletics is not an enticement to attend?

One already sees "Tik-Tok" shorts encouraging guys to go to trade school instead of college, because they will make more money. You also read of CEO's who preferentially pay/hire non-white or female candidates.

Can we imagine what D-3 will look like in 5 years?

It's not just Tik-Tok. It's easy to denigrate that way, but there is an increasing amount of research coming out that going to college may not be the simple path to a better future that we have pushed for 50+ years. Most of that research is dependent on how much it costs to go to college, and whether you have to take significant student loans, but the body of work is definitely starting to define a point where higher education is less lucrative in the long run than trade schools or apprenticeships.

Now I'm not saying that the research doesn't show that you will, typically, make more money in the long-term the more education you get. That relationship still holds. On average a h.s. dropout makes less than a h.s. grad, a h.s. grad makes less than a community college grad, a bachelor's makes more than a 2yr degree, a master's makes more than a bachelors. On average this is still true. But the cost to attain each level of higher education, paid up front instead of invested or borrowed and paid back over a decade or more, makes those relationships much less linear than it used to be.

$75-100K borrowed from 18-22 and paid back over 10 or 20 years is a massive opportunity cost versus earning 30-60K over that same time period as you go from apprentice to journeyman. And earning 85K-100K or more as a master electrician when someone else has incurred 150K-200K in debt to get an undergrad and a masters over 6 years is going to be real hard to overcome if you decide to be a teacher or end up middle management somewhere.
#2
Oh well... Maybe 45 years will be the Generals magic number. Good season though.
#3
What I know about basketball fits in a teacup, but it sure is turning out to be an exceptional year for W&L's mens and women's teams.

Be nice for the men to make the tourney... It's been 44 years. But the ODAC is so ridiculously strong in basketball I'm just glad they are typically a threat on any given night to topple ranked opponents. Much different from the dark ages when I was there.

As for the women... They should be in regardless but I hope they pick up another well deserved ODAC title. Spending the better part of the season in the top 15 has been very impressive.
#4
Great data. That's pretty bleak.
#5
General Division III issues / Re: Future of Division III
December 20, 2023, 10:53:27 AM
Yes. I noticed the same thing. W&L appears with 3 stressors, I think, I haven't looked at this article since I posted it. Of course, it is unknown which 3, but with 2.5B+ in assets as of 6/30/23 on the audited financials, and almost $1.98B endowment (78% of assets), I suspect the "stressors" are of the University's own making. Namely an increase in financial aid and a slight decrease in the number of students. Not sure what the third one would be, maybe operating loss in the short-term, but I think the analysis definitely applies to schools without a nest egg much better than to those with the ability to easily cover these "stress factors", especially over the short-term issue of the covid years.

Now, that does not mean that even W&L's endowment, and schools like it, will be able to cover the demographic issues indefinitely. But I suspect schools with $300MM or more in endowments are ok in the short-term and, I suspect, once you push over that $500MM, given active alumni support, you are probably ok in the longer term.

If you are looking at a school with $100MM and 3 or more of these stress factors, I'd be much more concerned. And under $50MM my kid is simply not going. Pick another college. It costs too much to gamble over a 4 year period that way. Even on a full-ride, the risk of disruption is massive and, in my opinion, very hard to call it worthwhile. The logistics of what do you do if the school goes under, even after graduation, and you need a transcript or a rec or something is just a massive pain.

Checking W&L's financials will help show why I think schools without massive endowments are in trouble. W&L's endowment high point was $2.09B reported June 2020, which included a massive 36% gain that year. So the value of the investments has drifted down over the following 2 years, despite steady increases in donations, and that may be one of the stress points.

I should point out that of W&L's 2BB or so, only about 400MM is unrestricted. So they can't do whatever they want with the vast majority of the endowment funds. The University is essentially an investment corporation, as ONLY $72MM in revenue comes from tuition and fees (that includes the law school, so 72/1850 undergrads does NOT give you the average cost of undergrad attendance).

What is interesting to note is that the University spends $90MM on instructional expense, so the revenue from tuition does not even cover the cost of instruction, let alone student services and plant. Total costs of almost $200MM dwarf the tuition revenue, so without being an investment corporation, W&L would run almost $150% in the red every year, though it wouldn't be so bad if they weren't handing out almost $60MM in student aid. Then it would only be about 50% in the red annually. But that should tell you why I'm skeptical of schools with smaller endowments.

Is W&L overpaying for instruction and services? Maybe versus a school with a smaller endowment. I'm sure W&L is not the cheapest run school, nor should it be with the financial backing available. However, it is important to note that without significant endowment assistance, W&L would have to seriously cut costs or student aid just to get even close to breaking even.

On the other hand, it's hard not going to comment on the fact that W&L's operating budget received $63MM from the internal endowment and $19MM from external trusts component of the endowment. 81MM from 2B... 4%. The school costs, on average, 27K per year for 1850 students. I mean, dropping that down to, say, 10K, would cost another 31.5M, or roughly less than 2% per year of the endowment. So spending 6% of the endowment annually would drop the cost of the school, on average, to one of the cheapest in the country. On the other hand, only $400MM of the endowment is unrestricted, so if that $31.5MM had to come from the unrestricted portion, that's almost 8% per year. A relatively large percentage, that a couple years of flat returns, like we've seen, would cut pretty drastically into the available funds.

So is that 6% ruinous? Hard to say. It would be very difficult to pull from the unrestricted account. And, to fund that $31.5MM on the same level as the current endowment contribution would require another $787MM in endowment devoted to tuition and fee reduction or unrestricted.

Figuring out the average return on endowment is over a long-term is a bit tricky. Certainly in the years since the high point hit, it would have made the endowment look very bad. But the 36% return in 2020 would mask a lot of basically flat to 1-2% negative returns over the last 2 or 3 years.

However, to put it in perspective, in the year 2000, when I graduated, NACUBA said W&L had a $400MM endowment. So that's a 425% increase over 23 years, which works out to a Compound Annual Growth Rate of 7.47%. Providing 4% per year to operating expenses all of a sudden doesn't seem so bad. Inflation over the last 20 years has averaged about 2.61% according to the Federal Reserve.

So despite paying 4% per year (using this year for all years over the 23 year period and assuming the 20 year inflation average is essentially the same as the 23 year), the endowment has grown around 4.75% per year post inflation. What does that work out to? Roughly $700MM over the period added to the endowment in post inflation dollars. If that had been cut to 2.75%, providing the extra 2% of the endowment needed to drop tuition significantly, it would still have been a $350MM increase post inflation.

So no, not ruinous, but definitely expensive, cutting the post inflation gains by half or $350MM. Plus, using averages is not strictly correct. Years where the base drops in the beginning have a much greater impact than the 36% gain toward the end thanks to the time value of money. So I suspect the effect would actually be a larger penalty, but I'm not going any deeper.

So if you've gotten this far, you are probably wondering what is the point? There are several.

1) Endowments are massively important. If you are looking at colleges to invest in for your kids' education, it's definitely a factor you need to take into account, especially with a private school. Probably the most important factor in the school's possible survival over the suspected demographic cliff we are about to hit.

2) Well-managed schools spend only a pittance of their endowment every year, but that is due to several good reasons. a) inflation is a bear b) unrestricted funds are not generally a large part of the endowment c) investment returns are not steady year over year

3) If you want to know how much trouble a school is in with possible declining enrollment, check to see how much of their operating budget tuition covers. If the ratio of tuition and fees to expenses is anywhere close to 1:1, declining enrollment could be a massive problem.

4) Is higher-education busted in this country? To some degree, yes. W&L basically has posted a roughly $700MM profit net of expenses and inflation over the last 23 years. Some of that is donations, some of that is investment profit. But a "non-profit" is absolutely profiting, it's just not distributing those profits and is holding them, "in trust" for future generations. However, over the same period, tuition and fees have steadily increased as well, so as the school has profited, the "customers" have paid more. I suspect this is true at most colleges with large endowments. They will say they are saving for a rainy day, and to some degree they are and that rainy day is just about on us, but the net result is a "non-profit" has essentially profited while continuously charging more to those it is supposed to serve.

Call me skeptical of our current model of higher education and it's "non-profit" status. Also call me skeptical of schools that have not done this successfully, as their tuition vs expenses pay model is going to be severely tested in the next 10-15 years.

What would I suggest? Here's where it gets a bit technical.

In order to keep "non-profit" status, I think the endowment should pay out roughly equal to the endowment gain vs a ratio like 2x inflation on a 5 year average 5 year trailing basis but collared at 4x inflation and limited to endowments of $500MM or above, adjusted every year for inflation. So, for 2020, schools should have budgeted to pay out any endowment gain they had, on average, over the period 2010-2015, that was more than 2x inflation but capped at 4x inflation. So if inflation was 2.5%, and the school's investment average was 7%, they would budged to pay 2% of the endowment to the operating budget. If they had an excellent period, with a 20% gain vs a 2.5% inflation rate, they would budget to pay out at least 10%, the remaining 10% could be reinvested.

If the school has a less than 2x inflation return, or a negative return average over the 5 years, it would not be required to draw down the endowment except that it still needs to pay bills and would likely do so regardless. Sub $500MM endowments would be exempt, or possibly have a graduated ratio (3x inflation or more as the lower limit), but the goal would be to ensure these schools can build to a healthy endowment. In fact, a straight endowment figure might not be a great idea, but rather endowment per student might be more effective.

This rolling time period/delayed rolling average, would allow schools to budget properly and also use investment returns while still allowing endowments to grow, even against the inflation rate. But it would limit the growth rate in most average years and, hopefully, benefit the consumers by putting more money to use.

Anyone who got this far... I'm impressed. You must really be interested in this topic. I'm a numbers guy, so I enjoyed playing with it, but I can't imagine reading it...
#6
Men's soccer / Re: SimpleCoach D3 Soccer YouTube Channel
December 19, 2023, 01:24:39 PM
I like pro/rel and I think it would have made for a better system in the U.S., certainly let the sport stand out from the crowd a lot more than it can now. There were several opportunities to set up American soccer as pro/rel, first in the early 90s when MLS was being formulated as a requirement of the '92 World Cup, then in the early 2000s when it almost went under and Lamar Hunt basically saved it, and finally recently NASL wanted to set up a competing tier 1 League as pro/rel and couldn't get sanctioned by USA Soccer.

But you are absolutely correct that we can't force Pro/Rel on MLS at this point. That's not happening and is a complete pipe dream. I wouldn't mind USA Soccer setting up USL as a competing First Tier League and then seeing what American's prefer over the long-term.
#7
Men's soccer / Re: SimpleCoach D3 Soccer YouTube Channel
December 18, 2023, 09:33:12 AM
Frankly I find this ridiculous. U.S. Soccer should threaten to set USL up as a competing League 1. The Open Cup is a traditional and amazing opportunity. It's named after Lamar Hunt, who basically saved MLS and these owners are being ridiculously whiny babies. Stop setting up more and more tournaments with Liga MX and play a domestic cup. Do a better job of promoting it. It is, literally, the only American professional sport where the underdogs get the big stage to work magic. That should be the marketing pitch, and it should be heavily promoted.

I know here in town the Birmingham Legion promoted the heck out of their games against MLS opponents last year. A road win at Charlotte in the Round of 16 where the team organized multiple fan buses and an 18K attended home loss to Inter Miami (no, Messi did not play) in the Quarter-Final. 18K for a soccer game, in Birmingham AL, where soccer is still sometimes considered a communist past time!

No, MLS needs to get a kick in the rear from U.S. Soccer and be reminded they don't hold all the cards even if they do hold most of the money. Perhaps U.S. Soccer shouldn't have helped MLS sue the NASL into history if this is the thanks they are going to get.
#8
D3football.com poll puts R-MC comfortably in front of Trinity. Not much of a surprise I think given how the Championship game went.
#9
I really don't care about this argument but I think it's very easy to argue either team at this point. Personally, given how the tournament played out, I'd put R-MC ahead. But I could easily see a 10 game split being 5-5. Cortland had to play darn near a perfect game to beat NCC and they played as close to one, offensively, as I can imagine. The QB was ridiculous, the running game was enough. Do I think Cortland wins 5/10 from NCC? No. But they won the one that mattered.

Cortland beat RMC pretty easy, but NCC destroyed Trinity. That's enough for me to give the nod.

Congratulations to Cortland. Heck of an accomplishment. This argument is irrelevant but both Trinity and RMC had excellent seasons to be proud of.
#10
Actually I don't mind those too much. Yes, the actual "signing" is the signing of the deposit check, which the NCAA makes very clear when you try and download the form! But it's something official that commemorates something that actually happened... a student athlete is agreeing to go to the school and is likely intending to try out for a sport. If the school wants to aid in that celebration, I understand it.

The concept of an "offer" for a sport in D3 means nothing, literally, unless it is the receipt of the student's acceptance, which has nothing to do with athletics. So an "offer" to play a sport is flat out ridiculous, whereas "signing" to try out for a sport after getting accepted is something that actually has some meaning. It is a bit silly, since it's non-binding, but since the deposit check is mildly binding, or at least punishing if you back out of attending, it at least has some attached consequence, even if that consequence has little to nothing to do with athletics.

Anyway, it doesn't bother me as much because it is something that celebrates the student athlete who is already agreeing to attend. The "offer" is just something made up to brag about when your school lands a recruit that other schools might have been interested in.
#11
Quote from: Etchglow on December 14, 2023, 07:28:58 PM
Quote from: jknezek on December 14, 2023, 07:01:29 PM
Quote from: Etchglow on December 14, 2023, 06:10:34 PM
Umhb picks up commit from UTPB transfer Wil Minor:

https://twitter.com/wil_minor11/status/1735411018388431193?s=19

Minor is a 6'4" 275 DL with 2 years of eligibility remaining from Manor, TX. He had offers from Sul Ross, McMurry, and Hardin-Simmons.

Offers for what? To pay tuition and room and board and tryout for football? Heck, I could get an offer from UMHB and I'm 46 years old and fat. Well, maybe not. I did use up a year of eligibility playing soccer almost 30 years ago. But all I'd have to do is send in application paperwork and pay the application fee and they'd "offer" me the chance to pay to come to school the same way they "offer" over 90% of the people who apply.

Check a box saying I'd like to tryout for football, show up at the right time in August and I've been "offered" by a college football team? No doubt I'd be sent to the very back of whatever line they have, be it cuts or just the hopeless end of the practice field, but I'd have the same "offer" anyone in the portal has gotten.

How strange and impressive D3 has gotten these days!

Or an offer to apply for need or merit based scholarships that 75 percent of division 3 athletes receive... Or an offer to be able to compete for a roster spot and playing time that they might not get at another institution or higher division. It is basically a way for a team to say "hey, if you go through all of the work to apply and go through the process to get accepted we want you here".

Athletes can't receive scholarships at a disproportionate rate or amount to the general population of a D3 school. So yeah, 75%, but most of D3 on average offers financial aid of some kind or another to at least 75% of students attending schools. The Leadership Scholarships schools tried in the 90s and 00s were heavily scrutinized on these grounds. As for the rest, that's about right. Not much of an offer. But I suppose a nice indication of interest. It just makes me laugh when fans start talking about all the "offers" from other D3 schools their incoming players got. The only "offer" you get in D3 is admission and a bill, as large or little as that bill may be.
#12
Quote from: RaidersRGr8t on December 11, 2023, 01:14:58 PM
FYI, I heard a rumor and this is what I found:

https://ferrumpanthers.com/sports/football/schedule/2024

Dear lord that is not going to go well for Ferrum....
#13
Quote from: Etchglow on December 14, 2023, 06:10:34 PM
Umhb picks up commit from UTPB transfer Wil Minor:

https://twitter.com/wil_minor11/status/1735411018388431193?s=19

Minor is a 6'4" 275 DL with 2 years of eligibility remaining from Manor, TX. He had offers from Sul Ross, McMurry, and Hardin-Simmons.

Offers for what? To pay tuition and room and board and tryout for football? Heck, I could get an offer from UMHB and I'm 46 years old and fat. Well, maybe not. I did use up a year of eligibility playing soccer almost 30 years ago. But all I'd have to do is send in application paperwork and pay the application fee and they'd "offer" me the chance to pay to come to school the same way they "offer" over 90% of the people who apply.

Check a box saying I'd like to tryout for football, show up at the right time in August and I've been "offered" by a college football team? No doubt I'd be sent to the very back of whatever line they have, be it cuts or just the hopeless end of the practice field, but I'd have the same "offer" anyone in the portal has gotten.

How strange and impressive D3 has gotten these days!
#14
General Division III issues / Re: Future of Division III
December 14, 2023, 03:15:43 PM
Here is a very good article about the economics of small colleges. It's very balanced, with lots of input from various colleges and universities that show up on the matrix. And there are a lot of D3 schools on that matrix. I do think it's a high level look that limited itself to 5 important but not all-important factors, so there are some factors that I believe should be a part of the debate, but it's still a good look at the challenges ahead for a very large part of the D3 universe.

https://www.bloomberg.com/graphics/2023-us-higher-education-analysis/#:~:text=Bloomberg%20News%20consulted%20six%20experts,aid%20and%20persistent%20operating%20losses.

https://www.bloomberg.com/graphics/2023-us-higher-education-analysis/?utm_source=website&utm_medium=share&utm_campaign=copy
#15
Bummer. Great season though YellowJackets!