Steven J. Timko admits he used to wake up in the middle of the night, worrying that financial problems could cause the demise of the New Jersey State Interscholastic Athletic Association.

As the executive director of the organization that governs the state’s high school sports, there was plenty to keep him awake:

  • A 2010 law limited the amount of money the NJSIAA could charge for tickets — the organization’s primary revenue source.
  • A 2010 report by the State Commission of Investigation, or SCI, cited the organization for “reckless” spending and “primitive” accounting.
  • The NJSIAA’s most vocal critic — Assemblyman John Burzichelli — sponsored legislation that would have disbanded the organization.
  • The NJSIAA’s $1.2 million bank-account surplus has been halved during the past three years as the nonprofit uses it to cover yearly losses.

Timko sleeps better today, however.

The NJSIAA visits Atlantic City this weekend for its single biggest event of the year — the state individual wrestling tournament at Boardwalk Hall. It does so having made budget cuts and having found new sources of revenue that have put it in better, although not great, financial shape. The organization has not cut any events or tournaments.

“We’re much better than where we were three years ago,” Timko said. “We have a more positive outlook, but we still have hurdles.”

The NJSIAA lost just $33,692 in 2011-12. That follows a loss of $263,924 in 2010-11 and $457,628 in 2009-10, according to the 990 IRS forms the organization is required to file as a nonprofit. A projected budget shortfall of $408,695 looms for 2012-13, but the NJSIAA projected a budget shortfall of $405,000 in 2011-12 and managed to cut that to the $33,692.

The association finished the 2011-12 year with a surplus of more than $600,000 in the bank. But that $600,000 surplus would disappear quickly if the NJSIAA continued to lose money at the rate it did the previous two years. The organization would be operating in the red and probably wouldn’t be able to survive.

“We assume the worst (about budget shortfalls),” said Gary Zarrilli, the NJSIAA’s business administrator and accounting manager, “and try to continue to look at all our costs and new revenue opportunities.”

The state wrestling championships have been held in Atlantic City nearly every year since 1992. This year is the first of a new three-year contract between the NJSIAA and Boardwalk Hall. The NJSIAA pays $80,000 to Boardwalk Hall to use the facility each year of the contract. The NJSIAA earned $130,000 on the state wrestling championships in Atlantic City last year and, barring bad weather, should do at least that well this year.

The wrestling championships have a big impact on the NJSIAA’s financial fortunes. The organization still relies on ticket sales for much of its revenue.

Zarrilli said the NJSIAA made $100,775 on the 2012 fall state tournaments, including football. That’s down from $154,512, but the decrease was due to an accounting change. For the first time last fall, the NJSIAA included payroll for its executive and assistant directors in the tournament expenses.

The NJSIAA came under financial scrutiny in the early 2000s. A 2010 law that limited the amount the NJSIAA could charge for ticket prices exacerbated its financial troubles. The law forces the NJSIAA to charge $3 for adults and $2 for students and senior citizens for most of their events.

Since the SCI report and the ticket law, the NJSIAA has taken several steps to cut expenses and reshape its financial outlook.

“We’re running a business now,” Timko said. “Our decisions are focused on making sure money is spent appropriately and there’s accountability.”

Here are some of the steps the state high school organization has taken:

This year, for the first time, the NJSIAA allowed local schools to run the district wrestling championships. The schools kept the profits and covered the losses. Timko said the NJSIAA lost between $40,000 and $45,000 on the 32 district championships in past years.

Timko said he spoke with representatives of the 32 districts after this year’s competition, and more than 90 percent said they would host the event again under the new arrangements.

Absegami High School Athletic Director Steve Fortis said the new arrangement had potential, but his school lost money when it hosted District 32 last month.

Fortis said the NJSIAA notified the schools of the new arrangement last spring when his budget was already set. Absegami also wanted to sell its own T-shirts at the event but couldn’t because the NJSIAA has a sponsor that owns the T-shirt rights for the wrestling tournament.

But the new situation will not deter Absegami from hosting the districts in the future.

“I think it needs to be tweaked,” Fortis said. “We’ll make it work.”

The NJSIAA also gave schools the financial responsibility for first-round basketball playoff games this season. There is talk of expanding that next season to all games but the sectional final and the state semifinals and final.

The NJSIAA hired Zarrilli in March 2011. He has sharpened the organization’s accounting practices and pursued revenue — such as unpaid dues and tournament entry fees from schools — that had fallen through the cracks.

“When I got here, there were 45 schools that still owed us annual dues,” Zarrilli said. “Within two months, I collected all those.”

The NJSIAA has sent requests for proposals, or RFP, to various sites to host its championships events. The organizations also sent out an RFP for its auditing services. Timko said RFPs help the NJSIAA get a better idea of what it costs to run an event.

“You want to make sure there aren’t any hidden costs,” Timko said, “and you get an (unexpected) bill after an event for $5,000.”

An RFP for the state wrestling tournament helped the NJSIAA get a more favorable deal at Boardwalk Hall. Zarrilli said the NJSIAA used to pay $2,583 to Ovations Food Services for water at Boardwalk Hall. Under the new contract, the cost of the water is absorbed in the $80,000 rental fee the NJSIAA pays, he said.

The NJSIAA has made several cuts. The organization did not replace Assistant Director Bob Bailey, who made nearly $100,000, after he retired in 2011. The NJSIAA now has 15 employees instead of 18. The organization froze salaries for the past two years. Timko earned $138,716 in 2010-11.

Former NJSIAA head Boyd Sands earned $132,680 in 2004, according to the NJSIAA 990 from that year. The NJSIAA has cut back on the use of color in state tournament programs. The organization also owns five cars and used to turn them over every two years. It has not bought a new car since the SCI report.

“We’re still struggling,” Zarrilli said. “Ticket prices aren’t the greatest, but we’re trying to keep our costs down. We’re doing more with less.”

The NJSIAA is also seeking new revenue. The organization will launch a new website in September, with hopes of drawing corporate advertising. Several other high school sports organizations, most notably Indiana, have had success raising funds with their websites.

Ticket prices are a work in progress. The NJSIAA must get the state Department of Education’s approval for ticket prices to events at non-high school venues such as the state wrestling championships in Boardwalk Hall and football games at Met Life Stadium in East Rutherford, Bergen County.

The NJSIAA is charging $10 for adults and $2 for students and senior citizens this weekend in Atlantic City. That’s compared to $10 for adults and $8 for students and senior citizens in 2007.

Burzichelli, D-Salem, Gloucester, Cumberland, has been the NJSIAA’s most outspoken critic. He sponsored the law limiting ticket prices. He said he’s glad ticket prices to state championship events remain affordable for families.

“Despite (the NJSIAA’s) claims of their world ending, they seem to be alive,” Burzichelli said. “It seems like life is going on. I suggested early on they could survive if they got smarter. Hopefully, they’re getting smarter.”

Burzichelli introduced a bill in October 2010 that would move the oversight of New Jersey high school sports to the state Department of Education, which would then appoint the state School Boards Association to take control. But no action has been taken on that measure.

“I said to people in the legislative process that I was willing to give (the NJSIAA) time to get their finances in order,” Burzichelli said, “and if the ticket prices were not impacted in the wrong direction, I would not be aggressive about forcing the legislation.”

However, the ticket situation continues to frustrate NJSIAA officials. The organization points out that high schools charge more than $3 for some events. Tickets to the Cape-Atlantic League boys basketball championship cost $5.

The NJSIAA wants similar flexibility. Timko noted that the NJSIAA charged $7 for adults and $4 for students and senior citizens at nearly all of its tournament events before the ticket law.

“We should be able to piggyback on (what the schools charge) for particular events,” Timko said. “They are regular-season games. Anything that leads up to our state tournament is counted as the regular season. But we’re not interested in having $15 ticket prices.”

But the NJSIAA knows ticket prices won’t increase by large amounts anytime soon, especially in a climate in which all government spending is under scrutiny.

So the organization will continue to search for ways to make its finances work.

“Our goal is to do everything in our power so we don’t have a negative impact on our programs — everything,” Timko said. “We’re looking at everything and every possible way so we don’t impact the good things we’re doing. I don’t think any of our student-athletes have been shortchanged at all, and I’m proud of that.”

Contact Michael McGarry:

609-272-7185