University of Tennessee Athletics Director Mike Hamilton said Wednesday the program is struggling financially and is facing hard decisions about how much financial support it can give the school and still be competitive.

"We've been blessed with great success athletically and financially for a long time, but we are at a tipping point for intercollegiate athletics for the University of Tennessee," said Hamilton, who was in Oklahoma with the men's basketball team.

"People shouldn't interpret that as anything other than we have to decide, is it an institutional priority that we are going to continue to perform at a Top 10 level in our athletic programs?" he said. "And if we are, then we've got to make some decisions to allow us to be successful in doing so."

UT's men's and women's athletic programs have a combined operating budget of $64.3 million this year. They will spend every penny of it.

UT's programs are among a handful of college athletic programs that are self-supporting, though athletics had to borrow money from UT last spring to pay $1.39 million to former basketball coach Buzz Peterson to buy out his contract.

Athletics also provides several million dollars worth of benefits to the academic side of the university in the form of everything from scholarships for nonathletes to giving 16,000 season tickets to UT's Development and Alumni Affairs Office to help with universitywide fund-raising efforts.

That's something many of UT's competitors, such as the Universities of Florida and Georgia and well-heeled programs like Texas, don't do, Hamilton said.

He indicated his department may not be able to provide as many benefits if it wants to continue to compete across the board with schools like that.

UT President John Petersen and Hamilton said they and other UT administrators have had a series of meetings about athletics' budget.

Hamilton said the program's margins have been razor-thin for years, and it has cut $3.5 million in operating expenses over the past two years.

"We had to do that to survive, to meet the budget, because there is no reserve," Hamilton said. "The financial part of the program, the margin we are operating on right now, is not healthy. We've got to do it.

"We'll have to live on less. We are already living on less than we were two years ago. We'll have to live on less going forward."

The athletics department has continued to provide full financial support to the university this year. Petersen and Hamilton said there are no plans right now to change that.

But there have been rumblings about the possibility.

At a UT Faculty Senate meeting last month, UT Knoxville Chancellor Loren Crabtree was asked if athletics was pulling its contribution for nonathletic scholarships.

Crabtree responded that athletics was having some difficulty, and "they are doing everything they can to control costs."

"One of the possibilities was to renege on that million-dollar commitment to academics," he said. "President Petersen was really strong about this and said, 'You may do some things, but you are certainly not going to do that.' "

Petersen, however, said that the scholarship money was not one of the items on the table during discussions about the athletics department's budget.

"I mean, we talked about their budget," he said. "If you really look at the net cash flow, there is more flowing from athletics to campus than vice versa. But we all agreed that the scholarship piece is a piece we don't want to mess with."

Asked if spending athletic department funds for non-athletic purposes hampers UT's ability to compete with other SEC schools, Petersen replied, "Perhaps."

"But also understand, like any enterprise, they are part of the university," he said. "We all work together to make sure we are delivering the best product, and they are good citizens of the university."

Hamilton said that athletics is proud of what it has been able to contribute and wants to continue to help — as much as it can.

"It's absolutely an athletic program desire to support the university to the extent we can, anytime we have a healthy bottom line and can I mean, that's not even a question in my mind," he said.

"The question is whether or not we can do it and still achieve what the goals have historically been for the University of Tennessee athletic program."

Randy Kenner may be reached at 865-342-6305.