We posted recently about how the Pac-12 was in the process of finding replacements for UCLA and USC as the two schools move to the Big Ten.* A little (late, admittedly) research by yours truly adds context to the move and the major controversy about it that developed last summer and fall.
Jon Wilner, sports reporter for the Mercury News, filled in some background about UC-Berkeley and UCLA in late January:
UCLA and Cal have wrapped up their revenue-and-expense reports for the 2022 fiscal year, as required by the NCAA. The numbers, both eye-opening and entirely predictable, provide an epilogue to the drama that played out over five months with the University of California Board of Regents, the so-called Berkeley tax, the lure of the Big Ten and the future of the Pac-12. On the surface, the Bears appear to be in far better shape than their sister school and would have little need for a subsidy from UCLA imposed by the regents. One layer down, clarity emerges, and UC politics are more easily understood.
Cal reported a $13.2 million operating surplus on $118.2 million in revenue and $105 million in expenses, according to an unaudited copy of the NCAA report obtained by the Hotline. Meanwhile, UCLA’s report shows a $28 million operating loss on revenues of $103.1 million and expenses of $131.1 million. But the reality is both athletic departments are hurting. They simply took different roads to the same deeply red destination. Cal’s operating expenses don’t include $8.8 million in debt service for the stadium renovation and training center. When added to the tally, that payment brings the total reported surplus down to $3.7 million. But even that number is misleading, because it includes massive institutional help. Cal received $31 million in direct support from central campus per a yearly policy implemented by chancellor Carol Christ. Add a modest amount of student fees funneled to athletics, subtract $1.6 million in transfers back to campus, and the net result is $29.8 million in institutional support that the Bears book as athletic revenue... Without that massive assist from campus, Cal’s revenue number drops to $88.4 million, and the reported surplus becomes a $16.6 million deficit.
...Just as Cal’s budget situation isn’t entirely what the bottom-line number suggests, so does UCLA’s $28 million operating deficit require context. In contrast to the philosophy in Berkeley, UCLA receives very little help from central campus. In fact, the cash flow system arguably works against the Bruins. For example, they don’t own the facilities — those are controlled by central campus. Instead, the athletic department is required to pay usage fees, even for Pauley Pavilion. Yet when it came time to renovate the hallowed arena, athletics had to pay for the project. Block’s approach is also evident in direct campus support for athletics, or lack thereof. The Bruins receive $2.5 million in student fees, but that’s it.
...Two other pieces of context are required to gain a better understanding of UCLA’s fiscal situation:
— The $103 million in revenue does not include approximately $9 million in cash that Under Armour was supposed to provide annually as part of a massive apparel and sponsorship agreement signed in 2016. The company backed out of the contract during the pandemic, prompting a lawsuit. Last spring, Under Armour agreed to pay UCLA about $67.5 million in damages, but those are not reflected in the FY22 budget. (UA has also ended its relationship with Cal, stripping the Bears of about $3.5 million in annual cash payments.)
— COVID continued to hammer the Bruins in the 2021-22 school year.
...The Bruins also incurred about $1 million in expenses for the ’21 Holiday Bowl but received no revenue after COVID forced them to cancel the game at the last minute. Had those issues played out differently — if UCLA were cashing paychecks from Under Armour and didn’t have COVID gnawing at ticket sales — then the operational loss likely would be in the $18 million range... The Bruins’ big red number would track closely with the mid-eight-figure deficit that Cal would have reported without all the help from central campus. Help that UCLA doesn’t get.
Should Block do more to support UCLA athletics? Should Christ do less to support Cal athletics? Each case has merit. But two very different campus philosophies have nonetheless given way to very similar outcomes. Both athletic departments are struggling to control expenses and generate revenue. Both schools desperately need their football programs to sell more tickets. Both have previously reported annual operating deficits in the tens of millions of dollars.
And both are eyeing that Big Ten cash — directly for UCLA through membership, indirectly for Cal through a possible seven-figure payment from UCLA, courtesy of the regents. When you dig into the numbers, all the politics and machinations that played out last fall make perfect sense.
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*https://uclafacultyassociation.blogspot.com/2023/02/replacements-they-may-not-miss-us-when.html.
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