Across the nation schools at all levels are cutting budgets, letting professors and staff members go in an attempt to stay financially solvent. Some small colleges in Ohio have cut as much as $8-10 million from their 2020-21 budget. Larger universities are facing major deficits. Administrative assistants, maintenance workers, fund raisers, admissions counselors and support personnel are being cut, yet the highest paid employees in most state university systems continue to be head football and basketball coaches. Most make three to four times or more than the salary of their state’s Governor.
Some smaller universities have closed their doors unable to navigate the financial waters of dwindling enrollment and pandemic inspired expenses. Facing a possible federal government lockout of international students, the possible inability to have in person classes full time and the potential loss of fall sports, these schools are facing major financial challenges at this time.
Most public institutions have been given or told to expect major budget cuts as states see their rainy day funds start to dwindle and run out. In May, California Governor Gavin Newsome announced $1.7 billion in higher education cuts. Ohio Governor Mike DeWine announced $110 million in cuts through the end of the fiscal year ending in June with new budgets adjusted after that. Oregon’s Governor Kate Brown told her state’s colleges and universities to anticipate an 8.5 percent budget cut over the next two years.
College athletics is facing some severe financial hurdles. In 2018 before the pandemic, only 29 institutions generated more revenue than expenses in athletics. Many Power Five schools that you would expect to be sound financially have announced large projected deficits for 2020-21. The University of Michigan announced they expect athletic department revenues of $135.8 million in 2020-21 and expenses of $161.9 million. This will result in a budget deficit of $26.1 million. Stanford University after anticipating a $25 million deficit just announced cutting 11 of their 36 sports at the end of 2020-21.
Ohio State AD Gene Smith has said that if football is not played there will be cuts among the 37 programs Ohio State offers. In 2018-19 sports outside of football, men and women’s basketball and women’s volleyball produced $8.1 million in revenue and had expenses of $45 million. Ohio State, like most schools, cannot float that kind of deficit for very long without football revenues.
So where does that leave college athletics? With increased expenses because of coronavirus precautions in 2020-21, it will lead to higher costs to operate all sports. Decreased attendance, if any is allowed at all, will lead to significant reduction in revenues. Schools are already reducing travel, number of competitions and asking staff to take salary cuts across the board to compensate for lost revenue. Many personnel have been furloughed and others cut outright. And yet schools are still facing major deficits.
The pressure to play football at most universities is crushing. For some schools it represents the opportunity to generate revenue to help balance the budget and operate the other programs, for others it represents a vital need to keep a large group of students paying much needed tuition dollars and enrolled at their institution.
If university leadership is able to reopen sports safely, many will still not meet financial expenses with limited game attendance. This is the right time for college athletic leadership to reset budget parameters in their departments. When powerhouse programs like Ohio State and Michigan with all of their resources face times of financial challenge, what chance does the rest of the NCAA have in making ends meet? The issues athletic programs are facing in this time of Covid-19 are not going to go away anytime soon.
When we emerge from this pandemic, expect to see leaner athletic departments and programs, reduced salary pools and possibly the start of a robust European club sport system to meet demands from students for sport activities.
Executive Management Partners LLC 