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Power Five public schools' athletics revenue fell at least $1.7 billion due to pandemic

Correction: An earlier version of this story mischaracterized the repayment terms of loans the Southeastern Conference obtained to fund a supplemental distribution to its members. Repayment to the lenders from the SEC currently is required to occur over two years – fiscal 2025 and 2026 – but the conference can request two one-year extensions, which would extend the period during which the conference would reduce planned distributions to all of the schools.

Compared to what they feared when the prospect of a 2020 football season was in doubt, many college athletics administrators at Power Five public schools are relieved with how their programs’ finances for the 2020-21 school year turned out.

But the COVID-19 pandemic still caused massive revenue declines, and the impacts will be felt for years – at some schools, for more than a decade, a USA TODAY Sports survey and analysis has found.

Operating revenue for the 50-plus Power Five public schools in fiscal 2021 fell by at least $1.7 billion compared to pre-pandemic levels. The figure is based on information obtained from 70% of the schools, as other schools either declined to provide data, citing ongoing audits or other reconciliations, or did not respond to requests for data.

The $1.7 billion estimate is based on the median revenue decline, multiplied by 53 – the number of public schools in the Power Five.

Power Five athletics departments were hit hard by the pandemic.

The revenue declines resulted in annual operating deficits for fiscal 2021 that were so substantial for some athletics departments, they had to borrow money either from their universities or from external sources. While many schools are still finalizing the terms of those loans, at least four schools have set up repayment plans that are set to last at least 10 years. At least three more have plans set to last at least five years.

That will just add to the more than $7.1 billion in athletics-related debt that Power Five public schools collectively showed on their financial reports to the NCAA for fiscal 2020, the most recent ones available. Those reports, which USA TODAY Sports compiled in partnership with Syracuse University’s S.I. Newhouse School of Public Communications, indicate that most of that debt is from facility projects. But now operational debt will be a factor.

And it may continue to be a factor during the 2021-22 fiscal year. About a third of the schools for which revenue projections could be obtained are planning, at least for now, on having operating revenue totals that are lower than the ones they had in fiscal 2019, before the pandemic.

This is occurring amid seismic shifts in college sports. Schools are attempting to sort through the potential impact of athletes starting to make money from sponsors for use of their name, image and likeness. They also are deciding how to deal with the Supreme Court’s ruling in the Alston antitrust case that has opened the door to schools being allowed to offer athletes an array of new education-related benefits, including cash for academic performance.

NCAA Finances: Revenue & Expenses by School - USA TODAY

Documents from a presentation that Minnesota athletics officials made to the university’s board of regents last month said the department is working fiscal 2022 numbers with a $9 million “budgeted deficit related to continued impact of COVID-19 and uncertainty related to changes in college athletics landscape.”

The direction in which all of this was heading could be seen in the operating revenue and expense figures the schools reported to the NCAA for fiscal 2019 and 2020. While athletics departments have grown accustomed to – and, in some cases, dependent on – revenues growing annually, 32 of the 51 Power Five public schools reported year-over-over declines in operating revenue for 2020, the documents collected by USA TODAY Sports and the Newhouse School show.

Many of those declines were modest because by the time the pandemic started shutting down sports in early March, schools were deep into fiscal years that, for the vast majority, end June 30. Revenues from football and regular-season men’s basketball, schools’ primary revenue sources, were not affected.

That changed during the 2020-21 fiscal cycle, when both of those sports were altered by the pandemic, with games being canceled or played before few or zero spectators. Fans at many schools have returned for football this fall, but athletics officials remain cautious about how the pandemic may affect attendance when the focus turns indoors to basketball.

The response to USA TODAY’s inquiry from Kansas, a school whose men’s basketball revenue is among the greatest in the nation, said its 2021-22 revenue forecast of $100.2 million – about $20 million less than the revenue it reported for 2019 -- is “Projecting facilities to be open again but a bit conservative in case pandemic restricts attendance.”

Debt service impact

Nearly all schools made spending reductions in fiscal 2021, and Tom McMillen -- president and CEO of the LEAD1 Association, a group representing Football Bowl Subdivision athletics directors – predicted that at least some of those reductions would be permanent. But he said: "Debt service will obviously be a cost that will impact. You wonder whether, in the aggregate, the debt service incurred will exceed the economies incurred.”

University of Washington athletics department chief financial officer Kate Cullen said her school anticipates having less revenue and lower expenses in fiscal 2022 than it did in 2019, the year prior to the pandemic. Asked whether Washington and other schools in similar situations could continue making their athletics programs work while spending less than they did prior to the pandemic she said:

“Yeah, but I don't know that that is super sustainable. We compete in a national market. … So a lot of what is sort of driving how we're looking at expenses and what we can do and the revenue we're trying to achieve to support those expenses is -- it just has a lot of nationwide sort of factors. And so, yeah, I think we've learned some really powerful lessons through the pandemic. But we also want to continue to invest in our student-athlete experience and grow as much as we can and generate the revenues to support that.”

Some Power Five athletics departments undertook fundraising campaigns during fiscal 2021 that were specifically aimed at persuading their fan communities to help mitigate the pandemic’s impact. Last November, North Carolina launched the Carolina Victory Fund, which it called “a new, unrestricted giving fund designed to provide new revenue to support the Tar Heels in a time of great need.” It began with a goal of $2 million and ended up raising more than $5 million.

UNC athletics director Bubba Cunningham said schools can’t go that route repeatedly, though. “That was a unique-year circumstance, we hope, and our fans were great. Our donors were terrific,” he said. “But you can't go back to them and manufacture needs like that. That just isn't appropriate.”

One strategy that Washington’s athletics department used to free up cash in fiscal 2021, Cullen said, was an arrangement relating to the department’s debt-service payments on an internal university loan that was used to pay for renovations to the football stadium and construction of a new baseball stadium. The university’s treasury office essentially moved the department’s debt service payments for fiscal 2021 to end of the loan., extending it by one year to 2045. Cullen said the move saved the department $13 million in fiscal 2021, but will cost the department $11 million over the remaining life of the loan.

Iowa’s athletics department took a more direct approach. It June, it took a $50 million loan from the university. According to the internal loan agreement signed by athletics director Gary Barta and university CFO and treasurer Terry Johnson, the loan term is not to exceed 15 years. It carries an initial interest rate of 2.5% that will remain in place for five years, then be reset based on the U.S. Treasury benchmark but may not exceed 5%. The agreement says the loan will be paid back through “net operating proceeds from the UI Athletics Department.”

But the fiscal 2022 budget plan that was approved in July by the state’s board of regents shows a projection of $117,041,199 in revenue and the exact same amount in operating expense. That’s about $5 million less in revenue than the comparable board documents show Iowa’s athletics department having for fiscal 2019.

Officials from several athletics departments said they covered at least of part of their 2021 revenue shortfalls from department-specific operating reserves, but they will be seeking to rebuild those reserves in the future.

Conferences step in

Elsewhere, conference offices have gotten involved in helping schools, but that too, has had a price. When the Big Ten Conference announced in September 2020 that it would be resuming football, conference officials said the conference would pay for the enhanced COVID testing that would be required. A budget presentation document for an Iowa state board of regents meeting in July stated: “For FY 2021, expenses related to Big Ten Conference COVID testing protocols were netted against the conference distributions to the University.” The document did not say how much money was involved.

Colorado is taking an interest-bearing loan from the Pac-12 against future conference revenue distributions, with a seven-year, interest-bearing repayment plan that can be accelerated if the school can manage it.

The Southeastern Conference borrowed money to provide each of its 14 member schools with a $23 million supplemental distribution that will need to be paid back from future revenue distributions. Repayment to the lenders from the SEC currently is required to occur over two years — fiscal 2025 and 2026 — but the conference can request two one-year extensions, said spokesman Herb Vincent, which would extend the period during which the conference would reduce planned distributions to all of the schools.

The first year of the repayments is the year in which the conference will be getting a massive increase in revenue from a new television agreement, under which ESPN will be taking over the package of football games currently held by CBS. Even with the repayments, the SEC’s per-school distributions likely will be higher in fiscal 2025 than the regular ones for fiscal 2021. Vincent said the conference will pay the interest on the loan out of its annual operating budget, a plan that will result in a slight decline in another type of per-school distribution.

Follow colleges reporter Steve Berkowitz on Twitter @ByBerkowitz  

Contributing: Kaitlyn Radde