Can the Cal Golden Bears Survive A Season Without Football?
The financial situation for the Cal Golden Bears is about to go from bad to worse.
One of the country’s largest and most successful athletic programs, Cal is also remarkable in another way. No public school’s athletic department has more debt than the Bears, the result of what was once the most expensive capital project in NCAA history.
The program is struggling in the same ways many others are too. College football is hanging by a thread, which means ticket sales and possibly TV money will drop significantly. Cal’s also losing partners—Under Armour is trying to back out of its $86 million contract—and facing a new wave of athlete activism, born from football players on its own campus, with a long list of demands.
It’s a financial minefield. In the four years before COVID-19 disrupted college sports this spring, Cal’s athletic department ran a combined $75.8 million deficit. With tensions already high on campus about resources given to athletics, the Golden Bears may be the poster child for how the pandemic could change the financing of big-time college sports.
“The options they have are really limited,” said John Cummins, Cal’s former associate chancellor. “Let’s just assume that the impact, even if they play football, is tens of millions of dollars. Then the question is, how much of that do they want to assume in debt, and how much of that will require cuts of some kind?”
Cal’s not alone, of course. This story will play out across the NCAA, as debt comes due, revenues dip, partners back out of deals and state funding dries up. Top-division athletic departments sold more than $1.1 billion in football tickets in 2018, and brought in more than $2.2 billion in media payments, mostly for football rights. NCAA payouts from the canceled March Madness tournament will drop by 63%, and the companies and people that college sports rely on are also struggling.
“We have no plan for a year without football,” one athletic director told Sportico.
“It would be Armageddon,” said another.
Those conversations happened before a group of more than 100 Pac-12 football players announced that they wouldn’t play this year until they were granted a series of new financial and medical benefits. The group was borne out of conversations between Golden Bears players, and their asks include a guarantee that no more sports would be eliminated on Pac-12 campuses, the right to market themselves, and most notably, 50% of conference revenue to be distributed to athletes.
“To ensure future generations of college athletes will be treated fairly, #WeAreUnited,” the group said in an open letter published on The Player’s Tribune.
“The problem is that athletics has never been able to pay back debt,” Cummins said.
A university known much more for its activism and academics, Cal–Berkeley’s athletic philosophy has historically focused on opportunities for students. The Bears offer 30 sports, one of the highest totals in the country, and they excel at many of them. As of last year, Cal had won 97 national team titles in 16 sports. The school has had a national champion, team or individual, in 46 straight years.
Offering that many sports is expensive, especially as the costs to maintain top-tier football and basketball teams skyrocket. Amid the financial problems of the past few decades, Cal’s athletic leaders have seemingly made decisions based on the belief that revenue will always grow in the future.
Many on campus no longer believe that’s true. Losing the $86 million Under Armour deal, one of the bigger apparel contracts in college sports, would affect revenue for years to come. The school’s $100 million commercial rights deal with Learfield IMG College, may also need renegotiating, though an athletic spokesman says it remains intact. Another big variable is the value of the Pac-12’s next round of TV deals, set to be negotiated over the next few years.
“There’s this optimism that lives in the world of college sports that you can just raise more money,” said Karen Weaver, a sports management professor at Drexel. “But COVID has exposed the problems with all of the money systems that they count on.”
Long before this metaphorical seismic shock, Cal had to deal with literal ones. Its football stadium was built atop a geological fault, and instead of building or playing elsewhere, leadership chose a pricey renovation that cost more than $200 million in retrofitting. By the time it was finished in 2012, construction costs (which included a high-performance center) had mushroomed to $474 million, an NCAA record for a capital project.
Of that cost, about $445 million was financed through borrowing. Debt-service payments, currently at $18 million, will eventually jump to $37 million in 2039. The payment schedule stretches into the next century.
Cal originally planned to pay off the debt with decades-long season ticket packages, but demand for those were weaker than expected. Just a few years after finishing the renovation, one of the largest athletic departments in the country realized it couldn’t pay its bills.
Facing an impasse, Cal formed a 14-person task force in 2016, then commissioned a review from an outside consulting firm. Millions were floated from the chancellor’s office to athletics. In late 2017 a potential long-term solution was reached—new chancellor Carol Christ agreed to have the school assume more than half of the stadium debt payments.
She and new athletic director Jim Knowlton then agreed to a six-year budget plan designed to reduce the department’s reliance on the school from $25 million in 2020 to around $13 million by 2025. A Bears spokesman said that despite the cancellation of spring sports, including the postseason basketball tournaments, Cal athletics met its budget target for 2020.
“We are considering a number of different measures, but at this point, we do not want to speculate and believe it is too early to fully understand the impact of the pandemic given the number of uncertainties,” he said.
That leaves a lot of questions for right now. Cal’s athletics budget is around $108 million, with $36 million of that attributed to football. Some revenue will be held, and the school will save some costs—it can cost $2 million to fly its football team to games—but a canceled football season would be catastrophic.
“Perhaps the pandemic will finally give Berkeley a way to get out of having a football team,” said one member of the 2016 task force.
What looms are a host of bad options, many of the same ones being debated by presidents, chancellors and athletic directors around the country. One option available to the Bears: borrowing more money. Cummins said athletics has the option to borrow money from the UC system president’s office in the form of a 2.5% interest loan that would feature five years of interest-only payment before the principal kicks in. (A spokeswoman for the UC President Janet Napolitano’s office did not respond to requests for comment.)
But the department, which is supposed to be self-sustaining, has struggled to pay back money in the past. Cal chancellors in 1999 and 2007 forgave a combined $49 million in athletics deficits that the school had covered. That was before Christ took on the around $200 million for the stadium project. “The problem is that athletics has never been able to pay back debt,” said Cummins, who wrote a 28-page research report on the saga back in 2017.
Then there’s cutting programs. Nearby Stanford University, a school that Cal considers a rival both athletically and academically, turned heads across the country when it dropped 11 varsity sports last month. Cal could drop the same number and still offer more than many FBS schools.
But Cal’s been there before as well. In 2010 the school tried to eliminate five sports, and all were reinstated following alumni uproar. Sports are near and dear to many donors’ hearts, and keeping donors happy is increasingly important as state money dries up. There are other options, like trimming operating expenses for sports or laying off staff, but those likely won’t save enough to cover losses.
The entire university, including athletics, has projected a $340 million budget gap due to COVID-19. The school has imposed a hiring and a salary freeze and last month laid out a mitigation plan—which includes short-term borrowing, more federal funding and personnel changes—that would reduce that gap to $65 million.
“Universities were struggling with resource allocation before this virus hit, and with remote learning and enrollment drops, resources will dwindle even more,” said Brad Bates, a former D-I athletic director who was part of the consulting group that did Cal’s 2017 review. “There’s going to be a more intensified fight for how those resources are prioritized and allocated across campus.”
The sports-specific decisions rest with leaders like Christ and Knowlton, who must correct the financial missteps of the people who held their jobs before them. Both were unavailable to comment for this story, though they’ve said in the past that cutting sports is a last resort.
No matter what happens, there’s likely to be a new round of opposition from faculty on campus. That last resort may soon become reality, but maybe not in the way that some would expect.
“Perhaps the pandemic will finally give Berkeley a way to get out of having a football team,” said one member of the 2016 task force. “We will see.”