Financial reports paint bleak pictures, add context (for both) to Big Ten situation – Orange County Register
UCLA and Cal have completed their fiscal 2022 revenue and expense reports in accordance with NCAA requirements. Both eye-opening and utterly predictable, the numbers provide an epilogue to the drama that unfolds over five months involving the University of California’s Board of Regents, the so-called Berkeley Tax, the lure of the Big Ten and the future of the… USA played Pac-12.
On the surface, the Bears appear to be in far better shape than their sister school and would have little need of a Regent-imposed subsidy from UCLA.
One level deeper, clarity emerges and UC policy becomes easier to understand.
According to an unaudited copy of the NCAA report obtained by the hotline, Cal reported an operating surplus of $13.2 million on income of $118.2 million and expenses of $105 million.
Meanwhile, UCLA’s report shows an operating loss of $28 million on income of $103.1 million and expenses of $131.1 million.
But the reality is that both sports departments are injured. They just took different paths to the same deep red target.
Cal’s operating expenses do not include the $8.8 million in debt service for the stadium renovation and training center. When this payment is added to the balance sheet, the total reported surplus drops to $3.7 million.
But even that number is misleading because it involves massive institutional support. Cal received $31 million in direct support from the central campus under an annual policy implemented by Chancellor Carol Christ. Add in a modest amount of tuition channeled into athletics, subtract $1.6 million in transfers back to campus, and the net result is $29.8 million in institutional support which the bears book as sporting income.
Today, most major college athletic departments receive some degree of campus support, and all of them record it as revenue on their NCAA files. There is nothing obscene or unusual about Cal’s procedure.
But without that massive campus support, Cal’s revenue falls to $88.4 million and its reported surplus becomes a $16.6 million deficit.
UCLA’s departure from the Pac-12, which is scheduled (along with USC) for summer 2024, will impact the conference’s media rights deals, which account for about a third of Cal’s total revenues. The exact size of the hit is not known, but is likely to be between $5 million and $10 million annually for each campus.
Just as Cal’s budget situation doesn’t quite match the numbers, UCLA’s $28 million operating deficit also requires context.
Contrary to the philosophy at Berkeley, UCLA receives very little help from the central campus. In fact, the cash flow system seems to be working versus the Bruins.
For example, they don’t own the facilities – these are controlled by the central campus. Instead, the athletic department has to pay usage fees, including for the Pauley Pavilion. But when it came time to renovate the sacred 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 get $2.5 million in tuition, but that’s about it.
Remember the $31 million in direct institutional support Cal sent to his athletic department: The equivalent support in Westwood is zero.
Two additional elements of context are needed to better understand UCLA’s tax situation:
– Revenue of $103 million does not include some $9 million in cash Under Armor was expected to provide annually under a massive apparel and sponsorship deal signed in 2016.
The company pulled out of the contract during the pandemic, sparking a lawsuit. Last spring, Under Armor agreed to pay UCLA approximately $67.5 million in damages, but these are not reflected in the FY22 budget.
(UA also ended its relationship with Cal, stripping the Bears of about $3.5 million in annual cash payments.)
— COVID continued to pound the Bruins in the 2021-22 school year.
Three men’s basketball games were canceled while two others were played without fans (a decision by the university, not LA County).
And for the ’21 football season, the Rose Bowl required proof of vaccination or a negative test within 72 hours of kickoff. This combination helped depress ticket and gate revenue, likely by several million dollars.
The Bruins also had about $1 million in expenses for the Holiday Bowl ’21 but received no revenue after COVID forced them to cancel the game at the last minute.
Had these problems played out differently — if UCLA was cashing Under Armor paychecks and COVID wasn’t eroding ticket sales — the operating loss would likely be in the $18 million range.
And look at this: The Bruins’ big red number would closely match the mid-eight-digit deficit that Cal would have reported without all the help from central campus.
Help UCLA doesn’t get.
Should Block do more to support UCLA athletics? Should Christ do less to support Cal Athletics? Every case has its justification.
But two very different campus philosophies have nevertheless produced very similar results.
Both athletic departments are struggling to control spending 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.
And both have their eye on the Big Ten’s money — directly to UCLA through membership, indirectly to Cal through a possible seven-figure payment from UCLA, courtesy of the Regents.
When you delve into the numbers, all the politics and machinations that transpired last fall make perfect sense.
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https://www.ocregister.com/2023/01/20/ucla-and-cal-athletics-financial-reports-paint-gloomy-pictures-add-context-for-both-to-the-big-ten-situation/ Financial reports paint bleak pictures, add context (for both) to Big Ten situation – Orange County Register