Authors: Matthew J. Williams1, Devin M. Mathis 2
1Department of Education, The University of Virginia’s College at Wise, Wise, VA, USA
2Senior Student, The University of Virginia’s College at Wise, Wise, VA, USA
G. Andrew Williams M.A. M.S.
96 Los Olmos
Green Valley, AZ 85614
Matthew J. Williams D.S.M., M.B.A., M.S. is an Associate Professor of Sport Management at The University of Virginia’s College at Wise. His areas of research interests include NASCAR, COVID-19, college athletics, professional sports, and sports management issues.
Devin M. Mathis is currently a senior student majoring in Business and Sport Management at The University of Virginia’s College at Wise. Devin’s area of research interest is the COVID-19 Pandemic and the effect it has had on college athletics.
The COVID-19 Pandemic and the stress it put College Athletics
In the early spring of 2020, the COVID-19 Pandemic invaded the United States and brought not only the economy to a stand-still, but college athletics as well. When all spring college sports were halted, along with the NCAA Men’s Basketball Tournament, it created a loss of revenue for college athletics. This forced college presidents and athletic directors to abandon their old business models in order to restructure their athletic budgets, thus moving both college presidents and athletic directors into uncharted waters. Before the COVID-19 Pandemic college athletics had a problem of long-term debt, offering too many sports, employing too many athletic staff, and paying an extraordinary amount in coach’s salary. Because of the Pandemic, college presidents, and athletic directors were forced to make drastic changes that consisted of salary cuts, elimination of sports, and athletic personnel in order to stay afloat. It will take years for athletic budgets to get back to the pre-pandemic era.
Key words: NCAA, Budgets, Debt, Business Model.
Recently, COVID-19 put a grappling hold on college athletics. In the early spring of 2020, COVID-19 reared its ugly head, creating a pandemic that took control over college athletics resulting in most college athletic programs losing their revenue sources. These revenue sources consist of ticket sales, advertisements, television revenue, donations, corporate-sponsorship, and much more. The result of the COVID-19 Pandemic caused a complete shutdown of college athletics revenue streams, forcing them to re-evaluate their athletic department. The continuation of their old model of doing business would not work. COVID-19 forced college athletic departments to deal with situations that they never expected or were never really prepared to handle. Consequently, they looked at Facility debt, reducing the budget, cutting athletic staff, salary reduction, and cutting athletic programs to stay afloat.
Over the last several years, college athletic programs have made a deliberate movement to upgrade their facilities to meet the needs of the fans and, more importantly, to attract better recruits. The push to upgrade facilities over other institutions was to have a significant competitive recruiting advantage to lure in the top-tier student-athlete. The Ohio State University athletic department “had about $205 million of debt outstanding in 2018, is completely self-supporting and shares stadium revenue with the university.” (8)
When colleges plan a facility upgrade, their most common business model is to make payments on the facility upgrades for an extended period. In 2018 there was more than $9.5 billion of outstanding debt from college facility upgrades (8). Revenue for athletic departments drastically dwindled due to the COVID 19 pandemic. The “Big Ten’s Ohio State University will lose revenue supporting a $42 million expansion completed in 2019.” (8)
The areas that were affected the most were ticket sales, advertisement, television revenue, and donations. Athletic programs were required to make budget adjustments to meet monthly payments for the facility upgrades.
Athletic departments make most of their revenue from ticket sales, TV broadcasting rights, donations, and corporate sponsorships from past and current seasons. The COVID-19 pandemic did not create the revenue funding shortfall within athletic departments; it merely underscored the fundamental problem. ” Closer examination shows that many athletics departments were financially stressed even before effects from the pandemic. Pre-existing structural problems in the broader economic system of college sports created financial challenges for many schools that are now being dramatically amplified by COVID-19.” (1) When programs lose their significant sources of income, they start to have financial hardships that will affect the institution and the plan for years, maybe even decades down the road. If fewer fans attend games, the businesses that donate to the department may refrain from contributing or pulling back the large amounts. Colorado State University bonds for the stadium that opened in 2017 were supported by $8.1 million in debt payments for 2018-19, according to the university. The pledged revenue grows to $12.2 million in 2021. (8)
Throughout the NCAA, there will be many teams that will feel the effect of Covid-19 in their athletic budgets due to them not being allowed to have fans in the stands at their sporting events. Due to the restrictions of fans, the lack of revenue by ticket sales, concessions sales, and other on-site generated revenue, athletic departments became more dependent on the annual distributions by the NCAA. The vital financially important question was would the amount be enough to offset the other losses or at least mitigate the financial shortcomings faced by the athletic departments. It was doubtful that most of the athletic departments expected a 62.5 % shortfall on their annual distribution amount. Last March, the NCAA made a decision to cut the expected 600 million down to $225 million. Institutions will only receive 37.5% of what was expected. To help the institutions of the NCAA, the Organization is using $50 million from reserves to help cover the $225 million distributed (7). When the NCAA cuts the disbursements to the universities, the effects will be felt throughout the whole athletic department and potentially create a ripple effect that may eliminate paid positions, such as grounds crews and assistant coaches. Financial aid for athletes could even be affected. In particular, at the Power Five level, athletics departments are experiencing annual revenue shortages upwards of $50M – budget gaps too large to be solved by belt-tightening alone. Athletics programs are thus in the process of sorting out financing that will create a way forward. (1)
Large college athletic budgets were already set for the 2019-2020 academic year with planned funding by a revenue stream of ticket sales, TV broadcasting rights, advertisement, corporate sponsorship, and personal donations used to keep these athletic departments going when, in the Spring of 2020, the COVID-19 outbreak forced college athletics to be shut down. Athletic directors had no idea when athletics would ever be back to normal. At the same time this was taking place, athletic departments had long gotten away with the escalating cost of large athletic departments and deficits, thus drawing a significant concern on how these athletic departments could survive the Pandemic. East Carolina University will cut four sports — men’s and women’s swimming and diving and men’s and women’s tennis — as part of a plan to address a substantial athletic department budget deficit exacerbated by the COVID-19 Pandemic. (2) The cuts, along with other cost-cutting measures, are expected to save $4.9 million over an unspecified period, the school reported. In a statement dated Thursday, May 21, 2020, the school said sports cuts had not been considered before March when the impacts of the coronavirus pandemic became apparent. (2) East Carolina University was not the only university experiencing athletic budget issues. Stanford University was also struggling with deficits within its sports budget before the outbreak of the pandemic. (4) Due to the escalating costs of operating such a large athletics department, a structural deficit emerged several years prior to the COVID-19 Pandemic (4). Athletic departments everywhere had to come to grips with changes that needed to be made in athletic departments. “We now face the reality that significant change is needed to create fiscal stability for Stanford Athletics, and to provide the support we believe is essential for our student-athletes to excel.” (4) Across the country, athletic directors, presidents, and board of trustees knew that the old business model of college athletics was no longer sustainable, and drastic measures like cutting team sports had to take place to survive now and in the future. Since March, a staggering number — 352 — of NCAA sports programs have been cut, and the vast majority have been Olympic sports. The most common reason cited: budget shortfalls due to the coronavirus pandemic. (3) Athletic directors could keep some of their sports from being cut but concluded that they would not be competitive. Stanford’s decision to discontinue these 11 varsity sports programs comes down primarily to finances and competitive excellence. With so many varsity sports and limited financial resources, we would no longer be able to support a world-class athletics experience for our student-athletes without making these changes. (4)
Even the athletic staffs were not spared from the COVID 19 pandemic-driven cutbacks. Presidents, Athletic Directors, and Board of Trustees across the Unites States had to make tough decisions to eliminate some sports teams. It was apparent that when this would also occur, there would also be the corresponding termination of athletic staff positions. Athletic Trainers, Sports Information Directors, and many other jobs were affected. Regretfully, according to Stanford’s open letter, 20 of -their- support staff positions are being eliminated as part of this realignment. (4)East Carolina’s athletic department announced a plan in May to reduce its deficit by $4.7 million. That included furloughs, eliminating several vacant positions, and decreasing the operating budgets for sports programs and administrative areas. (5)
The sports that the athletic departments did not eliminate were faced with the daunting task of shrinking their budgets. The easiest way to cut these budgets was to focus on head coaches and assistant coaches’ salaries. Across the United States athletic departments, even the most significant ones, were asking coaches to take voluntary pay cuts. Stanford Athletics has undertaken significant cost-saving measures. Stanford’s entire Athletics executive team and a number of their head coaches, including their head football and basketball coaches, have taken voluntary pay reductions. (4) In its second public announcement in the last nine months regarding measures designated to help mitigate budget shortfalls created by the coronavirus pandemic, University of Virginia revealed Friday it’s implementing athletic department layoffs and won’t fill many open positions. (10) University of Virginia didn’t reveal how many employees would be affected by the “reduction in staffing levels and (by) not filling several open positions.” It’s the latest step taken by an athletic department that on May 1 announced 72 head coaches, assistant coaches, and staff members would take voluntary salary reductions of 5 to 10% from mid-April through the end of 2020. (10) At Texas, athletics director Chris Del Conte announced that his department was laying off 35 employees and furloughing nearly a dozen more, but coach Tom Herman would be among those taking a voluntarily temporary salary reduction of roughly 15% of their pay.(6) As North Carolina projected an eight-figure deficit in athletics, coach Mack Brown agreed to have his salary cut by 20% And at Central Michigan, coach Jim McElwain agreed to give up 6% of his pay, which the school said was in line with other campus leaders.(6)
The COVID 19 pandemic was genuinely unexpected, and it magnified the fact that athletic departments would need to change their old business model of running athletic programs. Athletic departments had no idea that the COVID 19 Pandemic would have created such chaos this past year. They are addressing the stressors from the pandemic in a multitude of ways. While some have fared better than others, the fact remains that cutting some sports, cutting positions, cutting salaries and cutting budgets are necessary for the program’s survival. An important lesson from the impact of COVID-19 on athletic budgets highlights the tenuous relationship between revenue based funded projects and athletic budgets. They are easily susceptible to unforeseen catastrophes and, in this case, a pandemic.
The pandemic’s effect on athletic departments is in its infancy stage. Currently, cases of COVID-19 have increased in some regions. Concurrently, new strains of the coronavirus have been reported, including the delta variant of the coronavirus. Vaccinations, face coverings, and social distancing remain the approved measures for protection. Suppose the number of cases of COVID-19 or one of its variants sharply increases to an unacceptable level. In that case, the de facto response will be to close the stadiums or cancel the games and again curtail the revenues of the athletic departments. As we look to the future, athletic departments will still be forced to limit athletic programs to survive. Athletic budgets have been depleted, and their sources of revenue have diminished. It will take years for the athletic budgets to get back to the pre-pandemic era.
- Blue, K. (2020, October 4). Limit Spending To Save College Sports. Athletic Director U. https://www.athleticdirectoru.com/articles/limit-spending-to-save-college-sports/.
- DeCock, L., & Murphy, K. (2020, May 12). East Carolina dropping swimming, tennis in attempt to stem athletic budget deficit. The News & Observer. https://www.newsobserver.com/sports/article242897601.html.
- Kumar, A. (2020, November 6). The heartbreaking reality — and staggering numbers — of NCAA teams cut during the pandemic. ESPN. https://www.espn.com/olympics/story/_/id/30116720/the-heartbreaking-reality-staggering-numbers-ncaa-teams-cut-pandemic.
- Muir, B., Tessier-Lavigne, M., & Drell, P. (2020, July 10). An open letter to the Stanford community and the Stanford Athletics family. Stanford News. https://news.stanford.edu/2020/07/08/athletics/.
- Murphy, K. (2020, October 19). East Carolina announces more furloughs and salary cuts in athletics due to COVID-19. The News & Observer. https://www.newsobserver.com/article246565763.html.
- Schad, T., Berkowitz, S., & Wynn, M. (2020, October 14). College football coaches’ COVID-19 pay cuts are not always what they seem. USA Today. https://www.usatoday.com/story/sports/ncaaf/2020/10/14/college-football-coaches-compensation-covid-19-pay-cuts-often-misleading/5900033002/.
- Traylor, G. (2020, March 29). Financial damage to college athletics among COVID-19 side effects. The Herald-Dispatch. https://www.herald-dispatch.com/sports/financial-damage-to-college-athletics-among-covid-19-side-effects/article_b7c779f2-f4cd-533d-86e5-00033bee4142.html.
- Williamson, R. (2020, August 17). Coronavirus challenges stadium bonds amid college football timeouts. Bond Buyer. https://www.bondbuyer.com/news/coronavirus-challenges-stadium-bonds-as-college-football-seasons-stall.
- Wood, N. (2021, January 29). University of Virginia announces athletic department layoffs. pilotonline.com. https://www.pilotonline.com/sports/college/university-virginia/vp-sp-uva-athletic-department-staff-reductions-20210129-gt6rpeia4rc47dqrhibskp3oii-story.html.