This one is all about money
The athletic department is taking out a $20 million loan... so what?
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Money, Money, Money
It was a bit of a quiet week in Razorback Athletics, but one big piece of news is worth diving into on a deeper level. This week, the University of Arkansas announced that it would be taking on a loan worth up to $19.1 million to compensate for lost revenue due to COVID-19. That’s a lot of money, and if you’re like me, it probably caused a lot of questions to form in your head, so let’s take a closer look into what that actually means.
I’ll be honest, I’m a bit skeptical of any action a college athletic department takes when this kind of money is involved. For that matter, I’m skeptical when any amount of money is involved with college athletics, simply because of the constant question over whether or not the athletes are truly amateurs or unpaid professionals. I’m not going to litigate that question today, but that’s the reason I meet questions of athletic finance with a cynical eye.
The good news is, this doesn’t seem to be sinister, ill-informed, or otherwise a bad decision. Based upon the Board of Trustees’ resolution, it seems like the loan is serving to refinance pre-existing debt. Extra Points writer Matt Brown pointed out in his newsletter this week that “several P5 institutions are carrying over $200 million in athletic related debt, led by a whopping $486 million from Cal,” so it’s not unusual for high level athletic departments to operate with some level of debt, with some programs averaging $10 million a year in debt payments(!).
If you’ve got the guaranteed revenues of blue chip programs— or in Arkansas’ case, revenue from being the only show in town— debt is fine, because you’re going to more than make up for it with athletics revenue. It especially helps when you’re a unique program like Arkansas and make a profit in football AND basketball AND baseball. Very few schools can claim that.
I don’t think the loan is anything to worry about in terms of the financial status of the program. We’re seeing schools take out $75 million loans while simultaneously cutting athletic programs due to the impact of COVID-19 on revenue, so a $19 million debt restructuring is mild, but I suppose it does call a bigger question into my mind.
The Athletics department has made some unfortunately mistimed to downright bad financial decisions in recent years. No one could’ve predicted a global pandemic when a $160 million stadium renovation was planned, but the ill advised buyouts on coaches and administrators who are no longer with the university look pretty bad in a time where money is allegedly tight. That’s the question though: is money really that tight?
At the end of August, the Athletics department announced a pay cut across the board in the wake of projections of lost revenue due to COVID-19. This isn’t unique to Arkansas— it’s happening everywhere, and not just in athletics departments— but let’s consider Arkansas alone for a moment.
I read through the most recent tax filings I could find by The Razorback Foundation, which amounted to this PDF from 2018. According to that filing, the Foundation had $56,221,522 in net assets at the end of the fiscal year of 2018. Incidentally, that was around a $22,000,000 loss from the year before. My wager is that the loss was from stadium construction. Regardless, we do know definitively that donations make up only 18% of the Arkansas Athletics’ $130.1 million operating revenue. The rest is likely made up by conference payments, media deals, and other grants. Meanwhile, the University itself boasts an endowment of over $1 billion.
Now, I’ve never run a massive land-grant institution of higher education while overseeing the revenues of the 13th most valuable athletic program in the country. However, I have enough understanding of how the collegiate athletic model works to question again: is money really that tight?
I think it’s honorable that Hunter Yurachek gave himself the biggest pay cut in the department, but when “nonclassified staff making between $50,000 and $99,999 -- will face a 7.5% [salary] reduction, followed by a reduction of 5% for nonclassified employees making between $30,000 and $49,999,” I begin to wonder where the money goes, and for what purpose it’s being used, because it ain’t going to the folks who actually generate the money.
Obviously there are other operating costs in a massive athletic department like Arkansas’, but when endowments and donations are often said to be saved for “rainy days,” doesn’t a global pandemic constitute a “rainy day?” Taking this from Arkansas to the world at large, I think we’re going to see a lot of this— institutions that make hundreds of millions of dollars a year are going to act like beggars this year.
Schools are already shuttering low-earning athletic programs, and as I said before, some universities are even cutting education programs. With tuition costs skyrocketing and athletics being more valuable than ever, I’m wondering why someone making $30,000 a year in the 13th most valuable collegiate athletic program is having to take a pay cut. I’m wondering why fan donations are being used to pay the losses faced by concession staff instead of athletic funds. I’m wondering why players don’t get paid for their labor.
Okay, I guess I lied at the beginning— I’m addressing the player payment question. These athletes bring in billions of dollars a year to their schools, conferences, the NCAA, and all the media outlets that cover them. While they do receive scholarships, the value is nowhere near equivalent to the revenue generated on the football field or the basketball court.
The pandemic is causing us to re-evaluate a lot of things we previously considered “normal.” Perhaps it’s time to take an honest look at college athletics and realize that it’s time for the model to change. In a former edition of Pig Tales, I discussed my cynicism about the reasoning behind the Big 10 and Pac 12 shutting down athletics. I said then that it wasn’t due to player safety, but due to the pushes for player autonomy and compensation. The Big 10 has begun a restart now that the push has ended, and the Pac 12 is debating it. The SEC, ACC, and Big 12 never faced such pushes, and never once looked like shutting down.
At the beginning of the NBA Playoffs I wondered whether or not a “Bubble” model was feasible for college athletics. You could have every SEC team stay in Atlanta and try to pull off a whole season, maybe having one game per day, allowing us to watch SEC football from Monday to Sunday while ensuring player quarantine. But all of that came crashing down when I realized what the implications of a Bubble would be. Players would be off campus, focused solely on their sport. Sure, they could do distance learning, but that would be secondary. In essence, it would be professionalism without pay.
By fighting to restart, isn’t that what’s being said? Is this not college athletics taking the mask off? Is this not a tacit admission that it’s about money and nothing else?
You have to be pretty naive to think college athletics has ever been about anything else, but I don’t think that ruins the appeal of college sports. I love professional sports too, so athletes getting paid doesn’t change my love of the game. It’s just that it’s more apparent than ever that this is solely a money-making business, and education is more of an afterthought. When universities make hundreds of millions of dollars a year and boast multi-billion dollar endowments, the talk of financial difficulty feels hollow. If these massive universities are fine with revealing that, they need to be fine with compensating their athletes as such.
Of course several smaller programs are indeed suffering, because football pays for everything. I get that, and am not discounting that experience. I don’t know what the solution is in the case of Delta State or California- Santa Cruz. For our purposes though, Arkansas is a massive, flagship university in the biggest conference in the NCAA. The perks of being in that elite company also mean that you don’t get the benefits of crying poverty— especially when your money makers aren’t allowed to be paid at all.
Thank you so much for reading this edition of Pig Tales. Next time we won’t be taking such a deep dive into one topic, as we’ll have more pre-season football to discuss. What are your thoughts? Leave a comment below and let me know, or shoot me a message on twitter or leave a comment on our Facebook page. Be sure to like that page as well so you can stay up to date if the newsletter goes to your spam (be sure to mark us as “not spam!”).
Thanks again. This newsletter has been a welcome creative outlet for me during these difficult times. I’m glad to have you along for the ride. Stay safe, stay healthy, and go Hogs!