In a normal fiscal year in the WVU athletic department, a road map of spending and revenue, and the path being followed on it, would be well established by this point. With a budget put in place for athletic spending running from July 1-June 30 of the following year, each program typically knows how much it has to spend, what capital improvements it is committed to and a good projection on how much revenue it can expect.
This year, of course, is anything but normal.
Projecting expected revenues in the shifting sands of the pandemic proved to be an exercise that was outdated almost as soon as numbers were produced, with the result that West Virginia’s athletic department is operating on a bare-bones basis this year, with only the minimal amount of spending necessary to keep its programs operating.
“When all this started, we went through our budget planning exercise and came up with a number of $83 million for this year,” said Simon Dover, WVU Senior Associate Athletics Director for Business Operations and Chief Financial Officer. “We thought at that time, back in the early spring, that we could make it on that number.”
However, as the pandemic progressed, with the cancellation of the NCAA men’s basketball tournament, the resultant lowering of payment disbursements and the uncertainty over the amount of revenue to be projected from ticket sales, rights fees, advertising and the like, it quickly became apparent that a fixed budget in this year could not be produced — at least, one that was as detailed as in prior years. Therefore, WVU has been operating on a need basis, with only those expenditures required to keep each sport running being approved for expenditures.
“Our projection now is that we are going to have a least a $30 million deficit in expected revenue, from $92 million to about $60 million,” Dover said. “We are only dealing with need this year with spending for each program.”
Those amounts are still prodigious. WVU counts some $50-55 million in expenses this year as fixed costs — that is, costs that must be paid no matter if games are played or tickets are sold. Big-ticket items in that list include the cost of athletic scholarships, coaches and staff salaries, debt service and costs for facilities. Without a firm idea yet on how much the department can expect to receive in revenue, it became impossible to produce a detailed spending plan.
“In a regular year, by the end of March the budget is done,” said Dover, who came to WVU in 2017 from Rice University, where he held a similar post. “We meet with every coach and sport administrator, get a list of their needs and wants, lay out expected expenditures for travel, meals and all the things that go into running each program. This year, it became clear that producing a traditional budget wouldn’t be possible. There were too many unknowns as to whether games would be played and what revenues could be expected.”
Dover and his staff instead focused on ways to cut costs, while also educating top school administrators on the current situation.
“The day we spent with the Board of Governors was an educational one,” said Dover of the time when the department typically presents a budget. “We explained the situation and why it was impossible to produce our normal budget documents, and how we would operate this year.”
The uncertainty extends in many directions. Ticket sales, reported in excess of $19 million in fiscal year 2019, couldn’t be projected as games were first closed to all but a handful of observers, then modified to allow 20-25% capacity. Distributions from the NCAA and Big 12 were down slightly from $38.8 million to $37.7 million in the 2019-20 year, and that number could decrease again if rights fees from the conference are adjusted due to a fewer number of games played. Adjustments to student fees and a renegotiation of the schools’ in-house deal with IMG hold other potential revenue decreases in the year(s) to come, but the effects of those won’t be known until those processes are complete.
“As of now, we’re expecting about $2-3 million in total ticket sales this year,” Dover said, noting again that the projected totals could change in response to the operating status of the state and the country.
If another lockdown occurs, or public gatherings are banned, that revenue could be even lower. A cancellation of competition would also affect the negotiations for modified payouts from media rights holders.
“We were contracted to provide 57 football games to our rights holders,” Dover said, sharing one example of the uncertainty. “Right now we are at 51 games, so we won’t have 100% of the games we were contracted for. That will affect the amount of revenue.”
Dover also explained that the open-ended scheduling of many fall, winter and spring sports are affecting the budget/revenue conundrum.
“Take women’s soccer, which I am more familiar with because I am the sport administrator,” he noted. “They played a conference schedule in the fall, so we had to meet travel costs, meals and all the things associated with running the program. But we don’t know what will happen in the spring. Will we play some non-conference games? Will the NCAAs be played? All of those things have costs, but we don’t know what is going to happen.”
With no clarity to be found in the revenue picture, Dover emphasized that WVU is being as conservative as possible. In addition to earlier spending cuts, hiring freezes and the elimination of some staff positions, financial aid for summer school classes for student-athletes is being severely restricted.
There are some coincident cost savings that are helping. The extension of the ban on all in-person recruiting through April 15 of next year will help save some $1.5-2 million over a normal year, and the summer financial aid cuts could help save another $1 million. Travel costs are less in sports as non-conference games were contracted or eliminated. However, there’s still a long way to go in order to meet the shortfall. Dover is exploring every avenue possible in which to do so.
“Every 2-3 weeks, we have a call with the Big 12 and the member schools’ CFOs,” he noted of a process where ideas are shared and the current status of the league’s financial situation are discussed.
The league put a 10% budget cut for its own operations in place in the current fiscal year, and has eliminated some open positions — a process that has been echoed at most of its member schools.
West Virginia’s NCAA financial report for Fiscal Year 2020 is due out in mid-January, and that document will give a better picture of the effects of the spring shutdown of sports at WVU. However, the forecast going forward is still to be determined, and there’s simply not a good way from meaningful projections to be made, given the shifting landscape of the pandemic. The playing of the men’s basketball tournament and the College Football Playoff are two large revenue drivers, and every effort is being made to preserve those.
“We are in danger financially,” Dover said, noting that this has been the most challenging task of his career. “It all keeps compiling.”
