‘We certainly didn’t expect a storm like this’: UW Athletics provides budget update, expects deep cuts to stay afloat

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The financial update that Athletics Director Jen Cohen and Chief Financial Officer Kate Cullen will present to the University of Washington Board of Trustees on Thursday doesn’t sound like the original best-case scenario.

This The scenario – with a full football season with fan involvement in the fall, outlined at a similar budget meeting in May – was buried under a deluge of testing issues, long-term heart problems and increase in coronavirus cases. As a result, Pac-12 sports have been postponed until the end of the year, and its athletic departments face an uncertain financial future.

All of this will be described in detail on Thursday, beginning with the opening paragraph of a document prepared to accompany the presentation:

The updated FY21 budget included here reflects the following assumptions, as well as actions taken by the CIA, that resulted from this decision:

  • A football season truncated in winter/spring;
  • Fans are unlikely to attend events (however, we are open to welcoming fans if circumstances change);
  • Decline in sponsorship revenue; and
  • Staff and operating cuts equivalent to approximately $28 million.

But this is only the beginning. Before the UW athletics brass released their budget update, The Times spoke to Cohen to provide additional context and answers earlier this week. Here are six key takeaways from UW Athletics’ upcoming financial presentation.

UW plans to cut $28 million in personnel and operating expenses in FY21.

In June, UW announced that it would implement a 15% reduction in its operating budget (approximately $8.5 million) and a 10% pay cut for staff (approximately $5 million). That headcount reduction has since grown to 17% ($8 million) — via “voluntary contract reductions, department-wide furloughs and other staff reductions” ($20 million). Considering that 65% of the department’s salaries and benefits are tied to guaranteed contracts, the financial flexibility is limited.

The operating budget also reached 40% thanks to “continued cost control, spending freezes and operational cuts”.

“When we close and you just manage expenses and expenses, you can cut back significantly,” Cohen said. “Also, with the dead period with the NCAA extended, our recruiting costs are minimal right now because we are not allowed to recruit. The other thing is that game day operations are extremely expensive. Now, there’s income that comes with those. But when you’re probably going to have fewer games, especially for football, the reduction in spending around that is really significant ($5 million in savings).

“We have also worked with each of our sports programs to reduce their overall operating budgets, and coaches will work with us to raise funds. So it’s kind of a combination of those things.

The cancellation of UW’s non-conference football schedule also generated $3.125 million in windfall savings — $1 million for Michigan, $625,000 for Sacramento State and $1.5 million for the state of Utah.

Planned operating expenses do not include the potential price of the recently announced daily COVID-19 testing partnership between the Pac-12 and healthcare manufacturer Quidel Corporation. Cohen said “this is an area we’ve identified as a possible expense that we haven’t factored into the budget yet.”

The budget proposal assumes that a truncated football season will be played this winter or spring.

When asked specifically about his level of confidence that UW football will be played in FY21, Cohen said, “I’m more confident today than I’ve been in six months. . So that’s encouraging.

Even so, with a 6-8 game winter or spring season, UW is only projecting $73.5 million in revenue, which is $50.6 million less than its best-case budget expectation. may. That includes a $29.9 million gain in gate revenue — since the Huskies don’t expect to welcome fans in FY21 — as well as $18.7 million less in TV rights and NCAA distributions, $5 million less in royalties, advertising, and sponsorships, and $4 million less in in-game day-to-day revenue (concessions, parking, etc.)

To make up for those losses, UW has set a goal of raising an additional $15 million through the Huskies All In fundraising campaign (more on that later).

But even if that’s the case, Cohen and Cullen will still see an operating deficit of $13.4 million — and that’s before factoring in the $14.3 million annual debt service payment. dollars from the loan that funded the renovation of Husky Stadium, or $6.4 million expected in 2020. repayment of football season tickets.

Oh, and if a winter/spring season is further limited or canceled, UW could suffer an additional $20 million in losses.

So, to reiterate: this is definitely not the best case scenario.

The assumption is that there will be no fan attendance at UW athletics competitions in FY21.

But that doesn’t mean Cohen, Cullen and Co. have ruled out the possibility that UW could welcome fans this winter or spring.

“Our team is ready to accommodate all of our state and county guidelines regarding large gatherings as we begin playing football,” Cohen said. “That being said, we thought it would be more responsible on our part (not to project fan attendance) because we know at the moment that it wouldn’t be possible, just to prepare our budget around that. And then if we can improve our situation, great.

“And our situation could also get worse. We still might not have a sport for the year, and we’re in a completely different model as well.

UW is asking for a one-year deferral on the loan that helped fund the renovation of Husky Stadium in 2012.

Because of this proposed deferral — which the board will vote on Thursday — UW’s annual payments would be about $600,000 higher over the remaining term of the loan and it would pay $15.7 million more in interest. additional. Final full payment would be pushed back a year to July 1, 2045.

Under this loan agreement, UW is required to maintain enough for one year’s debt service payment in its reserve fund at all times. UW touted about $39 million in reserves going into FY21 and plans to spend $23.4 million of that this year to keep its athletics department afloat, leaving about $15.6 million remaining.

To avoid essentially draining its reserve fund, a deferral of debt service is an understandable request.

“It’s just not a consistent business model at times,” Cohen said. “So the reserves are there to get us through these storms. We certainly did not expect a storm like this.

UW estimates it will return $6.4 million in 2020 football season ticket refunds.

As part of its Huskies All In program, UW has offered its 2020 football season ticket holders three options: donate their ticket prices to the Athletics Department as a gift, convert it to credit to use in 2021 or request a full refund.

The projected results are as follows:

  • Ticket donation: 15%, $3.2 million
  • Converted to credit: 55%, $11.7 million
  • Note redemption: 30%, $6.4 million

UW has also set a goal of raising an additional $15 million through Huskies All In, specifically to replenish the dwindling reserve fund. The budget document states that “these challenges require a significant fundraising effort in FY21 to avoid the total depletion of the reserves that the ICA has built up over the past decades.”

Even in a time of sudden economic instability, Cohen is optimistic about achieving their fundraising goals.

” It will be long. It’s a really unusual time to raise funds, and we’re very sensitive to that,” she said. “That’s why we gave fans the option to redeem tickets and credits, especially with the initial gifts. Because we wanted to be sensitive to where people were (financially). That being the case said, we get tremendous support from donors, season ticket holders and fans who really want to make sure they can see our teams compete again.

“So it’s aggressive. We’ve had aggressive goals before. We have achieved them. I don’t think it will be any different in this case.

UW remains committed to preserving its 22 athletic programs.

Under a section titled “guiding principles,” Thursday’s UW Athletics document first lists the following: “to maintain athletic sponsorship and operations for all 22 teams.”

An accompanying document also states that “the athletic department is working tirelessly to increase philanthropic support, reduce expenses and be as creative as possible as it navigates one of the most challenging times in its history.”

The goal, of course, is to emerge from this period with all of Washington’s athletic programs still intact.

“It’s not on our planning list right now,” Cohen said of the prospect of cutting sports programming. “It’s always going to be on the air, because at some point if we can’t operate and we don’t have the revenue, we’ll have to look at what services we can and can’t provide for students. But we’re fighting.

“We are fiercely committed to maintaining our programs, and we also support the most important things – like scholarships and academic support, career development and mental and medical health and all that. So I think if you look at the plan we have now, it’s solid, to protect all of our programs. Much of our ability to do this over the long term will depend on the kind of support our programs receive from our community.

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