Report Describes Cal Athletics' Financial Shortfall

Jon Wilner of the San Jose Mercury-News lays out the numbers as Cal heads to the ACC. How will incoming chancellor Richard Lyons react to the athletic department's situation?

Sep 4, 2021; Charlottesville, Virginia, USA; A detailed view of the ACC logo on the down marker used / Scott Taetsch-USA TODAY Sports

A report by Jon Wilner of the San Jose Mercury-News indicates that Cal’s athletic department has experienced financial losses of nearly $68 million over the past two years.  And Cal heads into the Atlantic Coast Conference next fall knowing it will receive less than full revenue shares from that conference for the next few years.

Here are the pertinent excerpts from Wilner’s report, indicated in italics:

— In FY2022 [fiscal year 2022] the Bears generated $120.5 million in revenue against $116.8 in expenses and $29.1 million in campus  support. Total shortfall without support: $25.4 million

— In FY2023, they [Cal] booked $129.5 million in revenue against $138.3 million in expenses with $33.7 million in support. Total shortfall without support: $42.5 million.

The shortfalls come with the schools preparing to join the ACC this summer — they announced the 12-year arrangement  on Sept. 1 — at a distinct financial disadvantage.

Desperate for a home after the collapse of the Pac-12 but lacking negotiating leverage, they will receive 30 percent shares of the ACC’s annual media revenue from its broadcast contract with ESPN.

The discount covers seven years and will leave both Cal and Stanford with revenue distributions that are approximately $15 million less (annually) than the ACC’s current members.

And membership in the ACC will mean increased travel costs.

Wilner’s report included the financial state of Stanford’s athletic department as well, and he revealed that the Cal and Stanford athletic departments combined had an operating shortfall of $37.6 million for the 2022 and 2023 fiscal years. And the real story is worse than that because that number included direct university support. If the direct university support was removed from the equation, the combined operating shortfall was $46.9 million in fiscal year 2022 and $75.8 million in fiscal year 2023, according to the report.

Assuming that financial burden at Cal are athletic director Jim Knowlton and, more importantly, Richard Lyons, who takes over as Cal’s chancellor on June 1.  How will Lyons react to the athletic department’s financial situation, and what will he do about it? He is a Cal alumnus who attended Cal football games as a teenager and was in attendance for "The Play," the five-lateral kickoff return that gave Cal a 25-20 win over Stanford in 1982. So he has an appreciation for Cal athletics. But his expertise is in finance, and he presumably will wear an economist's hat when he is the university's chancellor

Cal’s situation could be improved slightly by the so-called Berkeley tax. More than a year ago, the University of California’s Board of Regents approved a motion that would require UCLA to send some of the revenue it earns from its Big Ten membership to Cal’s athletic department. That “tax” reportedly could be anything from $2 million to $10 million, but there has been no update on the status of that requirement for several months.

There are several other major financial obligations facing departing Pac-12 members as well as all NCAA members in the coming years. There is also the prospect that colleges may soon be required to pay revenue-generating athletes directly. This would be a departure from the current NIL system in which donations from outside the athletic department are used to fill collective coffers to attract and subsidize athletes.

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