Finding a foothold: First pass at how schools could deal with the House settlement proposal

A way too early, way too rough look at how six different schools fare with new CFB Playoff revenue and House payments.

May 28, 2024

Bottom Line: Football parity (or lack thereof) remains intact as Big 10 and SEC spend their profits on non-revenue sports, while others with fewer resources could cut those teams, but the more likely scenario is that they receive state funding to keep close to the status quo. Football, everyone’s cash cow, if it wasn’t before, is now everyone’s top priority.

In this article, I start with a baseline of six athletic departments’ financials, add new estimated revenue from recent media deals and the CFB playoff splits, deduct a rough estimate of the proposed House settlement (retroactive and future), and produce a surplus or deficit for each of the six schools in the sample. If there is a deficit, I identify the non-revenue teams that could be cut to balance the budget. This is my first cut, based on what has been reported so far. Admittedly it is not much better than a back-of-the-envelope analysis, but I think it is illustrative of what could happen when all the numbers are clarified. I will refine and update my analysis and include additional schools as things settle. Comments and suggestions are welcome!

My sample for this initial analysis includes Ohio State, Arkansas, Kansas, North Carolina State, Oregon State, and Colorado State. I chose these six partly for convenience, as each school posts its financial reports to the NCAA online. I used the source documents for my analysis as I found errors in the transfer of data from these reports to some of the popular online databases. All of these reports are attached below. The data is from fiscal year 2023 (July 2022- June 2023) and in thousands (000s).

Table 1: Annual academic and athletic budgets in thousands (000s).

Baseline Profit and Adjustments

Financial reports submitted to the NCAA provide extensive details on revenue and expenses per team, and the number of participants and coaches for each team. A weakness of the reports is the large amount of revenues and expenses not associated with a specific team. The undesignated expenditures primarily relate to the athletic department’s overhead. Undesignated revenues, in part, relate to corporate sponsorships that are not tied to a specific sport. For this first cut, I allocate 70% of undesignated revenue to football, 20% to men’s basketball, and 10% to all other sports. For the expenses I allocate 40% to football, 10% to men’s basketball, and the balance to all other teams. After distributing these undesignated revenues and expenditures, I calculate a net revenue/profit for the football and men’s basketball teams (first line on Table 2).

Next, I add new media and CFB playoff revenue and deduct the proposed House settlement and the future revenue-sharing agreements. These are rough numbers for now. If there is a positive change in position (last line) or a slight decrease, the Athletic Department can maintain the status quo. In this preliminary analysis Ohio State, Arkansas, and Kansas are in good shape to keep all of their existing non-revenue sports. North Carolina State, Oregon State, and Colorado State, face moderate to extreme program cuts in non-revenue sports if a public subsidy is not secured from the university or state and local government.

Realignment fallout and the non-revenue sports

High-resource schools already have many more non-revenue sports than small-market/small-budget schools. The change in CFB revenue sharing and the last round of media contracts will widen the gap in the number of non-revenue teams fielded by schools and leave football and men’s basketball programs relatively unscathed. Table 3 identifies the existing teams fielded by the sample schools in this analysis.

Here are summaries of how each school could address its shortfall.

North Carolina State ($9.2 million deficit)

The State of North Carolina is a strong supporter of athletic events and the economic impact they provide to communities. It is likely that the State will step in and fill any gaps to prevent cuts to team sports. If the state did not opt to help NC State, then cutting the men’s and women’s golf and soccer teams, along with the associated support staff would close the gap.

Oregon State ($32 million deficit)

Oregon State retained significant financial resources as one of the two remaining members of the Pac 12. These resources provide a soft landing for OSU, as it transitions to a new revenue model - one without significant media revenue. The Pac 12 resources could help Oregon State slowly phase out non-revenue sports over five years.

The most drastic scenario for the Beavers is to retain the two revenue-producing sports (football and men’s basketball) and baseball - a sport that Oregon State has enjoyed significant success this century winning three national championships. The three women’s sports that lose the least money and have some media interest are volleyball, softball, and gymnastics. Cutting all nine other men’s and women’s sports, along with the associated athletic department overhead, would close the $32 million projected deficit. Such a steep cut in programs is likely to get the attention of State politicians and Oregon State could expect to get some of the sports back with state funding.

Colorado State ($6.6 million deficit)

Colorado State’s women’s soccer team loses approximately $2.3 million each year. The men’s and women’s track teams lose $2.5 million each year. Cutting these two teams, plus the associated reduction in athletic department overhead would easily address the $6.6 million gap. This drops the number of teams from 12 to 9, with 3 men’s teams and 6 women’s teams. Alternatively, the State of Colorado could increase institutional support by 33%, from $21 million to $28 million to address the gap. I’d bet the state steps in to help.

Table 4: Program Cuts to Balance Budget Shortfalls

Several details have not yet emerged regarding implementing the proposed House settlement. The employment model is undefined, the number of scholarships and how they are funded is an open question for every school, collective bargaining is possible, and Congress may want to put its mark on the financial structure of collegiate sports - possibly clawing back gains of the SEC and Big 10 in the CFB playoff revenue allocations. I’ll refine and update this model, and apply the formulas to more schools in my next version.