At about the same time, the university brought in a new athletic director, Mike Williams, a onetime Cal wrestler who went on to work in corporate finance. In his search for new ways to make money, Williams has negotiated an apparel contract with Under Armour and a media-rights deal that together will increase revenue by $7 million annually for the next decade. Still, Williams said, “We need to do more.”
Enter the Chancellor’s Task Force on Intercollegiate Athletics, charged with reviewing the department’s finances and making recommendations. O’Donnell said the group is still in “input gathering mode.” The Mercury News reported that more than one-third of Cal’s sports could be on the chopping block. An administrative overhaul to lower expenses is also possible, or the broader university could increase the money it devotes to athletics, currently around $5 million.
There may be limits to how much help can come from central campus. Overall, Cal had a $150 million deficit last year and is up against its borrowing limit. “Not only does athletics have a problem on account of the debt service, but it’s also taking up a huge chunk of our available borrowing,” said physics professor Bob Jacobsen, a faculty representative for athletics. Meanwhile, he added, professors are losing research opportunities due to funding concerns.
Debt can be a tool to grow—especially when interest rates are low—but only if it’s used properly, according to the Georgia Tech athletic director Todd Stansbury. In September, he inherited a department with $226 million of debt. Most of the $13 million annual debt service, however, is linked to pledged donor contributions. “When it’s done that way, it’s both healthy and sustainable,” Stansbury said. “When it starts to eat into your operations budget, then it becomes highly problematic.”
This article was provided by Bloomberg News.