Without Michigan football, athletic director says school could take a $100 million hit
Early last month, Michigan athletic director Warde Manuel wrote a letter to season-ticket holders and asked for donations as the athletic department faced "an unparalleled level of financial uncertainty" during the COVID-19 pandemic.
The situation has only become more dire since.
In an appearance on the "Conqu'ring Heroes" podcast with Jon Jansen, Manuel revealed that the athletic department will take a nearly $100 million hit after the Big Ten's decision to postpone all fall sports on Aug. 11 — including football, the department's prime bread-winner.
"The impact is upwards of almost half our budget, about $100 million," Manuel said. "We’re still working through some finalized models to exactly figure out, hopefully we’ll have them at some point in September finalized and sort of nailed down exactly what everything will be. But it is just a significant loss.
"We have to take as many significant reductions as we can and cut back as we have already, and as we continue to do our budgets, salary reductions and those kinds of things. We just keep moving through it and try to figure it out.”
Previously, Manuel asked season-ticket holders to consider "converting your previous preferred seat contribution/season ticket payments towards a tax-deductible gift to the Champions Fund."
"As a direct result of COVID-19, we budgeted $61 million less in revenues this year which could easily double if the decision is made not to play any sports," Manuel wrote in his August letter. "In addition, we are also facing significant costs related to safely returning our student-athletes and staff to campus with COVID-19 protocols in place."
On the podcast, which was released Tuesday, Manuel thanked those who had made donations. But he emphasized that the department's revenue shortfall will be even greater now that there is no football this fall — characterizing the postponement as a "significant financial impact on the department."
The past few months have certainly only worsened Michigan's budget outlook for the 2021 fiscal year.
In June, Manuel presented the annual budget in a Board of Regents meeting, projecting a $26.1 million deficit based on operating revenues of $135.8 million and operating expenses of $161.9 million. That budget predicted that revenue from spectator admissions would decrease $29.2 million between the 2020 fiscal year and the 2021 fiscal year "due to lower anticipated attendance for all sports," while projecting preferred seat contributions to decrease $17 million, due to both lower anticipated attendance and potential refunds, and total revenues to decline close to $65 million.
But that projection was released before the Big Ten shut down fall sports, after the conference had previously planned to play a shortened, conference-only schedule in the fall.
Now, the athletic department is almost assuredly staring at a large deficit after operating at a surplus since at least 2005, according to USA TODAY's annual financial database. Based on Manuel's comments, the football program could lose close to 80% of its yearly revenue; during the 2019 fiscal year, the program generated $122.3 million, comprising most of the athletic department's $197.8 million in revenue.
The Wolverines have already implemented some cost-cutting measures. Some in the department have accepted salary reductions, including Manuel, football coach Jim Harbaugh and men's basketball coach Juwan Howard, who each took 10% pay cuts. Other Big Ten schools like Purdue have applied similar reductions, while Iowa went so far as to cut four sports: Men's gymnastics, men's tennis and men's and women's swimming and diving.
"Tough, hard, sad decisions have been made as we have to make cuts to expenses to offset the reduction in revenue," Manuel said. "And everybody is going through that in our society. One of my closest friends lost his job three weeks ago. And it was hard. It was hard as a close friend. He didn’t lose it because he wasn’t doing his job, he was losing it because the company was losing significant revenue during these times and had to make the decision on his job and other jobs.
"This is just hard. It’s a hard impact. It’s not easy to have to think of all the things we have to give up that we are normally used to having. But that’s where we find ourselves during this time. Difficult choices have to be made in order for the long-term health of the department and the long-term health of the university."
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