As crowd sizes have shrunk, the financial losses at Kansas Athletics Inc. have grown to the point that leaders were told Wednesday to expect about a $10.4 million loss for the current fiscal year.
The department will use a portion of a $20 million line of credit to cover the unexpected losses that have resulted from disruptions related to the pandemic, board members of the University of Kansas entity were told at a meeting of the group.
“We know we will be able to pay our bills this year,” Pat Kaufman, chief financial officer of Kansas Athletics, said.
It also was clear that the athletic department wouldn’t be asking for any new money from the general university to help cover athletic department expenses, Athletic Director Jeff Long said.
“We don’t count on that, and we know that is not an avenue for us,” Long said of additional university funding. “We are very comfortable with that, and it is why we have secured that line of credit.”
KU Chancellor Douglas Girod also reiterated that position to the group. The athletic department receives about $1.2 million in direct institutional support from the university, and Girod said there were no plans to provide additional such support to the athletic department, which operates as its own separate, KU-owned corporation.
“As much as I love you guys, I also appreciate that you aren’t expecting us to bail you out,” Girod said.
Significant reductions in both the number of football games and the size of crowds allowed at games have led to revenue reductions in the Kansas Athletics budget. Anticipated reduction in games and crowd size for basketball also have been factored into the projections, Kaufman said. Overall ticket revenue is expected to fall from a budgeted figure of $17.9 million to $3 million.
Another major reduction is expected to come from the amount of money the athletic department will receive from the Big 12 Conference and the NCAA. Much of that money is determined by how many league games can be shown on television during the course of a season. As football games have decreased in number, KU is now estimating a drop from $37.8 million in conference/NCAA revenue to $26 million.
Board members were told if the college football playoff games don’t happen as scheduled, KU could see another $5 million to $7 million drop in revenue. As a member of the Big 12, KU gets money from that playoff system, regardless of whether any Big 12 teams make the playoffs.
While the new budget for the fiscal year shows a $10.4 million projected loss, the amount of operating loss is actually greater. KU is using about $5.4 million in surplus funds from last year to help cover the operating loss. Without the surplus money, KU expects operating expenses of $89 million, while operating revenues are expected to be about $73 million.
If KU begins to see losses that threaten to deplete the entire $20 million line of credit, Long said the department would start to look at staff layoffs, among other cuts. The department already has made several temporary salary cuts and furloughs. The new projections show KU plans to spend about $3 million less on salaries and benefits than what it originally budgeted to spend. With the cuts, KU Athletics expects to spend $31.7 million on salaries for the current fiscal year.
Thus far, though, KU Athletics has not had to make any permanent layoffs, although a “small handful” of employees have accepted early retirement buyouts. More cuts would be likely if the department approaches losses of $20 million or more.
“Before we get to that level, we would be making some other cuts,” Long said. “We are following this very closely.”