Penn State Athletics in 'Good Shape' Financially Despite Shutdown

Athletic Director Sandy Barbour said a $12 million cash reserve will fortify the 2020 budget.
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The COVID-19 shutdown sounded financial alarms across college campuses and within athletic departments. Penn State was not immune.

"There's always a concern about financial implications," Penn State coach James Franklin said recently. "As a football coach at Penn State, you always carry a little of that weight on your shoulders, that pressure on your shoulders, because you know that the success of football will rise all boats in the athletic department and obviously has an impact on the community.

"Everybody is aware of that and everybody is sensitive to that, no doubt about it."

Sports Illustrated's Pat Forde and Ross Dellenger recently chronicled the cuts some athletic departments have made due to shutdowns and cancellations. The story detailed how some schools have eliminated programs in response to the shutdown but also argued that the college sports budget model is aging.

"It’s clear that the D-I model of intercollegiate athletics has been broken, and COVID-19 is exposing it," Mike Moyer, executive director of the National Wrestling Coaches Association, is quoted as saying.

So far, according to the story, cuts to team sports have been confined largely to programs in the Group of 5 conferences. No Power 5 school has eliminated a sports program yet.

But many programs have announced salary reductions and other budget cuts as part of short-term cost-cutting strategies. Penn State has not announced any such reductions.

Athletic Director Sandy Barbour said this spring that Penn State would be in "good shape" for fiscal year 2020. The athletic department carried a $12.3 million reserve following fiscal year 2019, which Barbour said would allow it to operate at close to normal. She said Penn State had no plans to cut any of its 31 varsity sports programs.

The cash reserve is important. Seven years ago, Penn State's reserve fell to $150,000 because of the NCAA sanctions and the loss of Big Ten bowl revenue. Penn State announced last fall that $5 million of that reserve would be marked for projects in the athletic master plan unveiled in 2017.

How the COVID-19 pandemic will change that is unclear, though Penn State did say in September that the reserve balance "can both guard against unexpected fluctuations in the market and allow for investment in strategic initiatives." Further, Penn State is continuing plans with renovations to the Lasch Football Building. The plans include the construction of a new "Quarterback Lab."

"In my 40-year career, and the last 26 as an athletic director, I’ve managed and led through hurricanes and earthquakes and protests, but nothing like this," Barbour said recently. "This is hopefully a once-in-a-lifetime thing for all of us no matter what line of work we’re in."

Penn State, whose athletic department is self-funding, obviously relies on football, which makes the sport's return this fall so vital economically. In fiscal year 2019, for instance, the football team generated a $54.3 million surplus and topped $100 million in revenue for the first time in school history. Penn State released those numbers in its 2019 financial report for athletics.

According to that financial report, three Penn State teams generated surpluses in FY 2019: football, men's basketball ($4.2 million) and men's ice hockey ($536,682). The other sports ran a total deficit of more than $20 million.

The athletic department also spent more than $34 million on debt service, facility rentals and other administrative costs that weren't team-specific. But because of the football revenue, Penn State's athletic department concluded FY 2019 with a total budget surplus of $4.2 million.

As Barbour said, Penn State likely can withstand a revenue loss this year, but future budgets will be important to watch. The good news, though, is that the Big Ten could see another windfall with its future media-rights contracts. According to The Athletic's Stewart Mandel, the next round of deals could make the COVID-19 budget shortfalls seem like temporary lulls, at least for programs in Power 5 conferences.

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