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Sunday Morning Quarterback: UCLA Athletic Department Ran a $19M Deficit in 2018-19 [UPDATED]

Guerrero is leaving Bruin fans with a $19M “retirement gift,” created by the perfect storm of increased costs and plummeting attendance.

NCAA Basketball: UCLA-Press Conference Kirby Lee-USA TODAY Sports

As Bruin fans continue to await the imminent departure of UCLA Athletic Director Dan Guerrero, they were dealt some awful news on Friday that could affect Bruin Athletics for years to come. The UCLA Athletic Department ran a $19 million deficit for the 2018-19 school year, according to a report from respected Pac-12 columnist Jon Wilner of the San Jose Mercury News.

The situation is so dire that the department was required to take out a low interest loan from UCLA to balance the books. In other words, Dan Guerrero is retiring at a time when there is no longer any money in Athletic Department’s reserves.

So much for Guerrero being a sound money manager.

This also should been seen as a big giant red flag with respect to promoting someone from within the department to replace Guerrero for next school year. After all, does anyone who was a part of running a $19M deficit in one year really deserve a promotion?

Wilner accurately writes, “Digging out could take years.”

Actually, years may be optimistic.

That’s because the reality is that the UCLA Athletic Department either needs to cut spending or increase revenues. Now, the school might be able to save some a little bit of money on the football program by forcing pay cuts amongst Chip Kelly’s assistant coaches, seeing as how those coaches have been getting paid top dollar salaries for sub-par results. After all, those contracts are coming up for renewal.

Meanwhile, the department’s financial situation could ensure that Kelly finishes out his contract if UCLA cannot afford to pay Kelly to go away.

While Wilner seems a little quick to blame coaching buyouts for the shortfall, a sizeable chunk of the deficit does appear to be due to the increase in the football nutrition budget under Chip Kelly. It went from just under $1M to a whopping $5.4M under Kelly for an increase of $4.4M just on nutrition alone. Meanwhile, football revenues falling $3.5M short of projections due to the team’s poor performance on the field.

Speaking of the revenue side of the ledger, UCLA isn’t likely to see an increase in revenues anytime soon. The Pac-12 TV packages aren’t up until 2024 and UCLA’s deals with Under Armour and Learfield IMG College are long-term ones.

With both the football program and the men’s basketball program mired in mediocrity, it will be incredibly difficult for the Athletic Department to increase revenue. On one hand, they could ask donors to pony up larger donations in order to be able to buy season tickets.

But that carries with it the same problem that simply growing revenue through ticket sales has: The teams have been terrible. Increases in either the Wooden Athletic Fund donation required to buy either football or men’s basketball season tickets is likely to drive donors away just as an increase in ticket prices would do.

Wilner correctly explains that the only real solution to UCLA’s revenue problems is for the Bruins “to win their way out of debt.”

But even that has gotten harder under Kelly.

In October, Ben Bolch of the LA Times reported that 63 players had left the UCLA football program since Chip Kelly arrived in November 2017. Since the season ended, 14 players have entered the NCAA Transfer Portal. Even if some of those 14 players were in Bolch’s original count of 63, there have been at least 70 players leave since Kelly arrived.

Considering that UCLA had 76 players on scholarship for 2019, Kelly has essentially driven away an entire football team and he hasn’t been making up for it with recruiting either. Kelly has only recruited four blue chip recruits to the program out of 39 signees in the 2019 and 2020 recruiting classes.

That is going to make it extremely difficult for UCLA to win their way out this deficit.

That might make it very difficult for UCLA to justify firing Kelly, given his $9M buyout. Of course, that could be saved over the course of several seasons based on cutting some of Kelly’s nutrition program. In fact, forcing Kelly to cut his nutrition program substantially could be enough to get Kelly to quit, even if UCLA waived Kelly’s buyout, the department might be able to reduce football costs enough to significantly cover the deficit.

It’s also worth mentioning that this doesn’t take into account how the reduced attendance for the 2019 football season has affected department revenues for this season. Average attendance dropped another 14% in 2019 to 43,849.

The lone saving grace for the short-term might be UCLA’s weaker schedule in 2020. Instead of Cincinnati and Oklahoma, the Bruins will play New Mexico State and Hawai’i. So, that may change the perception of the program a little. Wins in those game should allow the Bruins to become bowl eligible in 2020, but a 6-6 season may be the best fans can expect and, under normal circumstances, 8-4 should be necessary to save Kelly’s job under the new AD.

A 6-6 season isn’t going to create enough buzz about UCLA football to increase attendance much in 2020, leaving UCLA’s new athletic director, whomever that may be, with this question: Can UCLA really afford to continue to employ Chip Kelly?

In closing, none of what I’ve mentioned above takes into account that, according to documents obtained by Bruins Nation, the UCLA Athletic Department is also carrying a total debt of $88 million still on the renovation of Pauley Pavilion.

Somehow, Chancellor Block has bought into the narrative that Dan Guerrero is a “good money manager.”

I’m sorry, Chancellor, but a retiring athletic director who is a good money manager doesn’t saddle his department with more than $100M in debt.

Go Bruins.

UPDATED 1/29/2020: Yesterday, Jon Wilner published another article in which he estimated that the UCLA Athletic Department will run a $17M deficit for the 2019-2020 school year. The fact that this year’s deficit is as close as it is to last year’s deficit would seem to indicate that the cause for last year’s deficit doesn’t have as much to do with contract buyouts as Wilner initially claimed. It has more to do with runaway spending on things like Kelly’s nutrition program while Kelly has been unable to generate the revenue to pay for his nutrition program by putting more fans in the seats.

Wilner also cites the use of charter flights for both basketball programs as being responsible for adding about $1M to expenses.

It is time for the UCLA Athletic Department to start including financial statements in its annual report again. The department used to do so, but suddenly stopped back in 2013.