Aiming to drastically reduce the Arizona athletic department’s shortfall of $33.6 million in fiscal 2023-24, school officials outlined a new “five-point plan” to reshape its budgeting, operations and revenue generation during an Arizona Board of Regents meeting Thursday in Flagstaff.
John Arnold, Arizona’s interim CFO, and UA athletic director Desiree Reed-Francois announced a plan that will trim $500,000 annually in “administrative leadership personnel costs” while vowing to streamline the organizational chart, tighten up budgeting processes and capitalize further on revenue opportunities.
In addition, UA will pay back its loans to the university in accordance with future net revenue instead of paying them back on a fixed schedule, Arnold said, while the school will also seek to “cost shift” some items that the athletic department had been paying to the university’s general budget, Arnold and UA president Robert Robbins both noted.
“With all of the changes in college athletics, if we’re going to continue to have a Power Four athletics program at the University of Arizona, we’re going to have to continue to look at ways to cost shift and eliminate some costs,” Robbins said.
“I’m incredibly grateful to everybody in the U of A community that has participated in this very painful process, but I think it’s going to set us up well for the future and I’m optimistic that we will be back to a balanced budget and replenishing our reserves in the coming future.”
Arnold said that consultants from Ernst & Young, who helped devise the plan, identified $16-24 million in operating improvements UA’s athletic departments could make over the next five years, though he noted that initial improvements would have to be “fairly minor” because some cost structures were already set for 2024-25, when the department is also transitioning to some new staff and moving from the Pac-12 to the Big 12.
To cut down the $33.6 million operating shortfall from fiscal year 2024, Arnold projected UA would bring in an extra $9.1 million in revenue growth in part because of increased development and parking revenue while saying the school is forecasting a $2.5 million cut in operations.
Arnold said there would be $3.1 million in “expense transfers” that will move the costs of utilities for athletic facilities and security hired for athletic events to the university’s general budget, while moving costs for the marching band from athletics to the Fine Arts department, where Arnold said it is housed.
Arizona athletic director Desireé Reed-Francois speaks during an ABOR meeting June 6 in Tempe.
“These are costs that are generally university costs that are being borne by the athletics department right now,” Arnold said.
UA‘s athletics department also projects to save another $26.5 million in 2024-25 by eliminating a $7.1 million administrative service charge that the university was charging and by “rebasing” its debt. Arnold said future debt repayment from athletics to the university will be tied to net income rather than on a fixed schedule.
UA’s athletic department currently owes $171 million in loans for capital improvements to its facilities and also a total of $95.7 million in operational loans given over the past three years.
In fiscal 2022-23, according to UA’s official financial report issued to the NCAA, the school reported $143.1 million in revenues that included $8.92 million in direct university support and $35.4 million in indirect support. The support helped UA accommodate its $142.8 million in expenses during fiscal 2022-23.
Arnold said under the UA’s “cost model” it didn’t make sense for an area of UA to take loans from the central unit and repay them to the central unit.
“With athletics at this time, we are not planning to forgive these debts,” Arnold said. “But we’re planning to change the debt service schedule on what athletics owes back to the university and base it around net revenue instead of a set debt service schedule.”
UA’s “five point plan” detailed multiple budget-related procedures intended to tighten up the operations, with Arnold noting at one point that several departments didn't know what their budget was.
"There seemed to be limited accountability, tracking or communication around the budget," Arnold said.
The plan also had several items detailing ways UA would attempt to ramp up revenues on the other side of the budget. Noting that 54% of UA’s revenue was in their control, Reed-Francois announced plans to seek more revenue from philanthropy, naming rights and ticketing. Tickets for popular events will likely become more expensive, while complimentary tickets will likely be reduced.
“The EY (Ernst&Young) report recognized that we’re providing too many complimentary tickets,” Reed-Francois said. “We need to analyze that and we need to maximize dynamic pricing opportunities.”
At the same time, Reed-Francois said UA athletics provides $265 million in economic impact to Arizona and spoke enthusiastically about leveraging the passion of UA fans around the state into revenue opportunities.
“We contribute to the university’s brand,” she said. “We impact recruiting, retention and alumni engagement as the (Ernst & Young) report also notes. College athletics has faced unprecedented change within the last five years and the evolution is continuing. … We have an imperative to build a strong foundation, adjust as a team to the ever-changing landscape and together build an excellent business enterprise befitting our championship legacy.”
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