While Nevada faces a major budget deficit for fiscal year 2021 (a $10 million-plus debt even in the best-case scenario), the final verdict for fiscal year 2020 has been levied, and it also wasn't great news.
The Wolf Pack posted a $2 million deficit in the recently closed fiscal year, Nevada athletic director Doug Knuth told Nevada Sports Net on Thursday, which was a result of under-performance in attendance in its two big revenue sports as well as the cancellation of the NCAA Tournament, which dried up a most of the school's NCAA distribution.
This marks the second time in the last four fiscal years Nevada has posted a $2 million-plus deficit, also doing so in 2017. The Wolf Pack was coming off one of its better fiscal year showings in 2019 when it made a surplus of $216,678, in part because of a $1 million buyout Nevada got when Eric Musselman left for Arkansas.
The Wolf Pack has run a deficit in seven of the last 11 fiscal years (see chart at the bottom of the story), including $4.7 million in losses over the last four fiscal years. The latest deficit was three-fold: (1) declining revenue in football and basketball tickets sales; (2) the impact of COVID-19 late last fiscal year; and (3) an unexpected payment being due on a $3 million renovation of Mackay Stadium to make it ADA compliant.
Nevada's ticket sales in football and men's basketball were a combined $750,000 under projections in fiscal year 2020.
“We were off on our football ticket projection a little over $250,000," Knuth said. "We do our revenue projections in March of each year and we predict football in March and men’s basketball almost a year in advance. We make those projections and go forward. So in football we were down just over $250,000 and in men’s basketball we were coming off the Muss years and hired Coach (Steve) Alford and had all of this momentum and thought it would continue and something happened.
"Maybe the Martin twins were a bigger factor than I thought. I thought we would just continue with the same level of attendance and enthusiasm with another great coach and a good team coming back. I thought we’d be able to maintain that same level of revenue and we missed by almost $500,000. That’s a pretty good miss. If you miss by $100,000, percentage-wise that’s not a huge concern. But a $500,000 miss on our projections is a pretty big deal. Again, the enthusiasm or maybe Musselman or the Martin twins when those guys left, it changed.”
In football, Nevada drew only 97,080 fans (or 16,180 per game, 10th out of 12 MW teams), which marked the first time since 2012, when the Wolf Pack began announcing tickets distributed rather than actual attendance, the school failed to draw 100,000-plus fans. Last year's figure was down 6,005 fans from the season prior and down 52,555 from the 2013 season when Nevada set a program record for season-ticket sales (you can see all of the attendance marks since 2000 here).
In men's basketball, Nevada still ranked third among 11 Mountain West schools in per-game attendance at 8,721, but that was a sizable decline from the season prior when the Wolf Pack set a per-game attendance school record at 10,878. Overall, Nevada basketball drew 32,354 fewer fans last season compared to the year before despite playing the same number of home games. That was the largest decline in the MW by nearly 14,000 fans.
Declining attendance is not unique to Nevada as the MW has set its lowest per-game attendance numbers in football and men's basketball in each of the last two seasons, but the Wolf Pack's projections entering fiscal year 2020 were off by a combined $750,000. That issue was exacerbated by the NCAA Tournament being canceled, which cut nearly three-quarters of the distribution the department typically gets from the NCAA. The MW's NCAA Tournament units dwindled in recent years hasn't helped.
“The NCAA not holding a men’s basketball tournament was a little over a $800,000 hit, almost $900,000," Knuth said.
The state also cut 4 percent of the Wolf Pack's budget in the fourth quarter of fiscal year 2020 (Nevada is getting at least a $1 million cut in state money in FY21).
"We also had to do a weird accounting thing where we had to make a payment on the stadium renovation, the ADA renovation, the second round," Knuth said. "We had to make a payment on that even though the project wasn’t done. We had to make a payment last fiscal year of $200,000, which was unexpected and unplanned. We didn’t think we’d have to make payments until the loan starting in FY21. So that was an early payment.”
Add it up and the Wolf Pack fell $2 million short of its break-even point, a deficit that will be absorbed by the university. The Wolf Pack did get some good news on that front with the president taking over $8.25 million of historic debt/deferral last fiscal year, which had left Nevada athletics with only $3.9 million in debt entering fiscal year 2020, a figure that now sits at $5.9 million post-FY20 and will only rise given the expected financial situation this season.
Knuth said the Wolf Pack is fortunate to have partners like UNR president Marc Johnson and vice president of finance Vic Redding during this period but solving the financial puzzle won't be easy as his department is expected to pay back the debt it already has accumulated and will accumulate this year.
“It’s one of those impossible challenges," Knuth said. "Luckily, we have a great friendship and great partners in President Johnson and Vic Redding. They want to help us try and figure this out. They’re not leaving us to figure it out, which is good. But the university is facing state cuts and reduction in fundraising because a lot of folks in our community are hurting and there’s student enrollment. You’ve got to believe student enrollment isn’t going to be the same as it was last year. If there’s a decline in student enrollment, there’s a decline in revenue for the university. As thin as we operate right now, it’s going to be a major challenge for us."
Knuth said the Wolf Pack will be part of a university-wide furlough that is expected to shave 4 percent off salaries in the back half of fiscal year 2021, but he has not triggered further cuts to salaries, which some MW schools have resorted to. Even if Nevada doesn't play this season, the Wolf Pack will honor all athletic scholarships and try to avoid salary cuts beyond the furloughs. Coaching and administrative staff salaries combine for around $12.3 million annually, the department's largest expense line item. The Wolf Pack is part of a university-wide hiring freeze.
“We haven’t been able to replace some positions, which is a big deal for us," Knuth said. "We’re a relatively small staff to start with and when somebody moves on to a better job or bigger job or whatever and you can’t replace them that’s a challenge for us. That’s been the only thing in he personnel side so far.”
Knuth said the two areas the Wolf Pack can increase its revenue the most is in ticket sales, specifically football, and fundraising, although even if Nevada is able to play a spring football season, it's highly unlikely it will do so with large crowds given the pandemic.
"You have to find way to drive more revenue even if it’s marginal or small increases," Knuth said. "You have to continue to do better with fundraising and corporate sponsors. And on the expense side, we’re probably going to have to have a lot of cuts and reductions and those things might stay for future years. That’s going to be a challenge for us. To operate is one thing but operate at a competitive level is what we’re trying to do. We’re one of the smaller budgets in the conference, and that’s a challenge to start with, but when you start reducing from there, it makes things really hard to maintain a competitive level, and that’s what we’re trying to do, to maintain a competitive level and not just operate.”
“Selling more tickets matters and fundraising matters. It takes winning obviously, but selling more tickets at Mackay and getting more people on board in this community, and the second is fundraising and getting out in front of our fans and alumni and saying, ‘Hey, athletics is important at this university, and we need help.’ We all know what it looks like when we’re winning, how positive it is for school spirit and how positive it is for civic pride. When the Wolf Pack wins, it matters in this community and university. We just need to get more people on board to support the Wolf Pack."
While Nevada is not alone in this financial fight, that doesn't make things easier, Knuth said. The Wolf Pack is already looking at nearly $6 million in accumulated debt with limited revenue streams available at least in the upcoming athletic season.
"This is happening across the country," Knuth said. "Everybody is facing the same type of thing, and there aren’t a lot of good answers right now on how you operate this year without any revenue streams. It’s pretty incredible. Nobody has an answer. We’re all trying to figure out and solve the same problem, and there aren’t a lot of great solutions and great ideas so far. That’s the challenge. We’re all facing the same thing, and people say, ‘At least everybody else is in the same boat.’ But I feel like that doesn’t help us, that doesn’t help our bottom line just because everybody is facing it. It’s going to be a major challenge for us and will impact how we operate for the next 5-10 years. You’re paying off that debt, it’s going to be impactful for years to come.”
WOLF PACK’S FISCAL YEAR
The Wolf Pack had a deficit of $2 million during the 2020 fiscal year. Here is a look at Nevada’s profit/deficit in each of the last 11 fiscal years.
Source: Wolf Pack athletics