The financial struggles of Cal and Stanford’s athletic departments have been well-documented in recent years. A review of financial documents by the Hotline revealed that the two schools produced a combined operating shortfall of $37.6 million in the 2022 and 2023 fiscal years. This precarious existence is particularly concerning as they prepare for life in the ACC, where they will receive partial shares of the conference’s revenue.
However, it’s important to note that the $37.6 million shortfall includes direct university support that was booked as revenue under NCAA financial reporting procedures. Removing university support from the revenue totals reveals a much larger operating shortfall of $122.7 million over the past two years: $46.9 million in FY2022 and $75.8 million last year.
While the combined deficit is mammoth by any standard, many within college athletics believe that subsidies from campuses to support athletics are good business. David Carter, an adjunct professor of sports business at USC and founder of the Sports Business Group, argues that these transfers are more akin to marketing expenses, as athletic departments are major ambassadors for their universities.
Cal’s financial reports to the NCAA are public information, while Stanford’s, as a private school, are not. However, annual reports for the Cardinal’s athletic department are available online and show a similar pattern of financial shortfalls.
In FY2022, Stanford booked $134.1 million in revenue against $145.6 in expenses, with $10 million in direct campus support for varsity athletics programs. Without support, the total shortfall would have been $21.5 million.
In FY2023, Stanford showed $136.9 million in revenue against $157.9 million in expenses and $12.3 million in campus support. Without support, the total shortfall would have been $33.3 million.
Cal’s information is more complicated due to an internal accounting process that requires the athletic department to transfer money back to central campus each year. Excluding these transfers, the results are as follows:
In FY2022, the Bears generated $120.5 million in revenue against $116.8 in expenses and $29.1 million in campus support. Without support, the total shortfall would have been $25.4 million.
In FY2023, they booked $129.5 million in revenue against $138.3 million in expenses with $33.7 million in support. Without support, the total shortfall would have been $42.5 million.
These shortfalls come as the schools prepare to join the ACC this summer. The 12-year arrangement will provide Cal and Stanford with 30 percent shares of the ACC’s annual media revenue from its broadcast contract with ESPN. However, this discount covers seven years and will leave both schools with revenue distributions that are approximately $15 million less (annually) than the ACC’s current members.
How do they plan to make the math work? Leadership changes at both universities add a layer of intrigue. To what degree, if any, will new Cal chancellor Richard Lyons and new Stanford president Jonathan Levin provide additional campus support?
Stanford has stated that it will lean on new and increased revenue streams, philanthropy, and institutional support to ensure that its student-athletes have the resources they need. The Bears are still awaiting a decision from the University of California’s Board of Regents on the so-called “Berkeley tax,” which would require UCLA to funnel some of its Big Ten revenue to Cal’s athletic department.
Several external factors further complicate the situation for the Bears and Cardinal. A series of lawsuits against the NCAA’s economic model could result in athletes becoming employees, potentially costing power conferences billions in backpay and future revenue. Additionally, both schools are closely monitoring the turmoil inside the ACC, where Florida State and Clemson have filed lawsuits against the conference in an effort to break free and join the SEC or Big Ten. If they succeed, the conference could disintegrate before Cal and Stanford begin receiving full revenue shares.
