The NCAA will reduce its direct distribution to Division I conferences and schools for 2020 by about $375 million to $225 million, the association announced Thursday.
The move, voted on by the NCAA’s top governing board of college presidents, resulted from cancellation of the Division I men’s basketball tournament due to the coronavirus epidemic. That event generates nearly all the association’s roughly $1.1 billion in normal annual revenue.
According to its 2020 Division I Revenue Distribution Plan document, the NCAA had been scheduled to distribute just under $600 million directly to conferences and schools from April 15 through June 10.
NCAA chief financial officer Kathleen McNeely said in an interview with USA TODAY that all of this year’s distribution will be made in June, probably early in the month.
The reduction’s impact on schools may vary by conference. Some of the NCAA money goes directly to schools. But most goes to conferences, which, in turn, have revenue-sharing arrangements.
Big 12 commissioner Bob Bowlsby said during a conference call after the NCAA’s announcement that the conference maintains an operating reserve “and we have some money beyond that that was a result of money that we withheld last year for another purpose.” So, its schools may feel no impact unless the football season is affected by the pandemic.
“It’s a whole new ballgame if we find ourselves not playing football,” Bowlsby said.
Division I public-school athletics departments generally received 2% to 5% of their total operating revenue in fiscal 2019 from the NCAA, including reimbursements and payments for hosting championships, schools’ annual financial reports to the association showed. USA TODAY compiled the schools’ financial reports in partnership with Syracuse University’s S.I. Newhouse School of Public Communications.
The NCAA makes its annual revenue payouts from nine separated pools. Each is allotted a different amount and each has a different methodology for determining how much goes to each conference or school. The best known of these pools is based on how well teams do in the men’s basketball tournament.
That pool, like others, favors the wealthiest conferences. The NCAA is attempting to mitigate the impact of this year’s reduced distribution on lower-revenue conferences by leaving unchanged the amount of money in a pool divided equally among the 32 basketball-playing conferences, then reducing the amount in each of the other pools by a little more than 70%.
The association said that of the $225 million total distribution, $50 million will come from NCAA reserves. The association also has a $270 million event-cancellation insurance policy connected to the tournament, and the proceeds, when received, will be used to pay off a line of credit that the association will tap as needed.
NCAA chief operating officer Donald Remy said the association also is “triaging an examination of all of our (association-wide) programs to see where we can cut costs,” and McNeely said efforts are being made to cut the national-office budget.
Although event-cancellation insurance claims can bog down in a variety of disputes, McNeely said the association has been in touch with its primary underwriter “and we feel pretty good about where the claim is at this point. We believe our fact pattern for a claim is very strong.”
How the NCAA plans to work out matters with its primary multi-media and marketing rights partners, CBS and Turner, remains to be seen. Moody’s Investors Service issued a report on the NCAA’s credit rating on Tuesday that was based in part on the association receiving its insurance money and 30% of the $827 million it was scheduled to get in 2019-20 from CBS/Turner, said Moody’s vice president and senior credit officer Dennis Gephardt told USA TODAY.
Asked what type of consideration CBS/Turner could get in the future for that, Remy said he could not comment on the terms of that agreement because they are confidential, but “we are continuing to have conversations with all of our media partners about the circumstances and what the future is going to look like.”
The NCAA’s contract with CBS/Turner currently is scheduled to run through 2032 and has more than $12 billion remaining on it.
In 2004, the association began setting aside money as hedge against a possible catastrophic event that would affect the basketball tournament, and by 2014, that fund grew to nearly $400 million. However, at the direction of its governing board of college presidents, the NCAA distributed $200 million that money to schools to help them with increasing costs and spent it on their behalf in other ways, including a $208.7 million legal settlement.
Remy said the current remediation plan – insurance, plus a willingness to use reserves and reduce revenue distribution — was put in place in concert with the board’s decision to spend the original emergency fund.
And, as for that spending, “We’ve seen a lot of good done on campuses as result of the” $200 million distribution to schools.
Contributing: Paul Myerberg, Dan Wolken