Warde Manuel: Michigan athletic department faces $26.1M budget deficit for 2020-21

Michigan athletic director Warde Manuel projects a $26.1 million deficit in the athletic department budget in fiscal year 2020-2021 because sports were suspended in mid-March and a large list of unknowns remain heading into the fall.

Manuel, citing the uncertainty of the upcoming football season and resumption of college athletics because of the COVID-19 pandemic that shut down on-campus activities three months ago, presented the budget Thursday morning to the University of Michigan Regents.

The athletic department projects operating expenses of $161.9 million and revenues of $135.8 in the fiscal year 2021 budget. According to Manuel’s presentation of the budget, spectator admissions are projected to decrease $29.2 million “due to lower anticipated attendance for all sports.” Also, preferred seat contributions are projected to decrease $17 million because of anticipated lower attendance and the potential fans will request refunds.

Last year, Manuel presented a budget with a projected $1 million surplus. According to last year's presentation to the Regents, football was budgeted to make $49.5 million from spectator revenues for seven home games. Preferred seat contributions were budgeted for $28.3 million in 2020.

“There is still a lot of turbulence about what’s going to happen,” Manuel told the Regents. “We don’t really know. We have multiple models, although I’m presenting one to you, but we will adjust accordingly and move forward.”

Manuel indicated in his slide presentation to the Regents a projected decrease of $6 million in salaries, wages and benefits. Also, team and game expenses are projected to decrease $6.5 million.

Losses in football revenue even if there is a season would be the major blow to spectator admissions. Manuel, in a conference call with reporters last week, said he doesn’t know how the football season — if there is one — might look in terms of fans attending games but said it “won’t be normal.”  Student-athletes participating in football and men’s and women’s basketball, and staff began returning to campus last week for COVID testing. Voluntary football workouts began Monday, and Manual said last week a decision regarding the season could come by the end of the month or early July.

“We won’t have 110,000 people in Michigan Stadium this year,” Manuel said last week. “Will it be 50% or 30% or 20% or 10 or zero? I’m not sure. That will be a combination of listening to our public health officials knowing what our stadium capacity can handle given the direction that is put out by the Governor’s office. It all depends.”

Manuel told the Regents the athletic department has reserves and has been working with university CFO Kevin Hegarty on a debt-service plan to cover the deficit.

“Because of what we’re looking at for this year coming up and the disruption to our season, what we’re projecting in revenues is down almost $65 million from last year, and our operating expenses are already reduced about $39 million,” Manuel said in the Regents meeting. “It is a year where we are projecting a deficit of $26 million. I did want to bring to the board an understanding of exactly the impact that could be had on this season from a revenue and operating expense standpoint.”

Because sports were stopped in March, Manuel explained the decrease in NCAA revenues distributed across the country. Also, Michigan has, he said, “stopped and paused and moved” timelines for payment of preferred seat contributions for football, understanding the difficult current economic state for most fans.

“We have great fans, we have great donors, we have a great staff that are all pulling together to reduce as best we can this deficit and to mitigate it, but we also have to plan that depending on the number of games we play, if we play games this year, the potential for refunds being requested or money moved to next year in terms of purchasing tickets, and we want to make sure we keep this as a one-year problem and not spend money this year that is really intended or pushed to next year,” Manuel said.

Manuel did say with the suspension of athletics in March, the department had a significant decrease in expenses of nearly $8 million.

“We’re projecting as we close out this month an operating surplus for this fiscal year,” he said.

As the current situation evolves, Manuel said, the athletic department has several models to meet those changes. He praised how the athletics community at Michigan has responded to the COVID-19-related challenges.

“I want to give a lot of credit to my staff, my coaches, our student-athletes,” Manuel said. “They are sticking together, working hard, doing things that we need to do to continue to work our way through this as we have brought student-athletes back. The staff and student-athletes who are already back are following protocols we have in place. We just need to keep staying vigilant to see how we would continue to practice and participate in competition if we get to that point.”

The Michigan Regents, at the conclusion of the budget presentations from the various department heads, failed to pass the budgets as well as proposed tuition increases with a 4-4 vote. A majority vote is needed to pass the budgets.

New budgets will be presented to the board at the next meeting on July 16.

achengelis@detroitnews.com

Twitter: @chengelis