Goldman School Analysis: Cal football, Athletic Department, and Cruel Calculus of Wage Bills

AKA Putting my Masters in Public Policy degree to work

The wage bill is the aggregate amount of compensation an organization pays its employees in a fiscal year or a certain period of time. College football has its pageantry and history but it is not divorced from the cold calculus of a wage bill. Cal football is all the same and the Athletic Department is beholden to it as well.

General Fiscal Outlook

Here is FY 2020 (July 1st, 2019 through June 30th, 2020) it has some Covid months (March - June) however, for the purposes of this exercise it contains most of the expected levels of revenues and expenditures for football and other sports at levels we could expect from FY2022/2023.

Here we have a breakdown of the public wage bill for Cal athletics as well as a breakdown of football and aggregate expenditures and revenues. Note: that Cal had a $25 million revenue injection by the university to help balance its books. That influx turned Cal from being in the red to being in the black vs. UCLA’s issues ($100 million of AD debt likely pushed them to go to the Big 10).

As with any P5 program, the football program is the main revenue and expenditure generating line-item. Football pays for every other sports Cal chooses to provide and then some, this is even starker when we remove the direct institutional support number due to its 1-time nature: 45.76% of all revenue generated by Cal athletics being football related despite 29.9% of expenditures going into the program.

Wage Bill Rigidity

We can see here that reflected in the share of the wage bill vs. expenses and revenues, it is even starker when we remove the $25 one-time injection, more than half of the Cal’s revenues are going right back into various wages. This induces a structural block on how much revenue and expenditures can be moved around to support the football program.

Use IMF’s work on national wage bills:

We know that on a national level wage bill increases are hard to scale back and that increases are often deficit financed and even with the increase in revenues it leads to higher deficits. These increases can also be funded by revenue and expenditure adjustments but that’s conditional on debt levels and fiscal space available. In our case Cal is very constrained when it comes to fiscal space.

With so much of the expense being directed towards the wage bill it is hard to find non-wage bill sources for an additional cash influx without making specific structural changes within the athletic department and to the number of programs we support. We can either deficit spend it away by borrowing from the university, raise even more long term cashflow from donors, or cut spending elsewhere.

Wilcox Conundrum - Money Problems

This wage bill rigidity plays into the discussion of the potential firing of Wilcox that some fans are demanding. Wilcox was extended in early 2022 until 2027.

Let’s assume that the language of the firing without cause remains the same:

Furthermore, let’s assume that his average compensation due would be $4.75 million a year from 2022-2027. On the most optimistic look, we assume offset language is a 1:1 offset and that Wilcox is able to secure a DC job at a $1 million per annum salary (high-end estimate with Sirmon’s DC salary being $910,000).

This means that until 2027 Cal will have to spend $3.75 million a year to pay for Wilcox not to coach, on top of the spending we will need to make to secure a coach who is at the same level with the staff he will need to succeed at Cal would mean the same if not greater salary pool.

Let’s assume a $9.25 million total, with a $13 million total price tag this would mean finding another ~$5 million a year. One could argue that in lieu of the buy out Cal ought to save money by hiring a cheaper head coach, but any fan of MBB can tell you what happens when one hires on the cheap for a key sports program for a collegiate AD.

So what do we do?

Utah Comparison

Some might argue that 40% of all wages going to coaching being football wages is a large share enough, however, if we look at a program we aspire to be: Utah, we see that the football salary as a share of all sports wage bill is 51.64%.

And yes, Utah football makes more money than Cal football, that’s largely due to higher ticket sales + contributions on top of various distributions. We can see here that despite having a lower amount of sports and students Utah’s coaching wage bill is higher than Cal’s as a share of revenue and expenses. Furthermore, football in Utah accounts for 35% of total expenses while Cal only attributes 29.9%.

This skew is also reflected in the number of student athletes Cal has vs its Pac-12 comparators, especially Utah where Cal maintains 323 more student athletes than Utah:

Source: Department of Education: Equity in Education Dataset

With Cal maintaining 30 sports to Utah’s 19 the distribution of resources is broader and more shallow than Utah’s.

Furthermore, one could justify that it is because Utah football is a huge contributor to the total budget, but I would argue is because of early investment in football that Utah is now reaping the financial rewards of a continuously competing program.

One needs to look at FY2014: Both Cal and Utah football programs made roughly the same revenue $33 million for Cal, $37 million for Utah. Ever since Utah continued to invest in the football program while Cal tried to find its footing trying to find a way to balance its checkbook by being cheap with coaching salaries.

Another argument would be that the difference between Cal and Utah’s football salaries can be explained by the difference in HC Whittingham in HC Wilcox’s salaries for FY 2020. That’s also not right:

• Cal spent $8 million on football salaries, $2.8 million of it being Wilcox’s salary.

• Utah spent $14.6 million on football salaries, $4.1 million of it being Whittingham’s salary.

Utah spent nearly double on assistant salaries in a cheaper place to live than Cal. And if I were a betting man this ratio will remain once FY2022 data comes into light.

Lessons For Cal

So what do we learn here? Cal is stuck in a situation where the wage bill is already a huge portion of the bill with a lot of sports demanding a lot of the money suppressing the share Cal football could have to fund its sports. This complicates the hiring process and retention of talented coaching and players (as NIL and ADs become more and more intertwined).

Ultimately what we want as fans (Rose Bowl) and what the administration wants is reflected in the gap between the ideal spending: Utah and Cal. Not just in salaries but overall spending as a share of total spending (and this is not accounting for the fact that the cost of living in the Bay are 58% higher than in Salt Lake).

If we want to make a material and measurable impact on Cal football performances and go to the Rose Bowl:

Cal has to shift toward’s Utah’s spending model the football program of ~35% of all spending going to football for a permanent influx of $5 million across the board, which would bridge the gap between Utah’s and Cal’s salary spending.

If Cal were to spend 52% of it’s aggregate coaching salary pool it would also add ~$5 million to the salary pool itself.

Ultimately we have to accept short-term loss and painful cuts if this is indeed what we’re aiming for in this coaching marketplace. Granted this will not guarantee the outcome, but higher salaries mean a pool of talent that expands at the top of the candidate list.

This fiscal space could be made if Cal were to really focus on a smaller amount of sports we could save ~$4-5 million a year in eliminating the worst fiscally performing sports to go down to a 19 sport level Utah has. (as long as we remain Title IX compliant).

This would have additional impacts in freeing up various administrative and support structures to align just toward football success.

If we want to be a ~.500 program with rare pluckyness and Big Game wins on a Bi-annual basis:

Wilcox lifetime contract and same wage bill expenditures when?