Will UCLA be forced to subsidize Cal for financial damages for its Big Ten move?
Financial penalties might be the only recourse.
The die has been cast, as the UC Regents have begun their investigation of UCLA’s move to the Big Ten, most likely at the urging of California governor Gavin Newsom.
What could a successful, practical potential outcome look like for Cal?
It’s safe to say UCLA is probably not coming back to the Pac-12. The UC Regents has no authority to block such a move to the Big Ten, as the UC system is constitutionally free of any state obligations, particularly with regards to contracts.
But that doesn’t mean there can’t be repercussions. There are serious discussions about the financial complexities that UCLA’s decision have forced on their big brothers in Berkeley.
Multiple sources believe the regents will explore forcing the Bruins to subsidize Cal’s athletic department, which stands to lose millions annually in Pac-12 distributions because of the loss of the Los Angeles market.
The details of a power move by the regents are unanswerable at this point, including how the money would be redirected.
We aren’t sure they can touch Big Ten revenue; instead, they might have to hit UCLA’s state allocations.
The California Golden Bears are currently facing nine-figure athletic repayments due to their financially imprudent debt service on Memorial Stadium. Although UC Berkeley central campus has already taken on half the debt service to cut the $440 million to just over $200 million, it isn’t likely much relief is coming in the coming years.
From the terms of the stadium renovation, Cal Athletics initially only had to pay off the annual interest. But the terms change in the 2030s.
Starting at the end of the decade, Cal will have to start paying principal rather than just interest, via an investigation by KQED and reported by reputed Cal site California Golden Blogs. Those payments originally ranged from $24 to 37 million a year. They have likely diminished a bit thanks to UC Berkeley taking on some of the debt service, but there’s still likely eight-figure annual payments required.
With ESP sales lagging, the hope was that the new Pac-12 TV contract could pick up the slack. The hope is with ESP ticket sales for the premium Memorial Stadium seats and stronger TV contracts, Cal would be able to pay off that principal well in time. USC and UCLA leaving the Pac-12 hurts that calculation significantly.
So the UC Regents could investigate UCLA’s move and discover that even if the Bruins make a ton of money for themselves, that gets cancelled out by Cal potentially defaulting on debt repayments by a diminished Pac-12 TV deal and likely lower ticket sales (USC and UCLA are the second and fourth largest draws on average on the Pac-12 slate). More from CGB via KQED report:
Though the Berkeley campus has pledged that Athletics will make its debt payments, ultimately the Regents are on the hook for the bonds.
If there’s one thing I’m certain of, it’s that the state of California wants NO part of handling their flagship university defaulting on their debt repayments.
Even if UCLA doesn’t have to answer to the state of California, it is still a public university in the state of California, and hurting the flagship university this way would bear serious consequences. The UC Regents needs to do its due diligence to ensure it’s protecting its most valued property.
There is absolutely nothing the Regents can do to force UCLA to pay Cal. The logical consequences that would flow from such line of reasoning would be absurd. UCLA’s athletic department has no legal obligations or contracts with Cal. Conference membership is merely a scheduling arrangement that ties a member school’s media rights for a specified period of years to the conference in exchange for an agreed upon allocation of revenue sharing. That’s it. This is precisely why the UC bylaws explicitly without any ambiguity provide complete autonomy to campus athletic departments to enter into contractual agreements with the exception of coaching contracts. UCLA signed a grant of rights that expires in 2024 tying its media revenue to the Pac-12. Cal and the Board of Regents have always been aware of this. They’ve always known that UCLA was not committing its share of media rights to the conference beyond 2024. Thus, any financial ramifications that Cal took on beyond 2024 they did so fully knowingly accepting the risk that they may not benefit from UCLA’s media rights revenue. We actually know exactly what the UC regents policy concerning changing conferences is. We know, not only because it’s written into the UC bylaws but because it’s happened many times throughout history of the UC system where schools have left conferences with other UC members. Never has any school gone to the Board of Regents and asked for permission to do so. To make it up on the fly now would be nonsensical.
Moreover, on a more practical note, the campuses are not just different entities but they are competitors with each other in many respects, none more so than when it comes to the business of intercollegiate athletics. This argument that UCLA should pay Cal because Cal cannot benefit from UCLA’s media rights is so ridiculous it could even be extended to games between the schools. Each time UCLA beats Berkeley on the court or in the field, UCLA could be said to be gaining monetary value at the expense of Berkeley.
Furthermore, as the article here mentions, UC Berkeley has already paid over $200 million to its athletic department? I have no idea if that’s true but if so then that means Berkeley’s athletic department benefits from a lot of taxpayer money in a way that UCLA never has even though it currently faces $100 million debt of its own. UCLA’s athletic department only receives $3 million annually from UCLA’s general fund. It’s one of the lowest in power 5 athletics. In other words, if the Regents sought to go after that little funding, it would have to balance that against the $200 + million that Berkeley’s athletic department apparently receives from the state. If anything, by the same logic it seems like Berkeley should be the one paying UCLA, not the other way around. Btw, if this is true then it 100% clears the way for UCLA to go the Big Ten without subsidizing Berkeley a penny. Actually, it would make a lot more sense now why they left.
Most importantly, even if the Regents legally could go after UCLA’s Big Ten revenue (they can’t) and they actually dare to handicap UCLA’s ability to succeed in the Big Ten by forcing them to pay welfare to Berkeley, it would be such an insignificant sum that it would hardly make any difference to Berkeley. I’ll explain why. Prior to UCLA and USC leaving for the Big Ten, the Pac-12 projected TV revenue was set at $42 million per school in 2025. In the aftermath of their departure, the projected revenue per Pac-12 school is $30 million. That loss would amount to $12 million divided by UCLA’s portion of the damage (in actuality, USC is the more valuable commodity so it would be even less) that comes out to $6 million annually. That is the absolute maximum the Regents could redistribute from UCLA to its less fortunate sibling.
Last note, whenever you’re demanding what is essentially welfare payments from a sibling institution, it’s safe to assume you’re no longer the “flagship” institution. I do notice this foolish arrogance from Berkeley people thinking they have special rights because they think they are the “flagship” school. Even if they were the “flagship” school it has no legal bearing on how the Regents deal with the schools (they could even be sued for such illegitimate motives). So in case any Berkeley people are confused, I will help clarify: UC Berkeley does not own UCLA and UCLA is not Berkeley’s slave or colony. Berkeley has ZERO legal rights to UCLA’s media revenue. I feel like a lot Berkeley people misunderstand this stuff and think they own UCLA. I feel like it’s the source of this “pay us money” demand.
The state/regents fund educational programs (by paying for faculty and staff), capital expansion/building maintenance, and a small amount for research. No way the Regents threaten to withhold educational dollars to the Southern Branch (which are based on student headcount), but could put a hold on CapEx approvals.