West Virginia's balance sheet is ugly and it probably won't get any better in the near future despite joining the Big 12. What's that, you say? How can that be?
According to Register-Herald reporter Mickey Furfari, the school's athletic department is in debt close to $13 million. More:
That could have been almost $16.5 million if the WVU Foundation hadn’t seen fit to hand over to athletics a “gift” of $3.5 million.
According to the report, the department received a revenue of $80,064,869.86 and expenses also set an all-time record of $92,968,426.76.
Let's start off with some stuff that put West Virginia in the hole in the first place—a $20 million exit fee from the Big East.
West Virginia doesn't have to repay half of the $10 million loan it received from the Big 12 until 2016 but in the mean time, it also won't be receiving its full share of the Big 12's revenue. More from The West Virginia Gazette's Dave Hickman:
West Virginia, of course, won't receive any of that revenue sharing this year. The Mountaineers' share of revenue from its current league, the Big East, is expected to be in the $9 million range and that will be withheld as per the $20 million deal cut to allow WVU to leave the conference and join the Big 12 after June 30.
West Virginia was included in the Big 12's 2011-12 bookkeeping, however. That's because the school received $10 million in the form of a loan to help pay the settlement with the Big East. As reported back in February, the Big 12 gave the money to WVU with half to be repaid with interest and the other half to be forgiven.Patrick McDermott/Getty Images
That interest will be between 2 and 3 percent and the school will begin repaying the $5 million in annual $1 million installments in 2016, the first year WVU is fully vested in the league.
Until that time, WVU will get partial shares of Big 12 revenue sharing - a 50 percent share in 2012-13, rising to 67 percent the next year, then 85 percent and a full 100 percent in 2015-16.
Coaching salaries also contributed to the increased spending. Furfari noted some steep increases in salaries:
Despite the red ink, WVU does not plan to stop any athletic renovation projects, institute any pay freezes or cuts or lower operating expenses during the next few years.
It is interesting to note that the university gave recent pay raises to Luck, head football coach Dana Holgorsen and head men’s basketball coach Bob Huggins.
Luck’s base salary was bumped from $390,000 annually to $550,000, plus incentives.
Holgorsen, who was hired by Luck, now is to be paid $2.5 million this year. He was making $1.65 million.
Huggins’ base pay became $3 million in a new contract extension last November. He was making $2.3 million to $2.7 million, plus incentives.
There's some little stuff that adds to the debt—like settling with Florida State for $500,000 after the scheduled series was canceled. There's also some bigger stuff in the future that will impact the school's ability to lower its debt—this season (and in 2015) the Mountaineers only host four conference games in Morgantown.
Now for some good news.
The Big 12, as a whole, looks very lucrative for its members—while West Virginia will face some tough years ahead, it'll still end up with deeper pockets in a few years.
While the Big 12 did finish finish fifth in Forbes' ten most valuable conferences, it should be noted that the Big 12's per-school payout is higher than all conference teams. Because the Big 12 only has 10 schools to divide up a $262 million pot, while its pot is smaller than the Big Ten's $310 million, the payout is larger. From Forbes:
By contrast, the ACC and Big 12 each signed new TV deals within the last year that pay more per member school than the SEC’s ($17 million and $20 million, respectively, compared to $15 million). In fact, the Big 12 jumps to the top of the list when measured in terms of per-school income from television, bowls and the NCAA tournament. You might be hard pressed to find someone who thinks that either the ACC or Big 12 is truly more valuable than the SEC, but the two conferences are currently paid as if that’s the case.
Hickman notes that the expected payout share from the Big East to West Virginia would have been around $9 million had it not left the conference—that payout will instead be held to go toward paying the school's exit fee. But had West Virginia been fully vested as a Big 12 member, it would have received around a $26.2 million share of the conference's revenue.
West Virginia's new home in the Big 12 is a money pit at the moment but it will also incur another higher cost which will add to its debt—bigger travel expenses.
We should expect to see local FCS and lower-tiered FBS teams consistently pop up on its non-conference schedule in the near future—the exception will be a scheduled opening weekend contest against Alabama (in Atlanta) in 2014.
William & Mary (FCS), Georgia State (Sun Belt), Liberty (FCS) and Towson (FCS) are all slated as future Mountaineer opponents and while most football fans roll their eyes over cupcake schedules, they might want to bite their tongues and at least give the school a golf clap for showing some fiscal responsibility.
Those games (including beer sales revenue) should bring in at least $2 million per game. So while West Virginia is floating in debt, its future looks bright with the Big 12 staying at its current 10-school membership.
If the conference expands, the pot will be bigger but the payouts per school will diminish. And if that happens without a new television deal in place, we may have to revisit the ledger books at West Virginia.