With insufficient reserve funds, the University of Tennessee Athletics Department has secured a bridge loan from the university to cover the $10.4 million NCAA fine for fired coach Jeremy Pruitt’s recruiting scandal.
Athletics’ reserves, currently at $7.2 million, or about 3.6% of its 2022-23 estimated budget, were affected both by the pandemic years and by payouts to former coaches.
“Those were some significant expenses that the athletic department had to carry on,” said Ryan Alpert, the chief operating officer for UT Athletics. “If you go prior to COVID, there was some significant coaching turnover. So yes, those years, and on the back end of that COVID, those were not great financial environments.”
During the 2020-2021 athletic season, UT Athletics lost $28 million. UT Faculty Senate meeting minutes from 2020 show that reserve funds for Athletics were drawn down by $8 million. By contrast, UT Athletics earned revenue of $143.8 million in 2019 prior to COVID, and had a total operating budget of $143 million.
For the 2022-23 fiscal year, UT Athletics will reportedly have a budget of more than $200 million, according to The Athletic.
“I think we feel like we have made a turn in the post-COVID environment,” Alpert said in an interview. “We’re growing our revenues and we want to continue to invest in our success, but at the same time want to build our reserves back up.”
The terms and exact amount of the bridge loan are still being negotiated, according to Alpert.
A number of athletics departments struggled to repay loans made during the pandemic. Ohio State University loaned its athletic department $48 million to help cover pandemic losses. That loan will be repaid over 30 years with a 2.5% interest rate.
Not all Division 1 programs experienced losses. The University of Alabama made $9.6 million during COVID, and is estimated to have $65 million in reserve funds.
The issue of reserve funds, or a rainy day fund, varies among institutions. Some budget experts advise having as much as 40% of an annual budget in reserves. A 2020 study of college athletics showed that only 41% of Power Five departments, and only 26% of Group of Five departments, had reserves at all.
“...All it takes is a football coaching change to drain that reserve and the need to start over,” one coach wrote in response to the study.
Auxiliary units of UT, of which Athletics is one, should have between 3% to 5% of operating expenses in unrestricted reserves, according to the university.
Alpert said there’s no specific number or goal in mind for rebuilding Athletics’ reserve funds.
“But we do want to continue to grow our reserves and create some financial sustainability for ourselves,” he said.
Athletics expects to repay the university in late June using funds from Southeastern Conference bowl distributions, which last year amounted to almost $50 million.
(This story was co-produced with students from the University of Tennessee's Department of Journalism and Media.)
