University Of California Regents Delay UCLA’s Fate

After three days of meetings, and nearly three months after the shocking announcement, the University of California Regents delayed their verdict on UCLA’s decision to move to the Big Ten.

In the past, the oversight board could only weigh in on athletics contracts that rose more than 30% of guaranteed money. Attempting to create a more “forward-thinking” approach (which could anticipate the continuing challenges that college athletics may present), Regents discussed a wide range of topics and thresholds that should come to them in the future for approval.

For a refresher, when UCLA and USC announced they were leaving for the Big Ten Conference at the end of June, UCLA did not ask the governing body for permission to make the move. UCLA is considered a partner institution with University of California-Berkeley (also a member of the Pac-12) in the UC system. Many assume both the Pac-12 and Cal-Berkeley will lose millions of dollars in media rights because the two Los Angeles market institutions are departing from the conference.

To exacerbate the tension around the move, Cal’s chancellor, Carol Christ, gave a detailed presentation near the end of the day that revealed a projected $9 billion deficit to address the campus structures that need seismic retrofits and deferred maintenance. If UCLA was hoping to escape to the Big Ten without any financial penalty, it didn’t help their case for the Regents to hear that presentation.

California law requires the system schools to report and discuss major decisions with the governing body. But just what defines a “major decision”?

The General Counsel’s office proposed:

“Athletics Delegation Issues

At their August 17, 2022 meeting, the Regents discussed a proposal for future delegations and Board-action triggers in the context of athletics. The proposal was to reaffirm the general delegation to the President over athletics matters not already reserved to the Regents, while prohibiting re-delegation over athletics matters meeting one or more of the following criteria:

MORE FOR YOU

  • The proposed transaction likely will have material adverse financial impact on other campus(es) in the UC system—for purposes of this provision, “material” means an adverse impact equal to or greater than ten percent of the operating revenue(s) of the athletic department(s) of the other campus(es);
  • The proposed transaction raises a significant question of University policy; and/or;
  • The proposed transaction likely will create significant risk of reputational harm to any campus or to the University.

The proposal discussed in August would also obligate the President to notify the Chair of the Board of Regents and the Chair of the Standing Committee with jurisdiction over the matter, in advance of any decision, when matters falling within the above criteria are expected to come to the President for decision.

The General Counsel will facilitate additional discussion to seek consensus of the Board around preferred future approval authority delegations for athletics matters.”

One important outcome could mean that UCLA’s predicament may prevent all UC campuses from making significant athletic decisions unilaterally in the future (the UC system is a mix of Division I, II III and NAIA schools).

UCLA’s decision to leave the Pac-12 will likely cost UC-Berkeley more than 10% of their annual athletic operating revenues; as of 2020-21, Cal brought in almost $92 million in total revenues; UCLA brought in $110 million in 2019-20. Each brought in about $25 million in media revenues.

Navigate predicts the media revenues between 2022 and 2029 for the Pac-12 will increase by $22 million annually (from $34.4m to $56.5m); for the Big Ten, media dollars will grow from $57.2 million to $94.5 million, an increase of $37m annually. It’s a significant difference, and has as much to do with current media consumption habits as it does for the future (i.e. streaming).

The Big Ten announced their deal begins in 2023; Pac-12 Commissioner George Kliavkoff is working on assembling a future media rights package for his remaining schools. He went on the record earlier this week claiming UCLA would accrue little benefit from the new arrangement because the would burn through all the extra cash traveling all over the country. Don’t let the door hit you on the way out, Bruins.

It’s not likely a similar kind of blockbuster deal will happen for the Pac-12 in the near future-there aren’t that many heavily populated media markets yet unclaimed on the Left Coast. In the meantime, the jury is out on the likely cost to repair the financial and reputational damage inflicted on the UC System in general, and to UC-Berkeley in particular My guess is the buyout the Regents will require UCLA to make Cal whole will be in the $40-$50 million range, spread out over 4-5 years. Perhaps they could throw in a structural seismologist as a bonus.

Both UCLA and Cal have accrued a ton of athletic debt in the last 20 years. No matter what happens, a new 12 team College Football Playoff payout should be just what the doctor ordered. That’s a whole new discussion. Wonder if the Regents will have to sign off on that?