The Pac-12 released its federal tax filings Monday, as it always does this time of year. Unlike previous instances, however, the conference included bonus material to lend transparency to the state of its finances.
The highlights from the unveiling, which covered the 2018 fiscal year (full breakdown on key topics below):
- The Pac-12 generated $497 million in revenue, a year-over-year decline of 2.35% that the conference attributed to the nature of its contract with the Rose Bowl.
- Distributions to the schools were $29.5 million (on average) based on IRS reporting procedures and $31.3 million (on average) based on what the conference described as “actual cash distributions.” The former number represents a slight year-over-year decline in distributions, the latter figure a slight year-over-year increase (explained below).
- Commissioner Larry Scott’s annual compensation topped $5 million for the first time.
- In addition to the information required in the 990 tax filings, the Pac-12 released revenue/expense figures from fiscal 2018 for both conference and Pac-12 Networks operations in what it called an attempt “to provide enhanced clarity and transparency.”
However, the conference stopped short of a full reveal, stating in a news release: “Revenue and expenses, but not equity value, from the Pac-12 Networks are included in the Conference’s reported financial results.”
That equity value, of course, is a central piece to the Pac-12’s search for a strategic partner and resulting equity infusion.
Here’s a breakdown of the financials:
The Pac-12’s total revenue fell by $12 million year-over-year, from $509 million in FY17 (a conference record) to $497 million in FY18.
The Pac-12 attributed the decline to “the Rose Bowl and its associated revenue being part of the College Football Playoff in fiscal year 2017-2018.”
The conference receives tens of million of dollars from the Rose Bowl in traditional years, when its champion plays in Pasadena.
But once every three years, the Rose Bowl hosts the College Football Playoff semifinal, and the Pac-12 champion is forced to play in another New Year’s Six game.
In those instances (FY15, FY18, FY21, FY24), the Pac-12 doesn’t receive any income from the Granddaddy.
To offset that ebb, the Pac-12 withholds a portion of the Rose Bowl revenue from its membership in two out of every three years. It then uses those reserves to offset the dip in the third year, when the Rose Bowl hosts a semifinal. (See table below.)
Without the Rose Bowl paycheck, the Pac-12’s total revenue in FY18 is actually closer to the FY16 figure than last year’s amount:
- 2014: $374 million
- 2015: $439 million (no Rose Bowl for Pac-12 but first year of CFP for Power Five)
- 2016: $488 million
- 2017: $509 million
- 2018: $497 million
According to the conference, the per-school distribution figure for FY18 listed in the federal tax filings — about $29.5 million — represents the audited book value, which reflects the absence of Rose Bowl income.
However, what the conference described as the “actual cash distributions” to the schools in FY18 includes the Rose Bowl income that had been held in reserve.
With that revenue stream included, the schools received an average of $31.3 million.
(The conference had not previously disclosed publicly that its “actual cash distributions” were distinct from those listed on the federal tax filings.)
How does that payout figure compare?
Three other Power Five conferences have reported campus distributions for the 2018 fiscal year:
- Big Ten: $54 million per school (actual)
- SEC: $43.7 million per school (actual)
- Big 12: $36.5 million per school (actual; excludes local TV rights)
- Pac-12: $31.3 million per school (actual)
- ACC: not yet reported
Larry Scott’s compensation
Scott became a $5 million man in the 2017 calendar year.
(Employee compensation is reported on a calendar year, not fiscal year, basis.)
Scott received $2.85 million in base salary, $2.15 million in bonuses and incentives, $200,000 in other reportable compensation, $54,000 in retirement and other deferred compensation, and $37,728 in nontaxable benefits.
Grand total: $5,291,481.
(He also received a $1.861 million relocation loan years ago that has yet to be repaid.)
All told, eight conference and networks employees received at least $500,000 in compensation in CY17, including deputy commissioner/COO Jamie Zaninovich and general counsel Woodie Dixon, who oversees Pac-12 football and was involved in the officiating scandal in October.
Pac-12 Networks president Mark Shuken earned $280,000 in approximately four months on the payroll.
Shuken’s predecessor, Lydia Murphy-Stephans, was credited with $1.2 million in compensation during CY17, plus $221,277 in severance pay.
Scott’s salary, the object of much criticism by fans and the media, is based on his dual roles as chief executive of the conference and the networks; it was approved by the Pac-12 board of directors (the presidents and chancellors).
The $5.3 million in total compensation represents an increase of $500,000 over his pay in the previous calendar year.
While Scott earned approximately $3 million more than Greg Sankey of the SEC, he was not the highest-paid commissioner in college sports in 2017.
According to USA Today, Jim Delany received $5.5 million from the Big Ten, which generated 50 percent more revenue than the Pac-12 in the 2018 fiscal year (a whopping $759 million).
In addition to the compensation figures provided Schedule J of the tax filings, the accompanying notes shed unprecedented light on the policy that underpins Scott’s travel style.
Line 2 of the balance sheet states: “Savings and temporary cash investments: $22.5 million.” That’s the Pac-12’s rainy-day fund.
To some, it might seem like an unnecessarily large stockpile considering the vast majority of the conference’s annual revenue streams are fixed (ESPN/Fox contracts, Pac-12 Networks carriage deals, NCAA tournament payments and the Rose Bowl/CFP arrangements).
Could that money, instead of sitting in the bank, be spun off to the schools?
According to the conference, the reserve fund represents what the presidents and chancellors view as “best practice” in case of unforeseen events that are “unrelated to our revenue streams.”
The reserve funds are reviewed regularly, but there are no current plans to ship the cash to the schools.
Conference and Pac-12 Networks revenue
Conference operations generated $370 million in revenue in the 2018 fiscal year, the bulk of which ($240 million) came from the Tier 1 contracts with ESPN and Fox. (See below.)
The football postseason provided $84 million in revenue, down from $113 million the previous year, when the Pac-12 and Rose Bowl partnership followed traditional lines.
Meanwhile, the Pac-12 Networks reported $127 million in revenue in FY18, a drop of six percent from the initial projection of $135 million.
The year-over-year decline can be traced to the loss of carriage on U-verse.
Conference and Pac-12 Networks expenses
The additional financial documents provided this year (i.e., over and above what’s required in the federal tax filings) included line-item expenses for both the conference and networks. (See below).
The networks generated $101 million in expenses, leaving a surplus of approximately $26 million.
Although the Pac-12 did not specify the amount spun off to the schools from the networks, basic math gives us a reasonable approximation:
The $26 million surplus split 12 ways would result in approximately $2.2 million distributed to each campus in FY18.
That’s about $600,000 less per school than the projected amount based on a copy of the Pac-12 Networks budget obtained by the Hotline.
(The original budget showed the networks with a surplus of $33.5 million, or $2.8 million per school.)
Other notable expense information:
- The conference and networks spent approximately $34 million (combined) on compensation, salaries and wages.
- Of the $8.1 million in occupancy expenses, the vast majority was allocated to the Pac-12 Networks. (The conference also reported $10.3 million in deferred rent on the tax filings.)
- Expenses assigned specifically to conference-side operations totaled $40 million, the largest buckets being compensation and events.
In its news release, the Pac-12 highlighted that $40 million figure and stated: “The Conference’s annual expenses place it in the middle of its Autonomy Five peer group in terms of level of annual operating expenses as reported in publicly available Form 990s.”
Additionally, the Pac-12 acknowledged publicly what the Hotline has suggested on multiple occasions: The unique business model, by which two entities (conference and networks) operate under one roof, allow for shared and/or crossover expenses.