The financial update athletics director Jen Cohen and chief financial officer Kate Cullen will present to the University of Washington’s board of regents on Thursday does not resemble the original best-case scenario.

That scenario — featuring a full football season with fan attendance in the fall, outlined in a similar budget meeting in May — has been buried under a barrage of testing issues, long-term cardiac concerns and rising coronavirus cases. As a result, Pac-12 sports have been postponed through the end of the year and its athletics departments are facing an uncertain financial future.

All of which will be outlined in detail on Thursday, beginning with the opening paragraph of a document prepared to accompany the presentation:   

The updated FY21 budget included here reflects the following assumptions, as well as actions taken by ICA, which resulted from that decision:

  • A truncated football season in winter/spring;
  • Unlikely to have fans at events (however we are prepared to host fans if circumstances change);
  • Lower sponsorship revenue; and
  • Staffing and operational cuts equal to roughly $28 million.

But that’s just the beginning. Before UW’s athletics brass presents its budget update, The Times spoke with Cohen to provide context and additional answers earlier this week. Here are six key points from UW Athletics’ upcoming financial presentation.

UW plans to cut $28 million in staffing and operational expenses in FY21.

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In June, UW announced it would implement a 15% reduction in its operating budget (roughly $8.5 million), and a 10% salary reduction for staff (roughly $5 million). That staffing reduction has since grown to 17% ($8 million) — via “voluntary contract reductions, department-wide furloughs and other staffing cuts” ($20 million). Considering that 65% of the department’s salaries and benefits are tied to guaranteed contracts, only so much financial wiggle room is feasible.

The operating budget hit will also increase to 40% through “continued cost containment, spending freezes and operational cuts.”

“When we shut down and you just manage expenses and spending you’re able to cut significantly,” Cohen said. “Also, with the dead period with the NCAA being extended, our recruiting costs are minimal right now because we’re not allowed to recruit. The other piece is that game-day operations are extremely expensive. Now, there’s revenue that comes with those. But when you’re likely going to have less games in particular for football the reduction in expenses around that is really big ($5 million in savings).

“We also worked with each one of our sport programs to cut their overall operating budgets, and the coaches are going to work together with us to raise money. So it’s kind of a combination of those things.”

The cancellation of UW’s non-conference football schedule also produced $3.125 million in unexpected savings — $1 million for Michigan, $625,000 for Sacramento State and $1.5 million for Utah State.

The projected operating expenses do not include the potential price of the Pac-12’s recently announced daily COVID-19 testing partnership with healthcare manufacturer Quidel Corporation. Cohen said that “it’s an area we’ve identified as a possible expense that we haven’t built into the budget yet.”   

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The budget proposal assumes a truncated football season will be played this winter or spring.

When asked specifically for her level of confidence that UW football will be played in FY21, Cohen said that “I’m more confident today than I have been in six months. So, that’s encouraging.”

Even so, with a 6-8 game winter or spring season, UW projects only $73.5 million in revenue — $50.6 million less than its expectation in May’s best-case scenario budget. That includes a $29.9 million hit in gate revenue — since the Huskies are not expecting to host fans in FY21 — as well as $18.7 million less in TV rights and NCAA distributions, $5 million less in royalties, advertising and sponsorships and $4 million less in game day revenue (concessions, parking, etc.)

To offset those losses, UW has set a goal to raise an additional $15 million via the Huskies All In fundraising campaign (more on that later).

But even if it does, Cohen and Cullen will still be staring at an operating deficit of $13.4 million — and that’s before factoring in the annual $14.3 million debt service payment on the loan that funded the Husky Stadium renovation, or an expected $6.4 million in 2020 football season ticket refunds.

Oh, and if a winter/spring season is further limited or canceled, UW could suffer losses of an additional $20 million.

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So, to reiterate: This is certainly not a best-case scenario.

The assumption is that there will be no fan attendance at UW athletics competitions in FY21.

But that doesn’t mean Cohen, Cullen and Co. have eliminated the possibility that UW could host fans this winter or spring.

“Our team is prepared to adapt to whatever the guidelines of our state and county would be regarding large gatherings at the point in time that we start to play football,” Cohen said. “That being said, we thought it would be more responsible of us (not to project fan attendance) because we know right now that wouldn’t be possible, just to prepare our budget around that. And then if we can improve our situation, awesome.

“And our situation could also get worse. We could still not have sports for the year, and then we’re in a completely different model as well.”

UW is requesting a one-year deferral on the loan that helped finance the 2012 Husky Stadium renovation.

Because of that proposed deferral — which the board of regents will vote on Thursday — UW’s annual payments would be roughly $600,000 higher over the remaining term of the loan and it would pay $15.7 million more in added interest. The final full payment would be pushed by one year to July 1, 2045.

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As part of that loan agreement, UW is required to keep enough for one year’s debt service payment in its reserves fund at all times. UW touted roughly $39 million in reserves entering FY21 and is projecting to spend $23.4 million of it this year to keep its athletics department afloat, leaving approximately $15.6 million remaining.

To keep from essentially squeezing its reserves fund dry, a debt service deferral is an understandable ask.

“It’s just not a consistent business model at times,” Cohen said. “So the reserves are there for us to weather those storms. We certainly didn’t expect a storm like this.”

UW estimates that it will return $6.4 million in 2020 football season ticket refunds.

As part of its Huskies All In program, UW offered its 2020 football season ticketholders three options: donate the price of their tickets to the athletics department as a gift, convert it as a credit to be used in 2021 or request a full refund.

The projected results are as follows:

  • Ticket donation: 15%, $3.2 million
  • Converted to credit: 55%, $11.7 million
  • Ticket refund: 30%, $6.4 million

UW has also set a goal of raising an additional $15 million via Huskies All In, specifically to replenish the dwindling reserves fund. The budget document states that “these challenges necessitate a significant fundraising effort in FY21 to avoid total depletion of the reserves ICA has built up over the last few decades.”

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Even in a period of sudden economic instability, Cohen is optimistic that their fundraising goals will be met.

“It’s going to be a long haul. It’s a really unusual time to raise money, and we’re very sensitive to that,” she said. “That’s why we gave fans an opportunity for a refund on tickets and for credits, especially with the initial gifts. Because we wanted to be sensitive to where people were (financially). That being said, we’re getting wonderful support from donors and season ticketholders and fans who really want to ensure that they can see our teams compete again.

“So it’s aggressive. We’ve had aggressive goals before. We’ve reached them. I don’t think it’ll be any different in this case.”

UW remains determined to preserve all 22 of its athletics programs.

Under a section titled “guiding principles,” Thursday’s UW Athletics document lists the following first: “maintain sport sponsorship and operations for all 22 teams.”

An accompanying document also states that “the athletic department is working tirelessly to increase philanthropic support, reduce expenses and be as creative as possible as they manage through one of the most difficult periods in their history.”

The goal, of course, is to emerge from that period with all of Washington’s athletics programs still intact.

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“It’s not on our planning list right now,” Cohen said of the prospect of cutting sports programs. “It’s always going to be put out there, because at some point if we can’t operate and we don’t have the revenues to operate, we’re going to have to look at what services we can and can’t provide for students. But we’re fighting.

“We’re fiercely committed to keeping our programs, and we’re also supporting the most important things — like scholarships and academic support, career development and mental health and medical and all of that. So I think if you look at the plan we have now, it’s solid, to protect all of our programs. A lot of our ability to do that long term is going to be (dependent on) the kind of support that our programs get from our community.”