Taxpayers Shouldn’t Bail Out UW Athletics

It’s possible that taxpayers will be on the line for most of a $20 million loan given to the UW Athletic Department in 2020.

As a rule, UW athletics pays for itself. Football and men’s basketball produce enough revenue to pay for themselves and everything else. But when the pandemic shut everything down the campus floated the department a loan to get through that year. That in itself was fine. A lot of extraordinary things needed to be done at that time.

What didn’t make sense was to make the loan interest free. A rough estimate is that that amounted to a $3.2 million subsidy because if the loan were paid back over six years (the agreed upon repayment period) at a 5% interest rate it would have generated about that much for the campus.

But now it gets worse because the department is balking at paying back the principal. A recent story in the Wisconsin State Journal reports that the athletic department hasn’t made payments during the last two fiscal years. Not only has that meant that the campus didn’t get the $7 million or so in repayments, but Chancellor Jennifer Mnookin agreed to charge no penalties for their default.

When I asked my friend Google AI about that, here’s how it responded:

“Defaulting on $7 million in scheduled loan repayments constitutes a major breach of a commercial loan agreement, triggering severe, immediate financial and legal penalties. Standard consequences include the acceleration of the debt, significantly higher interest rates, and the initiation of legal actions to seize assets.”

Now, you may argue that this isn’t a standard commercial loan. Rather the UW campus and the athletic department are, broadly speaking, different parts of the same entity. But I don’t look at it that way. For all intents and purposes, athletics is big business. It has its own extraordinary revenue streams from media contracts and ticket, merchandise and vendor sales. It compensates its employees at levels that are wildly out of pace with other campus pay scales. The football coach alone makes about eight times as much as the chancellor. So, athletics wants to see itself as something immune from normal campus business practices… except when it comes to paying back a loan.

And it gets still worse. Now athletics is arguing that it shouldn’t have to make payments for another year because of the new financial pressures created by a legal settlement to pay players up to a total of $20.5 million. Never mind that the two years of previous nonpayments came before they were on the hook for that amount.

The football team alone signed 34 players from the portal last month. They won’t disclose how much they’ve agreed to pay them or where the money is coming from, which in itself is ridiculous. You can readily look up the pay schedule for the Green Bay Packers. The notion that this is some sort of trade secret for the Badgers is just ludicrous.

But if they can afford to pay these guys some millions of dollars, as they surely are, why can’t they afford the $3.3 million or so they owe on their loan? Last year the department took in something like $63 million in media rights revenue alone. They can afford to pay back the remaining $15 million on their interest-free loan and the Chancellor or the Regents should insist that they do just that.
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