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Sports College football coaches' COVID-19 pay cuts are not always what they seem

03:55  15 october  2020
03:55  15 october  2020 Source:   usatoday.com

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As college athletics departments began to confront the budgetary wreckage of COVID-19, it appeared that football coaches would be shouldering a fair share of the financial burden.

At Texas, athletics director Chris Del Conte announced that his department was laying off 35 employees and furloughing nearly a dozen more, but coach Tom Herman would be among those taking a voluntarily temporary salary reduction of roughly 15% of their pay. As North Carolina projected an eight-figure deficit in athletics, coach Mack Brown agreed to have his salary cut by 20%. And at Central Michigan, coach Jim McElwain agreed to give up 6% of his pay, which the school said was in line with other campus leaders.

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a man standing in front of a crowd: The Longhorns cut football coach Tom Herman's pay, but have promised to pay him back before the end of his contract. © Ricardo B. Brazziell, USA TODAY Sports The Longhorns cut football coach Tom Herman's pay, but have promised to pay him back before the end of his contract.

In those cases and others, however, the pay cuts weren't quite what they appeared.

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The Longhorns are in fact cutting Herman's salary, but they have agreed to pay him back before the end of his contract. Brown's pay cut was taken from only one component of his compensation — his base salary of $750,000 — rather than the $3.5 million he is due overall.

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And when the metaphorical dust settled for McElwain, who has made more than $17 million in three stints as a head coach, his pay cut amounted to $6,000.

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"It's nice when, after your pay cut, you're still making millions of dollars," said Sen. Chris Murphy (D-Conn.), a staunch critic of the financial model in major college sports. "I don't know that these pay cuts are going to result in any of these coaches facing eviction from their affordable housing developments."

As part of its annual review of coaches’ compensation, USA TODAY Sports has compiled and analyzed the salaries of head coaches in the Football Bowl Subdivision, just as it has since 2006. But this time, that data also includes a detailed accounting of the pay cuts that head coaches have — or have not — taken in the wake of the coronavirus pandemic.

USA TODAY Sports found that the temporary pay cuts range from as little as the elimination of an $80 monthly cellphone allowance (at Louisiana-Lafayette) to as much as $1.25 million (at Clemson). But when taken together, they show that head coaches have largely been insulated from the broader financial challenges of their universities and athletics departments.

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Of the 104 head coaches for whom pay cut information was made available, more than 40% have either not taken a pay cut or not been asked to do so. Of the 59 coaches whose pay has been reduced, the average cut amounts to just under 9% of their total scheduled compensation package for the year — which, on average, is roughly $3 million for that group.

Three schools — Memphis, Penn State and Purdue — announced that their football coaches were taking pay cuts but declined to answer specific questions from USA TODAY Sports about the nature of those reductions.

While a handful of football coaches are forgoing amounts north of $500,000, or separately making sizable donations to their schools to help cushion the financial blow, administrators have generally sought to portray them as equals — taking the same cuts, on a percentage basis, as other employees in the department or across campus.

"At the end of the day, we wanted everyone to be treated the same," Ohio State athletic director Gene Smith told reporters, when asked about his department's uniform 5% cuts.

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Yet at the FBS level, football coaches are often the highest-paid staff members at their universities — and, in many cases, the highest-paid public employees in their states.

Bob Lattinville, an attorney with the law firm Spencer Fane LLP, said some of the pay cuts for coaches end up being as much about optics as they are about actual cost savings for their universities.

"A lot of people obviously are hurting economically, and if (coaches) aren't doing something that essentially identifies themselves with the rest of the folks, many of whom are going to be supporters of the university, and (don't) essentially feel their pain, then I think it’s a bad look," said Lattinville, who assists USA TODAY Sports with its compilation and analyses of coaches' compensation.

"Again, it’s not that the pay cuts are ceremonial. They are significant. But for the most part ... you’re throwing pennies at dollars."

'Good business on both parts'

The coronavirus pandemic hit American colleges and universities like a freight train. Enrollment figures dropped, and COVID-19 considerations — like testing for on-campus instruction, or new technology for remote learning — led to rising costs. The recovery bill passed by Congress in May contained $37 billion in funding for higher education, providing some financial help. But last month, a group of industry leaders wrote to Congress and said they need at least $120 billion more.

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FBS athletics departments, some of which receive as much as 70% of their funding from the university, government or student fees, have dealt with similar issues.

With March Madness canceled and some football stadiums empty or only partly filled, departments that were once flush with cash have turned to belt tightening — cutting expenses, furloughing staff and, in some cases, even eliminating entire sports programs. Duke athletics director Kevin White said last week that at least 230 college sports programs have been cut due to COVID-19 so far, including 104 in Division I.

"The bottom line, I think you all need to know, is that American higher education — not just athletics — is hemorrhaging like never before," White said at a virtual assembly of the U.S. Olympic and Paralympic Committee.

At the upper echelon of Division I, the FBS, coaching salaries have been on a steep incline for many years, potentially making them ripe to be trimmed. So, now that times are tough, why isn't it happening? What's stopping a school from unilaterally slashing a football coach's contract to avoid layoffs, or save its tennis program?

Martin Greenberg, a Milwaukee-based sports attorney and adjunct professor at Marquette University, said it's simple: Legally speaking, at the majority of schools, they can't.

"I’m looking for a legal reason as to how to kill these contracts," Greenberg said. "And I can’t find one."

Contracts provide a layer of protection for coaches that most other university employees do not have, guaranteeing payment as long as they perform their duties. And Greenberg said the force majeure language in most of these deals, which could potentially give schools leeway to make changes in the event of unforeseeable circumstances such as a global pandemic, is not sophisticated enough to withstand a challenge in court.

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Instead, coaches and athletics department administrators are left to engage in a careful dance, bound by a desire to maintain a good working relationship and an understanding of how their actions will be perceived by the public.

"There’s not really a legal right to make the cut, certainly from a contractual standpoint. And there’s not any obligation to take the cut," said Lattinville, who represents both coaches and schools. "I just think it’s good business on both parts, by agreeing to do it."

In some instances, the voluntary cuts have led to significant cost savings for the school. Clemson's Dabo Swinney, who is making $8.3 million this year, is giving up a $1 million retention payment and a $250,000 raise that would have otherwise kicked in next year. Mike Norvell's reduction at Florida State is just north of $968,000, a 25% chunk of his pay.

Conversely, 45 schools told USA TODAY Sports that their football coaches have not taken cuts so far, including the two highest-paid coaches in the country: Alabama's Nick Saban and LSU's Ed Orgeron, who are due to make $9.3 million and $8.9 million this year, respectively.

But at Alabama and LSU, pay reductions have not been needed. The athletic departments benefit from quasi-independent fundraising arms that have tens of millions of dollars in reserve, according to their most recent financial statements. And university spokespeople said their respective campuses haven't faced any furloughs or pay reductions at any level thus far.

'It's a judgment call'

Earlier this year, when a full-fledged football season appeared unlikely, North Carolina athletics director Bubba Cunningham projected that his department could face a financial shortfall of up to $50 million for the year. Cuts had to be made.

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So in March, Cunningham implemented a freeze on spending and hiring. Three months later, he trimmed budgets and tapped into reserve funds.

In making those cuts, Cunningham asked his football coach, Brown, to take a 20% salary reduction, just like everyone else in the athletics department who makes $200,000 or more. But rather than seek 20% of his total compensation package — $3.5 million — Cunningham only applied the cut to Brown's base salary, which is $750,000. The resulting reduction was $112,500, a 3% cut of what Brown will make this year.

"It was one of the decisions we made in trying to be equitable and fair to the department and the individual," Cunningham said. "It’s a judgment call."

North Carolina is far from the only school to take that approach.

At Indiana, coach Tom Allen agreed to take a 10% cut of his base salary, which is $500,000, as opposed to his total compensation package, which is $3.77 million for this year, including $1 million signing bonus.

At Marshall, a similar salary-only reduction caused coach Doc Holliday to lose out on $7,000. He is due to make $765,320 in total compensation. (Holliday also gave up his school-funded membership at an area country club, which is valued at $8,000, according to athletics department spokespeople.)

Greenberg, the attorney, said he believes it's disingenuous for a school to announce a percentage cut but apply it only to one part of a coach's pay.

"I would be upset by that," he said. "The salary doesn’t mean anything. You have to take the total components of the financial package of the coach. That’s what they earn."

Central Michigan, meanwhile, said McElwain would take a 6% cut of his base salary, but his compensation for media appearances ($365,000) and annual retention bonus ($50,000) were unaffected.

Two weeks after that announcement, the Chippewas eliminated their men's indoor and outdoor track and field programs, which impacted 36 athletes and was projected to save nearly $629,000. That leaves them with just five men's sports teams, which is below the threshold required for FBS membership. The school was granted a two-year waiver in June to remain in the FBS.

Former athletics director Michael Alford, who oversaw the department at the time, did not respond to messages from USA TODAY Sports. Central Michigan declined to make his replacement, Amy Folan, or McElwain available for interviews.

Donations and deferrals

Some schools have taken minuscule but creative approaches to pay cuts, temporarily eliminating perks in their coaches' contracts — like a monthly allowance for cell phone use, or the lease on a car.

Others have axed or limited bonus provisions, capping them at smaller amounts.

A handful of schools, including Indiana and Iowa, have allowed coaches to maintain their salaries and instead donate to the university the amount that would have been cut. Experts in tax law said the benefits of these arrangements are likely negligible for coaches.

Purdue actually announced a combination of both reductions and donations. It said in a news release that coach Jeff Brohm and three others would be taking voluntary 20% pay cuts for 12 months but had also collectively pledged to donate $1 million to the athletics department "as part of their salary reduction."

Athletics department spokesperson Kassidie Blackstock repeatedly declined to specify whether the pay cuts and donations involved the same funds.

Elsewhere, some schools have offered their coaches more than flexibility when asking them to take a temporary pay cut. Cunningham said coaches at North Carolina were given one-month extensions to their contracts in connection with their cuts.

"In an effort to get them to change the contract, we felt we needed to offer them consideration to do that. So that’s what we did," he said. "We just negotiated, 'You take this cut now, we’ll do something for you later on.' "

At least one school, Texas, has already taken that concept to the extreme, promising to repay coaches in all sports the amounts that are being cut and essentially turning salary reductions into deferrals.

For Herman, whose pay cut was only applied to his base salary, this means he will miss out on $516,250 this year but be repaid by the end of 2023.

"We had a one-year COVID problem," Del Conte said last week. "These coaches, we had a contractual obligation, and I asked them if I could reduce their salary for this amount of money. They said yes, because they knew I had to honor that because we had (a) contract."

Lattinville said he believes many schools will ultimately try to take steps like these and make their coaches whole. They probably won't memorialize those plans in a contract amendment like Texas did, he said. But when the pandemic is over, and revenue is once again flowing, maybe a coach who took a $200,000 pay cut will get a one-time retention bonus in the same amount, or a mild raise.

"Will they remember the fact that coach accepted a pay cut and treat them accordingly, try to get that money back to them? I think absolutely," Lattinville said. "I think that’s human nature, and that’s what the coaches anticipate. ... Those conversations are coming up."

Long-term changes

In the eyes of Murphy, the U.S. Senator, some of the pay-cut arrangements for football coaches offer fresh evidence of what he views as a broken financial model in college sports — a system in which coaches and athletics departments rake in millions, while athletes are compensated only with scholarships.

"It just shows how omnipotent modern big-time college football coaches are," Murphy said, calling deferrals disguised as pay cuts, like those at Texas, "a joke."

"These coaches are ... running these universities in many ways. They're the highest-paid employees. Their threat to leave can rattle a campus to its bones. They just have way too much power and they're getting way too much money."

The fallout from COVID-19 might not fundamentally alter the power structure in college athletics, but it could lead to some changes.

The force majeure language in coaches' contracts is already being re-written, to make it both more specific and easier to apply. More schools will give themselves a contractual avenue to cut pay, rather than having to rely on volunteers. And coaches could soon see their compensation tied more directly to events that generate revenue, like games played, instead of receiving guaranteed lump sums.

"We pay a bonus if somebody coaches an extra game, like a bowl game," Cunningham explained. "It would make sense to do it at the front end, if you coach fewer games."

Ultimately, though, the pandemic appears to be little more than a speed bump in the broader coaching marketplace. Average pay has been climbing roughly 7% each year. At least 33 coaches now have buyouts of $10 million or more, making it nearly impossible for cash-strapped schools to fire them. And even as the pandemic rages on, at least two coaches have received contract extensions in recent months — a financial reward for a job well done.

Contributing: Brian Davis

Contact Tom Schad at tschad@usatoday.com or on Twitter @Tom_Schad. Follow Steve Berkowitz on Twitter @ByBerkowitz.

This article originally appeared on USA TODAY: College football coaches' COVID-19 pay cuts are not always what they seem

With $1 salary, Joe Moglia may be the biggest bargain in college football .
Joe Moglia, former CEO of TD Ameritrade, has agreed to forego his $177,000 salary and accept $1 this season in his unique role at Coastal Carolina.The one thing Moglia won’t do is go watch practice.

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