Stanford’s massive wealth still might not save its Olympic sports

When the pandemic rocked college sports in 2020, more than 200 athletes at Stanford University had a wrench thrown in their future plans. School administrators announced their shocking decision to eliminate 11 varsity sports that July, citing “harsh new financial realities imposed by COVID-19 on all university operations.” Less than a year later, in May 2021, Stanford walked back that decision, reinstating all 11 sports after fundraising efforts improved the school’s financial outlook. For a brief moment, athletes in field hockey, rowing, fencing, sailing, synchronized swimming and men’s volleyball and wrestling were saved.

Regardless of where Stanford ultimately lands, one thing seems clear: The university’s athletics department will likely lose a significant amount of money during the realignment process. The Pac-12 media agreement, which expires at the end of the 2023-24 sports season, netted each of the 12 schools an average payout of $37 million in fiscal year 2022. It seems clear that even if Stanford (and Cal) reach a deal to join the ACC, their athletic departments will be taking in significantly less money than that — at least at first — and face greater travel costs. Current ACC members take in about $39 million annually; Stanford has reportedly offered to take just a 30% share of that initially. While travel costs are rough estimates now, one (aggressive) calculation had UCLA’s new travel costs in the Big Ten ballooning from $8 million to $23.7 million, for example. And Big Ten schools are closer to Los Angeles than the ACC members are to Palo Alto.

The whole situation has some athletes and coaches wondering whether another downsizing is coming, although several prominent sports economists have argued that cutting sports doesn’t make sense given the broader financial reality at Stanford.

School administrators have not indicated that team cuts are imminent, but if the past is any indication, it could be one avenue they explore. 

“Not to worry about things like that would be naive, just based on the history,” wrestling head coach Robert Koll told SFGATE. Wrestling was one of the sports cut in 2020, but the team raised $10 million in just over three months from alumni and supporters in an attempt to ensure their financial viability in the future. 

Koll said if Stanford attempts to downsize its athletics department to make up for the financial hit it will likely be taking soon, he thinks the teams that have made themselves the “least attractive option” to be cut — such as wrestling — will be spared. 

“I’ve been in sport for a long, long time, and I’ve seen a lot go by the wayside, because they didn’t prepare and they didn’t build up their endowments and have a good following and fan base,” Koll explained. “And so those are the things we’ve done to make ourselves as safe as humanly possible under the circumstances.”

One of Koll’s athletes wasn’t quite as concerned: Wrestler Charlie Darracott, a senior, said cutting sports is “always a possibility, but I haven’t really considered it.”

Both the Big Ten and ACC are strong wrestling conferences, with 14 and six teams, respectively. Because the two conferences that Stanford has been linked to have such strong wrestling programs, and because Stanford wrestling raised enough money itself to become self-sufficient in perpetuity, Darracott is not focusing on the hypotheticals.  

“We were cut during a time when certain people were in administration, and that played a big role in that decision,” the athlete said.  “I think there is definitely a bit of concern about teams being cut, but at the same time it seems like it’s a smaller problem than it was during COVID, at least the way they’re relaying information to us. … I think [athletes] are going to be a little more optimistic with the new administration.” 

While Stanford is expected to take a pay cut no matter where it lands, both athletes and several others brought up the possibility of using the university’s $36.3 billion endowment (as of August 2022) to make up for the money that could be lost during the realignment process. 

But, according to a person familiar with Stanford’s endowment who was also granted anonymity, most of that money is already earmarked for other uses. The broad term “Stanford’s endowment” is used as a shorthand to refer to all of the collective gifts that have been made to Stanford to ensure aspects of the university are funded — and there are close to 8,000 of these gifts, according to the source. 

The vast majority of those gifts were made to support a specific part of the university: For example, one gift could exist only to fund a particular professorship, while another might only be available to pay for a scholarship for a football player majoring in civil engineering. Because of this specificity, most of the money in Stanford’s endowment cannot be used to address budget shortfalls that may come with the Pac-12’s dissolution. 

As of 2019, 90% of the total endowment was restricted to specific uses, according to reporting by Stanford’s alumni magazine. That doesn’t leave Stanford with much wiggle room if it wants to shift resources to sports. The university may decide to route some of the unrestricted endowment funds to athletics, or it could look at gifts in the endowment that are specific to athletics and determine whether there is any leeway with where that money can be spent within the department. 

Even though Stanford might end up in a situation where it does not receive as much money from a media agreement payout and cannot cover the difference with money from its endowment, several prominent sports economists disagree with the notion that cutting sports teams is the best way to deal with a financial hit. Andy Schwarz, a partner at the economics consulting firm OSKR, and David Berri, a professor of economics at Southern Utah University, both assert that the decision to cut sports almost always comes down to a university’s values, not its economics. 

If universities made decisions that were guided solely by economics, Schwarz said, they would have a list of priorities; whenever they experienced a budget cut, they would eliminate the lowest priority on the list, regardless of where the university had lost money. 

“If they lose money because they lose a government contract, so $5 million less is flowing into the university, that really shouldn’t be any different than if it was $5 million lost of football revenue,” Schwarz explained. “So if it’s the case that [a sports team] is the least important thing on campus, that’s what they should cut when they lose a government contract, and that’s what they should cut when they lose football revenue.” 

Berri pointed out that Stanford’s overall fiscal outlook is healthy and the athletics budget is a fraction of the university’s vast financial resources, regardless of TV money. Stanford’s budget during the 2021-2022 academic year was $7.2 billion, while athletics expenses totaled just over $157 million that year — about 2% of the university’s budget. 

“The amount of money we’re talking about — it’s insignificant to the overall budget of the school,” Berri said. 

Therefore, if a university values sports, regardless of how profitable they are, “then it is irrelevant whether the football team’s revenue goes up or down,” Berri explained. “That means nothing to you: if you thought this was valuable before, then it’s valuable now. And you should still be funding that.” 

One thing is clear: Stanford is not cash-constrained. No matter where it ends up, it has the money to fund all 36 teams. The only question is whether it’s willing to do so.