Oregon State paints ‘devastating’ financial picture, Oregon says move to Big Ten adds ‘stability and visibility’ at legislative hearing

College football realignment reached the halls of the Oregon State Capitol on Thursday, when representatives from the University of Oregon and Oregon State addressed their diverging paths in the wake of the Pac-12 Conference’s demise.

During a public hearing before the House Interim Committee On Higher Education, school presidents, athletic directors, one student-athlete and a small business representative detailed how the implosion of the Pac-12 — and Oregon’s defection to the Big Ten — will impact the schools and their athletic departments moving forward.

The conference fell apart last month, when Oregon and Washington announced they would be leaving for the Big Ten at the beginning of the 2024-25 season. The news came roughly a year after USC and UCLA made a similar move, and days after Colorado said it would leave for the Big 12. It started a domino of departures, with the rest of the conference bailing for the Big 12 and ACC. Only two schools were left without a future conference home: Oregon State and Washington State.

During Friday’s hearing in Salem, Oregon State President Jayathi Murthy said the “consequences” of the Pac-12′s collapse will be “devastating” for Oregon’s largest university, causing a $42 million budget shortfall created, mostly, by a loss of television revenue. The funding deficit, Murthy said, will threaten athletic scholarships and jeopardize the future of non-revenue and Olympic sports and women athletes.

Conversely, Oregon President Karl Scholz said the university bolted from the Pac-12 to remain financially stable and self-sufficient, noting that its athletic department was self-funded and would remain so. The move to the Big Ten, he said, will provide “stability and visibility” for the Ducks.

“We had only one choice,” Scholz said.

The hearing, which lasted 90 minutes, was merely a vehicle for the legislature to gather information, so no action was proposed, let alone taken. In fact, multiple representatives wondered aloud whether there was even anything the legislature was authorized to do. It’s not known when the committee will meet again to address the issue, but Chair John Lively, D-Springfield, asked his fellow committee members to log questions for the future, so presumably it will do so at some point.

Here are the highlights from Thursday’s hearing:

‘DEVASTATING’ FINANCIAL IMPLICATIONS FOR OSU

Oregon State is forecasting a budget shortfall of more than $42 million from the 2024 fiscal year to the 2025 fiscal year, thanks to drops in ticket sales, the annual fund and, most significantly, conference and media revenue.

The most recent media right’s deal with the Pac-12 generated more than $30 million in annual revenue for the school. OSU projections estimate that television payouts and conference revenue will plummet from $42.7 million to $6.7 million between 2024 and 2025, creating a mammoth funding gap that could be catastrophic for the athletic department.

“The consequences for OSU are devastating,” Murthy said. “There are significant impacts on athletic budgets on student-athlete scholarships and to the Corvallis community. There are severe impacts to non-revenue sports, Olympic sports and to women athletes. We’re working tirelessly to secure our path forward following these guiding principles that emphasize the holistic development and well-being of all students. The ability of OSU student athletes to compete at the highest levels possible, the best experience for alumni and fans across all sports, visibility for OSU, nationally and globally, and financial resources for OSU athletic programs and student-athletes.”

The school distributes more than $10 million in athletic scholarships to student-athletes, and Scotts Barnes, the OSU athletic director, said the costs are traditionally covered by conference and media revenue.

“Even with all the momentum occurring at OSU right now, we can’t sugarcoat the financial realities we must address,” Barnes said. “We must be transparent about the reality of the financial impact, while recognizing that we are in a situation no one has ever experienced.

“But be assured, our team is committed to pursuing every opportunity. It will take time for us to build something and we owe it to our student-athletes, Beaver Nation and the state of Oregon to do so. We will do our part to seek all other possible sources of revenue. And what we need from the legislators is supporting student athletes. Moving forward, my top financial priority is preserving our scholarship commitment to our student athletes.”

Making matters worse for Oregon State is the fact that it still has to repay debt incurred during the COVID-19 shutdown, when college sports were shuttered and roughly a year’s worth of events were played in front of sparce crowds — or none at all.

“To bridge the impact, Oregon State loaned its athletic department $31.8 million to cover the COVID-related deficit,” Barnes said. “The opportunity for athletics repayment have changed due to the conference realignment. If left unpaid, this debt will ultimately be paid by OSU students through E and G funds, which consist of tuition and state funding allocations.”

OREGON’S MOVE TO BIG TEN NOT ABOUT ‘MONEY OVER MISSION’

Scholz said he was “sad” that the landscape of college sports had “disrupted the Pac-12,” but added that Oregon’s move to the Big Ten was “the right time to do in today’s world.” The school’s athletic program is self-funded, meaning Oregon does not funnel state money or student tuition and fees to the department. That will remain so as a result of the move.

“As the president of the UO, my job is to maximize the benefit of higher education to all students on our campus,” Scholz said. “When presented with a value proposition to renew a contract with the Pac-12 or move to a conference providing greater stability, which, among other benefits allows us to maintain a self-funded athletic program, the choice was both difficult, but clear.

“I believe it is vital for the taxpayers of the state of Oregon and to the families of the students we serve to keep tuition dollars and state appropriations where they should be with student learning and achievement. We faced a difficult choice. One path would be to extend our media grant of rights to the Pac-12 conference for another five years. … the other path was to accept the offer to join the Big Ten, which provides stability and visibility for our program and so, in turn, our students, and provides the financial resources to support our athletic program. We had only one choice.

But while money was a clear driving force behind the move, Scholz said, Oregon is not sacrificing its “mission” as it bolts to join the Midwest schools.

“Some would say this move is an example of money over mission, that is simply not the case,” he said. “This decision was firmly rooted in ensuring a stable place where students and student athletes can thrive, where they can continue to have opportunities to learn and discover, where they can have resources to compete at the highest levels, and where the state of Oregon can benefit from increased visibility across the nation through our athletic programs.”

ONE SCHOOL IN FINANCIAL DISTRESS IS BETTER THAN TWO

When looking at the broader impact of college football’s changing landscape, Scholz said, it’s better to have one public university in “financial distress” rather than two.

“I think it would be unfortunate to have two R1 universities in the state of Oregon coming in front of the committee saying we are in terrible financial distress because a media rights deal was inadequate to support our athletic programs,” he said. “And so, both considering these broader impacts and the future the University of Oregon, to maintain the separation between the athletic program and the academic side of the house, we felt it was prudent to do this. And we’ve followed the appropriate procedures working with our Board of Trustees.”

But Murthy disputed the widely-held belief that the Pac-12 was unstable and destined to crumble. Yes, USC and UCLA had bailed on the conference. But if the remaining 10 schools had stayed together, she said, a proposed media right’s deal from Apple could have been lucrative and maintained stability in the conference.

“It is true that there are enormous winds of change buffeting college athletics,” Murthy said. “But I would submit that we have agency. We free will. We have determinism. We can choose to withstand some of this buffeting. Or we can simply choose to simply go with it and let somebody else pick up the losses, which is really what happened here. It’s not true that the Pac-12 was falling apart and it was so unstable that you had to head for the exits. The Pac-12 falls apart if you leave. You may choose not to leave and therefore hold the conference together. The Apple deal wasn’t some horrendous deal. It was actually a pretty intriguing one and there was no obvious reason to leave it for half a share of the Big Ten proceeds. So there is nobody up there determining that we ought to leave the conference (so) the conference falls apart. We have the choice not to do so.”

FINANCIAL DETAILS OF APPLE TV BID

Legislatures questioned Murthy and Barnes about the Pac-12′s media right’s negotiations and, specifically, about the details of a potential streaming deal with Apple. Scholz was unavailable to answer similar questions because he left early — before OSU representatives spoke — for another scheduled hearing with the senate.

Murthy said a deal with Apple was intriguing for multiple reasons. On the one hand, streaming platforms are quickly growing in sports, setting a new foundation for the future. What’s more, she said, it was potentially more lucrative than media right’s deals with other conferences. Also, there was protection — if the deal turned out to be a worse than advertised, the conference had an out.

“The Apple deal was an interesting deal, to say the least,” Murthy said. “The first year would have been a baseline of $23 million. And if we brought in enough subscribers, we may have very well exceeded what we were making in the previous ESPN deal. In the second year, if we didn’t hit $30 million, we had the option to simply step away from the deal altogether. And beyond that, every year, the money we would have made would depend on the number of subscribers we brought in over the $30 million.

“So we could very well have ended up with a great deal more money than UO’s even making with the Big Ten deal for the next five years. It was an unusual deal. Very different from the kinds of deals that we were getting before. But there were many of us who were quite intrigued by the upside potential of that deal and the inevitability of streaming coming to sports. I mean, that’s happening one way or the other. So it’s not given that it was some kind of a horrible deal.

Added Barnes: “The delta was a little over $26 (million) in the current deal, $23 (million) guaranteed by Apple in first year, with projections that actually got the entire conference membership very excited about Years 2 and 3. And that’s why it was such a surprise at the end. There was an opportunity to close a gap on the Big Ten and SEC over time if this worked.”

OREGON DOWNPLAYS TRAVEL INCREASE

While detractors insist Oregon is adding unnecessary stress and harm to its student-athletes by moving to a conference that predominantly features schools in the Midwest, Scholz and Rob Mullens, Oregon’s athletic director, downplayed that notion.

Scholz said 45% percent of Oregon’s student-athletes, including those that compete in cross country and indoor and outdoor track and field, will not see an increase in travel. As for the other 55%, he said he challenged athletic department leaders to make sure the school maintains “a second-to-none student-athlete academic experience” for them.

“As president, a key, key priority is our students’ experience, and that extends to our student-athletes,” Scholz said. “And so one of the things that we have to be very mindful of in this move is how does that affect the student-athlete experience. And so there’s a top line that people don’t understand that

Oregon boasts 20 sports programs and more than 500 student-athletes. Mullens said 10 of the 20 sports will not experience a change in regular season travel and he does not anticipate the Big Ten move to affect graduation timelines. The school, he added will boost academic services and support for those who do travel more.

“It should have no impact on time to degree,” Mullens said. “We have a robust set of academic support and this is something that we will continue to work on.

A PLEDGE TO HELP?

Some legislators wondered what, if anything, the government could do to help. Others outright asked Murthy and Barnes what Oregon State needed.

Their answer, essentially, was emergency funding to pay for student-athlete scholarships and the COVID-19 debt.

Kevin Mannix, R-Salem, wondered whether Oregon State’s status as a land grant university could open a window to provide state and, perhaps even, federal funding at a time “an emergency (is) confronting the state of Oregon.”

“Oregon State University is unique here because you are a land grant university,” Mannix said. “And one of the things we need to explore is how do we take advantage of that special status to do some things. And I’m simply trying to plant some seeds here, Mr. Chairman, going forward, to make sure that we remedy the circumstances you’ve been placed in. I think we’re challenged to be listening to you about how we resolve the implications and the effect on your institution. I think it’s important to note that we have people of goodwill on both sides. I am disappointed that there wasn’t a consideration of … lots of discussions brought to you by the University of Oregon. I think there’s a fault there. And I’ll say that, at the same time, things are moving forward and whether or not we can stop those things from moving forward, we have an obligation, in my view, Mr. Chairman, to make sure that Oregon State University is made whole and protected in this shift. And given the opportunity, we have a crisis … do we see it resulting in chaos or do we see this as an opportunity?

“I’m simply trying to open the door to discussion as to how we move forward, because we may be unhappy about how we got here today. And, yes, we’re being driven by media and money considerations, which, on the one hand, offend me. On the other hand, it’s a reality that we face in today’s sports world. So I invite you to think about — and perhaps not answer today — some positive steps we ought to be doing as a state institution to bolster you financially in the short-run, treating this as an emergency which you did not cause. At the same time, transition to what do we do with that land grant status. I do think we need to be engaged positively to solve this dilemma.”

— Joe Freeman | jfreeman@oregonian.com | 503-294-5183 | @BlazerFreeman | Subscribe to The Oregonian/OregonLive newsletters and podcasts for the latest news and top stories.