A few years ago, the NCAA was financially prepared for a missed NCAA tournament.
But savings of nearly $500 million to help offset the financial loss of college basketball’s biggest event was spent elsewhere. According to a report from Will Hobson of the Washington Post, NCAA leadership spent more than $400 million of its savings while never increasing the event cancellation insurance coverage.
NCAA chief operating officer Donald Remy acknowledged that university presidents on the board of governors made the decision to spend the savings. It was also decided event cancellation insurance on the NCAA tournament should not be increased because of cost. From 2004 through 2014, the NCAA compiled savings in the event of a missed NCAA tournament. Event cancellation insurance was also put in place to cover one-third of the event.
Under Remy’s leadership, and at the recommendation of some school athletic directors, the NCAA started to get rid of the $500 million savings in 2016. Some athletic directors viewed the cash pool as a liability. One theory involved lawyers targeting the NCAA because of the savings.
So the money was spent. The NCAA board of governors approved a $200 million “special one-time distribution” to Division I athletic departments in 2016. Even more puzzling, in 2017, the NCAA settled a major class-action lawsuit for $208.7 million. The NCAA could have forced 11 football conferences, the case’s other defendants, to split the cost. Instead, the NCAA opted to cover the full amount using its savings.
It’s led to this year’s current situation. The cancellation of the 2020 NCAA tournament allowed the NCAA to recover a $270 million insurance policy. Unfortunately, that only amounts to about one-third of the tournament’s $800 million annual revenue.
Since 70 percent of the NCAA’s annual revenue comes from the NCAA tournament, it means a significantly leaner year for the organization. Payouts to member conferences and schools are also dramatically decreasing.