The days of the mega buyout may be numbered

On August 17, 2018, Jimbo Fisher formally signed a ten year, $75 million agreement to coach Texas A&M. Buyout-wise, this is about as favorable as a contract can get. If A&M ever decides to fire Jimbo without cause, he gets the balance of whatever they still owe him from that $75 million. After that, he’s not subject to any mitigation requirement – where he would have to make efforts to find a new job – and there’s no offset against the $75 million. Nothing he makes at a new job reduces A&M’s buyout payment. And if Jimbo leaves on his own, he doesn’t have to pay the Aggies a dime.

At the time, most people outside College Station, me included, thought this contract was pretty amusing. Ten-year marriages between schools and coaches are rare in college football; and none of A&M’s last three coaches made it to Year Seven. Why lock yourself into a one-sided deal?

The answer is “Because that’s what it cost to get the coach the Aggies wanted.” And while that contract is now Texas A&M’s problem alone, it might well represent the peak of a buyout market that is slowly and erratically starting to deflate.

Over the last decade or so, coaching salaries have climbed at a fairly rapid pace, and buyout amounts moved right along with them. Take Louisville, for example: The Cardinals fired Steve Kragthorpe in 2009 and paid him $2.2 million. Nine years later, they fired Bobby Petrino, and that buyout number had climbed to over $14 million.

That wasn’t because Petrino did $12 million more for Louisville than Kragthrope. It’s just been the cost of doing business in college football. Charlie Weis spent two years collecting simultaneous buyouts from Kansas and Notre Dame! Florida kept paying Will Muschamp while he coached another team in the same division, including one South Carolina win over the Gators! Athletic directors made questionable choices and agreed to bad contracts, and they paid for their mistakes. (By “they,” of course, I actually mean “whichever boosters they convinced to cover for them.”)

But some schools are starting to bristle when the buyout bill comes due, with four notable examples:

• In the middle of the 2017 season, Florida decided it was done with Jim McElwain. His contract called for a buyout of $12.9 million, but the final payout was negotiated down by over $5 million. (Rumoredly, that was because McElwain failed to cooperate with the administration after claiming he’d received death threats from Florida fans, which the school couldn’t substantiate.)
• Kansas fired David Beaty in 2018 without cause, then decided a few weeks later that they’d withhold his buyout while investigating possible reasons to convert that firing into one for cause. Beaty sued, and the parties settled a year later for about $500,000 less than the full buyout amount.
• Bret Bielema, fired by Arkansas in 2017, filed suit against the school’s Razorback Foundation, who not only stopped paying Bielema but demanded he return $4.5 million in buyout money they’d already turned over. The Razorback Foundation accused Bielema of failing to meet his obligations to find new employment and manipulating some of his contracts as an NFL assistant to prevent offsetting any of the buyout debt Arkansas owed him. That suit is ongoing.
• FootballScoop recently reported that USF is hunting for NCAA violations to use as an escape hatch from its buyout obligations to Charlie Strong, whom they fired in 2019. (The Tampa Bay Times says an investigation is taking place, but USF did not initiate it.)

The rationales and strategies in all four of those instances are different, but they have a few interesting common elements.

First, they’re all geared towards giving the school some leverage to push for a lower buyout number.

Maybe that happens privately, as with Florida and McElwain. Maybe it means going to court, like Kansas and Beaty did. Either way, the mere threat of withholding a buyout shifts the balance of power. The school has more resources to fight a long battle, either legally or in the media, than the coach does. They can effectively starve a coach into submission – take this reduced offer today, or fight us and get nothing while you do.

Second, and somewhat essential to the first, athletic departments know these coaches are unlikely to get much public sympathy.

Most of them are millionaires, after all. Worse, they’re failed millionaires. Fans and boosters are not going to be moved by the plight of coaches that are no longer part of the program and didn’t meet expectations when they were.

Third, the schools can win just by running clock.

Kansas, for example, wound up paying Beaty $2.55 million, and the school’s legal bills in the case were around $350,000 as of April 2020. That’s pretty much the $3 million Beaty was owed in the first place, so aren’t the Jayhawks in the exact same spot, plus some bad press? They’re not, for one reason: Kansas got to keep most of that money for 15 months.

There’s an economic concept called the time value of money that explains why $3,000,000 in June 2020 is worth less than that same sum in Winter 2018. But even if you don’t think Kansas was going to invest that three million dollars and enjoy the interest, that’s nearly a year and a half where the athletic department didn’t have to cough that money up (or go ask donors for it). Arkansas’s already on the hook to pay $10 million to Bielema’s successor, Chad Morris, so every month they don’t have to pay Bielema himself is a welcome one. Imagine you can delay this year’s rent and just add it to next year’s, only in this case you are a major athletic institution making millions of dollars off unpaid labor.

Perhaps these are just outliers, rare cases where schools hit a cash flow problem or resented the idea of paying a former coach his full buyout, and there’s no pattern here. But schools were doing this when their biggest financial challenge was pretending to be broke. Now, with a global pandemic squeezing college budgets and threatening football revenue lines, they might have actual money problems, so athletic departments are cutting sports and looking for savings wherever they can. Arkansas, Florida, Kansas, and (maybe) USF have built a playbook for how to reduce or delay a hefty buyout payment. Are you that confident other schools aren’t going to copy it?