After decades of balancing the books, UCLA’s athletic department finds itself in a hole. And not just any hole — a hole so deep, it resembles the worst of times at the Bruins’ sister school 400 miles to the North.

UCLA athletics reported a whopping $18.9 million deficit for the 2019 fiscal year, according to a statement of revenues and expenses submitted to the NCAA and obtained by the Hotline.

The Bruins generated $108.4 million in revenue against $127.3 million in expenses for the 12-month period that included Chip Kelly’s first season as the football coach and the tumultuous basketball stretch in which Steve Alford was dismissed.

The shortfall will be covered by an interest-bearing loan from central campus, according to a spokesperson.

The terms of the loan were not available; nor were athletic department budget projections for the current fiscal year.

This marks the first time in 15 years that the Bruins haven’t balanced the books, according to university records, and coincides with the final months of athletic director Dan Guerrero’s tenure.

Guerrero, on the job since 2002 and the target of frequent criticism by UCLA fans, announced recently that he will step down at the end of the academic year.

Guerrero was not made available for an interview but issued a statement on the budget situation:

“Fiscal responsibility has been a hallmark of UCLA Athletics and being almost completely self-funded while growing the budget from $42 million in 2002 to $130 million currently has been a point of pride.”

The deficit is all the more stunning because of the Bruins’ past problems with the budget:

There haven’t been any.

Unlike Cal, which piled shortfall upon shortfall for years until its deficit reached the $20 million range, the Bruins traditionally are one of the most efficient departments in the Pac-12, if not all of major college athletics.

They hadn’t produced a shortfall since 2004, when the red ink totaled just $164,000, according to university records.

That prolonged stretch of balanced books came with limited university assistance. The athletic department receives just $60,000 in direct institutional support and $2.5 million annually in student fees.

That’s just two percent of the athletic department’s budget — among the lowest totals in the Pac-12.

(Even with massive help, budget balance is difficult to attain, anywhere: Expenses outpaced revenues at five of the 10 public schools in the conference, according to USA Today’ database of major college financials for the 2018 fiscal year.)

Yet for all those years, the Bruins were largely self-sufficient — until a convergence of unfortunate events (and expenses) struck during an 18-month period that began in the fall of 2017:

Jim Mora’s dismissal as football coach and poor ticket sales in the first season under Kelly …

Alford’s mid-season termination and the bonus paid to his successor, Mick Cronin …

The increase in operating expenses for football under Kelly’s watch and added resources for UCLA’s thriving Olympic sports …

It all formed a wallop the Bruins couldn’t overcome.

Not even the lucrative Under Armour apparel deal, which included a $16 million up-front bonus and features $9 million in annual payments, could bail out the Bruins.

“A confluence of events over the past two years led us to this point,” Guerrero said in his statement, “and while it is unusual for us, we expect this shortfall can be mitigated.

“The investments made into our football and men’s basketball programs will pay off, ticket sales will normalize and one-time expenses will be paid.”

The Hotline examined the past three years of UCLA’s revenue/expense statements — all schools submit the annual reports to the NCAA — in order to gain context on the shortfall.

Why three? Because UCLA’s football schedule varies in the number of home dates; even-year seasons, which include USC’s visit to the Rose Bowl, are the biggest money makers.

We wanted to compare revenues and expenses over multiple even-year seasons.

The differences were immediately apparent.

(UA = Under Armour):

Revenues:

FY17: $104.1 million

FY18: $131 million (UA bonus/payment)

FY19: $108.4 million (UA payment)

Expenses:

FY17: $104.1 million

FY18: $131 million

FY19: $127.3 million

(Statements of revenues/expenses below.)

A few highlights from our examination of the numbers:

*** The coaching changes created an $18.4 million hit.

UCLA paid $12.5 million in severance to Mora during FY18 to cover the four remaining years of his contract.

The Bruins then paid $3.9 million to Alford in FY19 and gave Cronin a $2 million signing bonus.

Although donors agreed to help cover portions of the buyouts, that assistance came in the form of pledges that will be paid over time. UCLA swallowed the buyouts at once, and immediately.

Despite Mora’s severance, the Bruins were able to balance the books in FY18 thanks, in part, to a reserve fund and the $16 million influx from the Under Armour bonus.

But that limited their options for covering the $5.9 million hit from the basketball change in FY19.

At the same time, operational expenses were increasing.

*** Upon hiring Kelly in Nov. 2017, the Bruins began to plow unprecedented resources into the football program:

Expenses have climbed by 30 percent (or $8 million). The areas of elevated costs include not only wages but nutrition — Kelly is fanatical about nutrition.

The Bruins spent $997,000 on meals in FY17 under Mora. In the first full year under Kelly (FY19), they spent $5.4 million.

(A portion of that increase would have occurred regardless because of Cost-of-Attendance legislation affecting athletic department budgets everywhere.)

*** The budget for UCLA’s Olympic sports has also increased: by $5 million (17 percent) over the two-year period.

That rise includes a $1 million uptick in travel and equipment and a $1.3 million increase in salaries for head coaches.

Additionally, the Bruins devoted $600,000 to additional event security following a murder-suicide on campus in the summer of 2016.

All told, the added resources for football and Olympic sports combined to increase annual operating expenses by approximately $13 million.

The coaching changes produced an additional one-time hit of $18.4 million.

That $31.4 million punch landed over the course of two fiscal years.

The Bruins were forced to dip into their reserve fund in FY18, to the tune of $7 million. But they don’t have the reserves available to cover the FY19 shortfall.

Then again, they were expecting help on the revenue side, in the form of a substantial increase in football ticket sales in the first season of the Kelly era.

That bump never materialized.

*** UCLA’s 2018 football schedule featured seven home games, including USC, and department projections called for approximately $16 million in revenue from ticket sales.

But the Bruins lost the home opener to Cincinnati, were blown out at Oklahoma, then got run off their home field by Fresno State.

The buzz was gone before the conference season even began.

The announced crowd for USC was 57,116.

Two years earlier, it had been 71,137.

As a result, revenue from ticket sales for the 2018 season fell $3.5 million short of expectations.

Empty seats also became the norm at Pauley Pavilion.

In FY17, the Lonzo Ball-led resurgence in men’s basketball produced $7 million in ticket sales.

That number dropped to $5.5 million in FY18 and $5.7 million in FY19.

So the increases in operating expenses that UCLA knowingly took on collided with unexpected drops in ticket revenue, and the costly coaching changes have thus far failed to produce the expected results.

Guerrero is optimistic — “the investments made into our football and men’s basketball programs will pay off” — but at least for now, the stunning shortfall is sure to impact his legacy.

Digging out could take years.

“We have been actively working with campus to find long-term solutions,” he said, “and to address the financial challenges impacting college athletic programs across the country.”

What might those solutions entail?

According to a spokesperson, the athletic department is evaluating efficiencies in operations (with help from campus), and there have been “no discussions of cutting any sports programs or staffing.”

But at the same time, the resource commitment to football and the Olympic sports cannot be reversed.

The Bruins have to grow their way out, but how?

The Pac-12 Networks are limping along financially.

The conference’s Tier 1 deal with Fox and ESPN is in place through FY24, and there is no indication an equity infusion is forthcoming.

The campus deals with Under Armor and IMG/Learfield (multimedia rights) are set for years.

The department has asked a lot of its donors lately.

There is one opportunity for revenue relief: On the field.

The Bruins, it seems, have to win their way out of debt.

That starts Aug. 29, against New Mexico State.

*** UCLA financial documents below.

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