Buyouts are a hot topic around college football of late, especially within the Big Ten. Every coach has one, large or small, as they are often negotiated into the contract. That’s where a recent USA Today article explored. They discussed how it is expensive to hire a coach, but can be just as expensive to fire a coach:
The buyout boom isn’t just caused by the rising pay market, experts say. In some cases, schools appear to be getting out-leveraged in contract negotiations by coaches and their agents, perhaps because multi-year contract signings are usually sunshiny occasions. With so much optimism in the air at the time, schools might not be considering the dark possibility that the honeymoon might not last.
“There’s such tremendous pressure to generate revenues and win that basically these universities are sort of bending over contractually to get these coaches in the door,” said Martin Greenberg, a Milwaukee-based sports attorney who has represented several coaches in contract negotiations. “Euphoria sometimes overtakes objectivity and intelligence.”
Yeah, that is where Purdue was in December 2012. Darrell Hazell was supposed to be the guy to come in and take us from Detroit to Pasadena. He even had the Rose Bowl in his eyes. Purdue paid him, and it wasn’t even that much compared to his peers. Hazell’s salary of $2.19 million this year was only 53rd among 119 schools that reported their coaches’ salaries. It was actually quite low in the Big Ten with only Chris Ash, Tracy Claeys, and Lovie Smith making less. They are all in their first seasons, too, while Hazell was in year four. Here is how the Big Ten salaries worked out in 2016 in terms of actual pay the school gave each coach:
Jim Harbaugh - Michigan - $9,004,000
Urban Meyer - Ohio State - $6,300,000
Kirk Ferentz - Iowa - $4,500,000
James Franklin - Penn State - $4,500,000
Mark Dantonio - Michigan State - $4,300,000
Pat Fitzgerald - Northwestern - $3,350,638
Mike Riley - Nebraska - $2,800,000
Paul Chryst - Wisconsin - $2,700,000
DJ Durkin - Maryland - $2,412,000
Kevin Wilson - Indiana - $2,320,000
Darrell Hazell - Purdue - $2,190,000
Chris Ash - Rutgers - $2,000,000
Lovie Smith - Illinois - $1,809,179
Tracy Claeys - Minnesota - $1,400,000
Those numbers can fluctuate with performance bonuses and such. For example: Hazell earned an additional $120,000 for Purdue’s graduation success rate. His players going to class is apparently the only thing he did right. The bonuses can be quite lucrative, with Dabo Swinney at Clemson making more than $1 million in bonuses paid for last season.
The chart here makes it clear that Hazell’s replacement will very likely receive a similar contract, if not a larger one. Purdue once tried to go after Paul Chryst and, as we remember from the letter from a former player we published, Chryst laughed at what Purdue was offering. It was with good reason if he is having a ton more success at Wisconsin and he is making more.
Where things can get real tricky is the buyouts. Many coaches have clauses where the buyout is the full unpaid value of the contract. That’s where we were with Hazell, and it only went down monthly since he was paid monthly. When Hazell was canned earlier this month Purdue paid him an additional $4,991,667 to go away. It can be mitigated and offset as opposed to one lump sum, so that helps, especially with the new TV contract coming next year. We will likely be paying Hazell off over the next year or two, especially since Purdue has had to dip into cash reserves of late, will likely not have a huge revenue boost from football ticket sales, and they lights are coming.
Hazell’s buyout was big, but not as large as the rest of the league. Here is what it is at the other 13 B1G schools based on termination without cause before December 1, 2016:
Urban Meyer - Ohio State - $27,434,457
Jim Harbaugh - Michigan - $25,555,556
Kirk Ferentz - Iowa - $25,304,167
Lovie Smith - Illinois - $19,336,957
James Franklin - Penn State - $13,550,000
Mark Dantonio - Michigan State - $10,500,000
Chris Ash - Rutgers - $9,493,150
DJ Durkin - Maryland - $6,695,000
Mike Riley - Nebraska - $6,630,000
Paul Chryst - Wisconsin - $5,000,000
Darrell Hazell - Purdue - $4,991,667
Kevin Wilson - Indiana - $2,744,677
Tracy Claeys - Minnesota - $541,667
Pat Fitzgerald - Northwestern - Not Given (Private School)
There are a lot of moving parts here. Meyer, Ferentz, and Dantonio have been at their schools a while and have earned their large contracts. They have the good will right now of knowing that no one int heir right mind would fire them and they can survive a down year or two, like MSU this year. At Michigan they clearly went all-in on Harbaugh, but it is paying off so far. Ferentz basically cashed in on last year’s Rose Bowl appearance and re-upped for a huge amount just as his previous buyout was at manageable levels.
The ones taking a big risk are Illinois and Rutgers. Lovie Smith and Chris Ash are both in year one and it is not going well, but the schools are on the hook for awhile. If Lovie does not work out at Illinois it will be a very expensive failure, and Rutgers spent big even before they started getting a full share of Big Ten revenue.
Minnesota has a much more measured risk. They elevated Tracy Claeys from interim to permanent and if they stumble down the stretch they can be done with him for a pittance. Maryland is measured too, as Durkin’s initial contract was for five years/$12.5 million, but the full $12.5 million was NOT guaranteed. His contract was negotiated that if he is fired without cause he only gets 65% of the remaining value. As we know, Morgan Burke gave Darrell 100%.
What does this mean for Purdue’s new coach? Well, this is the critical piece:
Whatever happens, rising revenues still might be able to cover much of Iowa’s rising costs, even if a hefty buyout is in order. Iowa’s Big Ten Conference distributed roughly $34.6 million to each of its 11 longest-standing members during the fiscal year ending in June 2016 and is projected to distribute more than $38 million in 2016-17.
Purdue is expected to get $38 million this year, then probably close to $50 million in 2017-18. Purdue also has the double whammy of needing to bring in a new coach in the neighborhood of $2.5-3 million a year AND make some necessary facility improvements to Ross-Ade beyond the lights. We’re only at the beginning of this, and until the product on the field improves to generate more internal revenue even the Big Ten welfare check can go so far.
I think you will see Purdue offer something in the neighborhood of 5 years/$15 million, and I hope it has the foresight this time not to guarantee the whole thing before the guy even signs. The 65% kicker that Maryland has is a very good compromise.