March 2019: A deeper dive on the salary cap - Rule of 51 & the Rookie Pool

People have a lot of interest in salary cap right now

This time of year, fans and journalists spend a lot of time focused on salary cap, but often struggle to really understand the nuances of how salary cap works.

It relies on the principles of accrual accounting, which can be complex and difficult, and since some pretty smart lawyers are involved with crafting contracts that are controlled by the league’s Collective Bargaining Agreement — a document typically renegotiated every ten years or so — the player contracts and cap implications are often based on arcane principles that defy common sense.

I have published a couple of articles previously aimed at explaining the basics of salary cap and NFL contracts:

Click here to read A Primer on Salary Cap Management

Click here to read Why calculating Total Contract Value, APY and Total Guarantee for an NFL contract can be really hard

I thought I’d take the opportunity today, in this short window between the ‘frenzied’ part of free agency and the college draft, which is about 5 or 6 weeks away, to look in a bit of detail at some concepts that some people sometimes struggle with.

Filling up a 90-man roster

Most teams enter the offseason, say, a week after the final game, with about 60 to 70 players under contract for the upcoming league year. For example, in early January, the Redskins had 66 players under contract, while, at the time of writing this article, about a week into free agency, OverTheCap lists 68 players under contract for 2019 (NOT counting the two most recent announced signings, Dominique Rodgers-Cromartie and Ereck Flowers).

Obviously, most of these players were on the 53 man roster in Week 17. Some of them were on reserve lists (Reuben Foster and Montae Nicholson, for example). Also, the Redskins have a half dozen or more players who were signed to futures contracts in early January.

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Click here to read A Primer on Reserve/Future Contracts

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By the time free agency ends, it is typical for a team to have around 70 to 75 players in total under contract.

Each team can bring 90 players to Training Camp.

This year, the Redskins have 9 draft picks; barring any trades, then, they can expect to bring those nine players to camp.

That would leave room for about 10 UDFAs (undrafted college free agents); traditionally the Redskins bring around 10-12 UDFAs to training camp. These are players that the front office targeted prior to the draft, but didn’t actually pull the trigger on. NFL teams compete with one another to get the best undrafted players into camp, and every year, one or more UDFAs makes the Redskin roster.

Among the notable UDFAs that have played for the Redskins in recent seasons: Casey Dunn, Danny Johnson, Rob Kelley, Maurice Harris, Quinton Dunbar, Deshazor Everett, and Anthony Lanier.

How can the team bring a dozen UDFAs to camp when they only have 10 roster spots available (for example)? Well, usually they cut some players who have future contracts to make room, since there is a hard limit of 90 players on the roster during the off-season.

Of course, teams cut down to 53 players, and form an additional 10-man practice squad, two days after the final pre-season game.

The “Rule of 51”

From the roster cutdown deadline following the end of preseason to the final game of week 17 (and into post season as well), teams are required to stay within the annual salary cap with their 53-man roster.

But during the off-season, with expanded rosters, this simply isn’t feasible.

Because of this, the CBA establishes the “Rule of 51” that applies to every NFL offseason roster. The rule is very simple:

Throughout the off-season, only the players with the 51 largest cap hits for the season will be counted toward the salary cap.

This is significant because, when a player is signed to a contract, as Adrian Peterson was this past week, we don’t just account for his cap hit, we also have to account for the cap hit of the player he pushes out of the top 51.

Let’s look at the bottom of the Redskins roster as it stands today (the date that I’m writing the article). Information is courtesy of OverTheCap

You can see that Joshua Holsey is NOT counted in the top 51 contracts right now, even though he is among the 68 players currently listed by OTC as being under contract.

But before Adrian Peterson was signed to his contract, with its $1.78m cap hit, Holsey was in the top-51.

So, when we calculate the impact of AD’s contract on the Redskins off season cap space, it isn’t $1.78m, but $1.21m, which is Peterson’s cap hit, minus that of Joshua Holsey, who is no longer counted against the cap.

Like Holsey, tight end/fullback Matt Flanagan has a $570K cap hit. The next player contract to be added to the Redskin roster during free agency (Dominique Rodgers-Cromartie) will push Flanagan off the top-51 list.

The next player signed in free agency after that (Ereck Flowers) will push Casey Dunn and his $570,000 cap hit off the list, and so on.

This is one reason why free agent signings never seem to use up as much of the available cap space as you expect them to.

The other reason is that the Redskin front office uses a fairly standard template for most of its veteran contracts. The recent Landon Collins contract, though, was unusual in that it had an atypical structure that was driven by the desire to work around the $20.4m cap hit the team has to absorb for Alex Smith in 2019 despite the fact that he won’t see the field.

Adrian Peterson, on the other hand, signed what is basically the standard Redskin template for a contract.

Peterson has a lower first year cap hit ($1.78m), and an easy “out” on the contract at the end of 2019. If the Skins cut the running back after this season, he would be paid $2.53m for one season. Fully guaranteed money is $1.5m (comprised entirely of the $1.5m signing bonus). If he plays both years of the contract, his $3m cap hit should be affordable in 2020.

The average person, when they read that Adrian Peterson signed a 2 year, $8m deal, reasonably assumes that the Redskins just lost $4m in cap space.

As we’ve already seen, due to contract structuring (including incentives making up a large part of the reported $8m), and the Rule of 51, the actual impact on the Redskins available cap space is only $1.21m!

We know that through some fancy structuring, the 6-year, $84m Landon Collins contract, with its $14m APY has a 2019 cap number of just $4m. In fact, because Landon Collins pushed Robert Davis and his $570K cap charge below the 51-player cutoff, the net cap hit impact for the Collins contract was just $3.25m!

The Rule of 51 and contract structuring make free agents signed this time of year much more affordable than one would expect based on the Twitter reporting that provides the headline numbers on player contracts.

Rookie Pool estimates

One thing that every team must account for is the money needed to sign the draft picks that will be joining the team at the end of April.

With the current CBA and its “slotting” of draft picks, teams can project with a great deal of accuracy the cost of each draft pick.

Absent any trades, even as fans, it’s easy for us to know how much the Redskins are going to need for their draft class before the draft even starts.

Again, though, the Rule of 51 makes the calculation less straighforward than it seems.

Step One of the calculation is simply to identify the team’s draft picks, and the expected contract value of each of those picks. Fortunately, the people at OverTheCap do all that work every season for us, and it’s as simple as clicking the link to the Rookie Pool page at OverTheCap.

Because of this handy tool, we can see at a glance that the 9 contracts for the incoming draft class are projected to total $7.928m.

But that’s not the end of the calculation!

Remember that the Rule of 51 means that we’re only counting the 51 highest cap hits for 2018. We won’t actually need to allow $8m for signing the rookies.

To run the example, I’m going to account for the fact that the Redskins have signed Dominique Rodgers-Cromartie and Ereck Flowers to contracts (though their contract details haven’t been made public yet), and I will also assume that the team will sign 1 more veteran free agent between now (when I’m writing this article) and the draft, pushing 3 players off of the current top 51. So, let’s revisit the bottom of that list:

Notice that the three veteran free agents signed pushed 3 players off of the top-51 list. Now, the lowest paid player on the list is Trey Quinn, last year’s Mr. Irrelevant.

Let’s look at the expected 2018 cap hits for the 9 drafted rookies that the Redskins expect to sign:

• Rd 1 $2.621m
• Rd 2 $1.174m
• Rd 3 $745,803
• Rd 3 $700,541 (comp pick)
• Rd 5 $572,707
• Rd 5 $553,718 (comp pick)
• Rd 6 $526,958 (comp pick)
• Rd 7 $519,473
• Rd 7 $513,645

The Round 1 pick will have a cap hit of $2.621m, but he will push Trey Quinn and his $587,268 cap hit off the list. Net cap hit for Rd 1 pick = $2,033,915

The Round 2 pick will have a cap hit of $1.174m, but he will push Greg Stroman and his $588,944 cap hit off the list. Net cap hit for Rd 2 pick = $585,355

The Round 3 pick will have a cap hit of $745,803, but he will push Shaun Dion Hamilton and his $608,252 cap hit off the list. Net cap hit for Rd 4 pick = $137,551

The Round 3 compensatory pick will have a cap hit of $700,541, but he will push Shaun Dion Hamilton and his $609,048 cap hit off the list. Net cap hit for Rd 4 pick = $91,493

Now the pattern breaks.

The lowest remaining salary on the top-51 is Tim Settle’s $637,011.

The final 5 draft picks from Rounds 5, 6 & 7 all are projected to have cap hits less than Settle’s 2018 cap number, so these final five draft picks are not counted in the top 51, and have no impact at all on the off-season salary cap.

This means that the actual amount of available cap space that the Redskins need to reserve (in this example) is $2,848,314 (The net cap impact of the first four draft picks: $2,033,915+$585,355+$137,551+91,493).

The Redskins will need $2.85m to sign their 9 draft picks.

Of course, any trades (up or down) will affect these numbers, but, absent a big move in the first round, there will be very little change in the amount of money the Redskins will need to reserve for the rookie pool.

Just in case you were wondering, each of these nine players is charged against the Redskins salary cap the moment he is drafted, regardless of when he actually signs his contract.