I got into a bit of a Twitter handbag fight last year or the year before.
What happened was that a guy wrote a congratulatory comment about a player getting a “win” for other NFL players by signing a new record-breaking contract. I made the point in reply that, when a player signs an above-market contract, he hasn’t won a fight against the NFL owners, he’s simply taken money out of the pockets of his teammates, since the salary cap is a specific-sized pie; more for one player means less for the others.
That guy kept arguing with me, which was fine. At one point, though, he suggested that I didn’t understand how the salary cap worked, and I realized that he thought I was stupid and wrong, while I thought the same of him. It was the first, and will probably be the last, time I ever get into an extended argument via Twitter.
This past week, I wanted to write an article about something (I forget exactly what it was), and I wanted to begin the article with the same argument; that is, that the salary cap is a specific-sized pie, so more money for one player means less money for his teammates.
As I started typing, I thought of the first objection I was likely to hear in the comments: teams don’t necessarily pay out the full salary cap. By utilizing ‘rollover’ and other such things, teams can avoid paying out the full amount. This means that the “pie” isn’t really a fixed size at all — in fact, it might be quite a lot smaller than fans generally believe.
When I was in school, the nuns taught me to anticipate the arguments you are likely to face, and address them before they are made.
I knew the rules about minimum spend outlined in the CBA, and in the draft of the article I was writing, I detailed them:
There are two cash requirements in the current CBA.
- The first is a league wide spending requirement of 95% of the NFL salary cap over two four year periods (2013-2016 and 2017-2020).
- The second is that each team must spend to a minimum of at least 89% of the salary cap to make certain that the 95% number is not being met by a minority of teams.
That was fine so far as it went, but it left me feeling unsatisfied about the argument I was trying to make. I started doing a complex set of calculations involving a spreadsheet in which I planned to show minimum and maximum amounts spent, then break that down by player to show that even if the league spent only 95% of the salary cap, the difference wasn’t significant enough to make a practical difference to the concept.
The evening grew late. Soon it was past midnight and my draft article was an unreadable mess. I finally decided to put it away, go to sleep, and attack it fresh on the morrow.
In the morning, this is the mess that I found typed in a sort of ‘memo’ form to myself:
Just to puts some numbers to that:
687.67/4= 171.9175/70=2.4559 (max)
95% - 100% payout
53 roster + 10 practice + 7 IR/PUP = 70
For practical purposes, the minimum spending floor isn’t really an issue in the NFL as most teams are constantly working to stay under the cap.
Players get their money.
The creative process at work. It was garbage, meaningless and overly complex. I had realized it before giving up and going to bed, for this was the advice I’d typed to myself:
This calc probably isn’t necessary, but think about whether there is a way to use it convincingly. If not, just stand on the 95-100 percent payout, and most teams are closer to the max than the min argument.
It was a new day; a chance to start afresh. It occurred to me that the cat might be skinned more simply.
I clicked on “Bookmarks”, then “Google” and typed in my search.
Incredibly, the top item in the list was an article that had been published that same week that had exactly the information I wanted, and it came from my favorite source: OverTheCap.
Based on the estimates we have in cash spending here is how much we estimate each team to have spent from the 2015 through 2018 seasons, as a percentage of the salary cap.
There are two things that stick out to us here. First, is the average spending in the NFL is way above the 95% number at 101%.
Now, that caught me off-guard. With a “hard” cap, how could NFL teams spend an average of 101%? How was that possible?
Then I re-read the CBA rules, and remembered the idea that I write in salary cap articles so often; specifically, that there is a difference between cash accounting and accrual accounting.
The salary cap is based in accrual accounting, which is why teams can so easily make adjustments to stay under its limits.
The minimum spending limits (89% per team and 95% for the league) are based on cash spending, which is why teams, collectively, are out-spending the cap.
Player contracts routinely pay large cash signing bonuses to players that go into their Year 1 cash flow, but the salary cap impact of those bonuses is spread over the life of the contract, to a maximum of 5 years.
Let’s take a look at one of the most recent free agent contracts as an example.
DeMarcus Lawrence signed a 5 year contract with the Dallas Cowboys on April 6, 2019. Per details from Patrik Walker the contract is worth $105 million with $48 million fully guaranteed at signing, with a total guarantee of $65 million. Lawrence received a $25 million signing bonus. For 2019 Lawrence receives a $4.6 million roster bonus (presumably 3 days after signing) and a full guaranteed salary. For 2020 Lawrence receives a full guaranteed salary of $16.9 million. In 2021 Lawrence has a $17 million salary guaranteed for injury only at signing; and will vest into a full guarantee 3 days after the start of the 2020 league year.
Lawrence’s cap number, as you can clearly see from the chart, is “just” $11.1m in 2019.
But how much cash will he receive this year?
- Signing bonus = $25m
- Roster bonus = $4.6m
- Base salary = $1.5m
If I’ve done my math correctly, the Cowboys edge rusher is set to receive $31.1m in cash this year.
So, $31.1m in cash vs. $11.1m in cap space. The $20m difference is spread across the remaining 4 years of the contract — years in which his actual cash received will be less than his cap hit.
When you put together all the players on all the teams across the league, the analysis from OTC says that teams are not paying out 95% of the cap, or even 100%, but that they are paying out more in cash payments to players than the scheduled salary cap limit — 101% of the cap, in fact — and no team is threatening the 89% minimum, with the Texans the lowest in the league, at nearly 93%.
Because there’s so much smoke and mirrors in the management of salary cap, it’s easy to wonder if the CBA is accomplishing its goal of making sure that players are fairly treated and fairly paid.
While Mark Twain famously pointed out that there are three great lies: “Lies, damned lies, and statistics”, this particular statistic indicates to me that the CBA is working by making sure that, at least, the money that is supposed to be spent on players is actually being paid to them.