NFL SALARY CAP PRIMER
"It’s that time of year again when contracts will be restructured, players
cut, and rosters begin to be reshaped for the new season. As such, there is
generally a lot of misconception and questions regarding the salary cap, which
of course is the basis of what a team can and cannot do. So I’ve put
together this Q&A primer for you that will hopefully answer some common
questions. If something isn’t addressed, feel free to shoot me a letter or post
a comment below.<span id="more-3990"></span>
<div class="art-postcontent">
Q: What is the amount
of 2012 NFL Salary Cap?
A: The number hasn’t been determined yet;
however, it’s been projected by some to be around $122M. Last year the figure
was $120.375M. This is significant because back in 2009, the last capped year of
the old Collective Bargaining Agreement (CBA), the cap was up around $128M,
meaning that once the cap came back, teams that were close to that $128M mark
had to scramble to get under the new $120M limit set for 2011. As teams continue
to transition under the new CBA, more of the same scrambling is expected to take
place again in the coming days.</p>
Q: Why is it that some teams have so much space at the end of a year
while others are constantly pressed against the cap?
A: There are
numerous reasons for this, including player incentives not coming to fruition
and this being “Credited” back to the team’s following year cap and expiring
contracts. Another reason might be contract restructurings designed to reduce a
player’s cap hit, players being cut, split bonuses, etc.</p>
Q: How is a player’s cap value calculated?
A: A
contract’s value takes into consideration base salary, prorated signing bonus,
and any other bonuses. For example, John Doe signs a five-year, $10M contract
that includes a $5M signing bonus. John’s base salary for each of the five years
of the contract is $1M. His cap number, though, is bumped up to $3M because his
signing bonus must be spread over the life of the contract ($2M per year). John
won’t get an additional $2M per year – the singing bonus is paid up front by a
team. But for bookkeeping purposes, he will count for $3M against the cap for
each year of his contract.</p>
Other lesser-publicized monies paid to players that count against the cap
include per diem pay (such as for mini camps, training, camp, etc.) Any money
paid by a club to a player inflates his value against the cap. This is why
trying to calculate the EXACT cap figure for each team can be tricky.</p>
What DOESN’T count against the cap are benefits (health, dental, etc.) paid
to a player.</p>
Q: How does one arrive at a figure reflecting how much a team has
spent against the salary cap?
A: In the off-season, only the top 51
PLAYER salaries count against the salary cap. These include any outstanding
tenders made to exclusive rights and restricted free agents. During the season,
ALL player salaries, including those on reserve lists (with the exception of
retired players) count against the cap.</p>
Q: What happens if a player is cut before his
contract expires?
Let’s use John Doe as an example. Let’s say his
team decides to cut him with two years remaining on his contract. Take the
remaining prorated bonus ($2M per year times two, or $4M), and take his base
salary, $1M. Subtract the remaining signing bonus from the base. The result is
minus $3M, which means that John would cost his team $3M in dead money (money
that essentially goes to waste and can’t be used on another contract.)</p>
This is why many teams wait to cut a player in the final year on their
contract, as usually the base salary is significantly higher than the remaining
prorated portion of the signing bonus.</p>
Q: What else do I need to know about the cap and
player contracts?
A: Under the current CBA, a veteran player is free
to negotiate his contract at any time. However, once he signs his extension, he
cannot request a new negotiation for at least 12 months, unless his present
contract expires. Players cannot go back and renegotiate for a year completed,
meaning Victor Cruz can’t go back and ask for more money despite the year he had
in 2011. Also, rookie contracts cannot be renegotiated for one year after the
rookie has signed on the dotted line, or the following August 1, whichever is
later.</p>
Q: If a player receives a contract extension before his present deal
expires, how does that affect his cap value?
A: The new signing
bonus is prorated over the remaining years of the contract PLUS the extension.
So for example, if John Doe has two years left on his contract and a cap value
of $3M, and he signs a two-year contract extension that carries a $2M signing
bonus. That $2M is split into fourths, with $500K additional being tacked on to
the remaining two years of his first contract, and the other two $500K
installments added to each year of the extension.</p>
Q: Does the June 1 rule still exist?
A: If a team cuts a
veteran player after June 1, the remaining signing bonus will be spread over two
years rather than accelerate into the current year’s cap. For example, John Doe
is cut in year 2 of his contract with $2M left on his signing bonus and a base
salary of $1M before June 1. His team is hit with dead money ($1M base salary
less $2M signing bonus equals $1M in dead cap space).</p>
If John is cut AFTER June 1, only $1M of his remaining $2M signing bonus hits
the current cap year with the remaining million being dumped into the next
year’s cap. Thus, if you subtract the $1M signing bonus from the $1M scheduled
base, John Doe ends up costing his team ZERO against the current year’s cap;
however, in the next year’s cap, he’ll end up costing his team $1M against the
cap.</p>
Q: What happens if a player has a voidable year in his
contract?
A: If a player reaches all the incentives in a contract
that trigger a void (shortening) of a contract year, the signing bonus will
count against the team’s salary cap for the following year.</p>
Q: What happens if a player is traded or waived?
A: If a
player is traded or waived, any remaining prorated signing bonus money
automatically accelerates against the current year’s cap. However, the old team
is no longer responsible for any base salaries that will be paid to the player;
that responsibility is absorbed by the new team. In essence, a trade can create
dead money against a team’s cap."</p></div>
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