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NFL offseason guide: The salary cap

Editor’s note: Brien is a well-traveled Houstonian and Army Combat Veteran with an extremely wide range of talents and interests including the NFL (Packers), Irish History, and writing. Follow him on twitter @ODonalsVanguard

By BRIEN O’DONAL

Before the end of the league year and unrestricted free agency begins, it’s time to talk salary cap. Last week the new 2017 number was set at $167 million for the year. That’s a lot of money, but then again there are a lot of players on each team’s payroll. Understanding the basics of the cap can help you watch free agency with an eye on how your team builds a roster with key players and depth at important positions. It was $155 million in 2016 and since it starts fresh every year, the only money counted toward last year’s cap was what was charged to last year’s cap. Every team has to remain under the cap and the NFL allows money to be rolled over into the new year. That and the $12 million increase should leave teams with plenty of money to improve their roster (assuming the team has kept a healthy salary cap in recent years). The active cap space for each team can be found at http://www.spotrac.com/nfl/cap/  

Terms such as salary, roster bonuses, performance bonuses and cap number are important to calculating current cap space. All of these change each season according to the player and his contract, but the biggest factor we hear so much about is the guaranteed money. Only certain money in the contract is guaranteed and paid up front. Usually this is the signing bonus and any initial salary guaranteed on signing. Not all salaries and monies are initially guaranteed, but they may become guaranteed upon a certain date that a player is on the team. Good contracts often tie salary being guaranteed to a specific date giving teams the option to move on from a player. Other contracts, often rookie deals or deals with players who have little bargaining power, do not have a guaranteed salary and the majority of signing bonuses are small. Money is earned one week at a time.

Other payments found in contracts are usually only given out when certain criteria are met. One of the easiest is to simply be on the team. These are roster bonuses or workout bonuses. Most other types of bonuses negotiated are performance based and paid out as they are earned. When new contracts are inked with bonus money for performance, these bonuses are in two categories: likely to be earned and not likely to be earned. A likely to be earned bonus is one based on some statistic that the player has achieved with regularity throughout his career. An example would be a bonus in J.J. Watt’s contract if he gets 10 sacks in a season. Since he has reached that number and beyond nearly every year makes the owners assume that it is likely to be earned. This bonus is planned for and charged to the cap that same year. If the bonus is not earned then it is credited back the next year. Not likely to be earned are kind of like benchmark goals that would suggest a player performed better this season than he has in the past. An example of this would be a bonus paid to Brock Osweiler if he threw 20 touchdowns. They might have thought it was a good idea to motivate him, but based on past years there was no reason to assume it would happen. These types of bonuses, because they are not likely to be earned are projected to the cap for the next year. If they are not earned then they are not charged.

Signing bonuses, like I mentioned before, are paid in full as soon as the contract is signed. But as luck would have it, teams get to spread the bonus amount evenly over the life of the contract. A $4 million signing bonus on a 4 year contract would be paid to the player in full up front, but charged to the salary cap $1 million every year of the contract. That’s in addition to the salary and other bonuses paid to a player and charged to the cap in that particular league year creating his cap number. Every player has a cap number and every cap number counts toward the total cap for that league year.

Here’s the trouble spot, any remaining guaranteed money that has not been charged to the cap is accelerated into the current year when a team releases a player. Remember that big signing bonus that was paid to the player when he signed but spread out evenly over the life of the contract? The amount that was spread over the remaining years of the contract gets charged to the year in which he was cut. That means if you cut a player with a $4 million signing bonus after year 1, the remaining $3 million for years 2, 3, and 4 all has to be charged to the salary cap in year 2. That’s in addition to any other guaranteed money that might be charged to the cap that year. It all adds up. All money charged to the salary cap for a player no longer on the roster is known as dead money and counts against the total cap for that year. That means teams are paying for players who aren’t playing for them. Chew on that for a bit before you start screaming cut this player or that player.

Sometimes it is important to recognize the date that the player is released. Teams with a large amount of cap space can afford to cut a player before the start of the new year and accelerate the remaining amount into that year. This effectively reduces the dead money charged to the new salary cap. However, they must remain under the salary cap by a certain date or they face penalties. If teams wait until after the new year, that accelerated money can significantly reduce the space needed to improve their roster. It is a balancing act that plays out every offseason.

Now you know the basics of the salary cap. When I say the basics, I mean the basics. There are so many scenarios that apply to contracts and how they affect the cap that I couldn’t possibly discuss them all here. So before free agency really gets going and all the fans start clamoring for the hottest guy on the market they should take a good look at their team’s salary cap and assess how much space is available to sign that player. Think about the contract size he is seeking. Think about how much guaranteed money he wants. Think about how many other needs your team has to fill before signing him to that large contract.

Teams often have to make tough choices in free agency. This includes the decision to re-sign current players and pending free agents. They generally identify those key players on their roster who are priority re-signings and do everything they can to get them under contract before they hit the open market. It’s not always easy to do but everything has to be done within the context of the salary cap now and in the future. Keeping a healthy salary cap provides the ability to stay competitive when key players are due for new contracts, and allows flexibility when considering potential free agents that provide good value. Building a winning roster means making effective use of the salary cap. It can provide depth at key positions and foster the growth of young players, limiting turnover year after year. I hope your team does it as well as mine, but for now; let’s all sit back and calmly enjoy the frenzy of free agent signings.

 

 

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