Reported vs Effective Cap Space

Great question yesterday from DMB asking about “reported” cap space versus “real” or “effective” cap space. Upon reading it I realized it would be a great post topic and since I have a large Jets readership we will focus on them as an example.

There are a number of misconceptions that occur when people talk of salary cap space during this time of year. Perhaps the biggest comes from a majority of the media who say the team needs to set aside x amount of dollars for the rookie class, which in the Jets case is $5.6 million. We have touched on that before but the basic consideration that is missed is that each player being signed replaces a player already under contract so the space needed is much less than the full amount.

Secondly you have to remember that during the offseason only 51 players count towards the cap. Once the regular season begins you have to account for 53. Not only that but you have to allocate resources for a practice squad, injured reserve replacements, injury settlements, and possible grievances. Each team also is going to want a cushion to make sure they are not forced to re-work deals in the season to remain cap compliant in the event of excessive injuries or other unexpected cap issues.

Now going back to the Jets DMB wanted to work under the assumption that the Jets are trading Revis before the draft. Considering the Jets have been shopping Revis this is a pretty solid assumption as to a contingency that the Jets must build into their cap management right now. So here is how you break down the real cap space for the Jets.

Start: $13 million- Reported cap room for the Jets

Less: $4 million- Loss of cap space in a trade of Revis due to acceleration of bonuses paid

Less: $480,000- Replacement of Revis on roster by 52nd highest cap player

Less: $5.6 million- Estimated Year One Rookie Pool Allocation for Jets 7 draft picks

Add: $1.92 million- Rookie displacement of players 48-51 in the current salary cap ($480,000 x 4)

Add:  $1.215 million- Removing the base salaries from the rookie pool for players who do not displace a current top 51 contract ($405,000 x 3)

Less: $960,000- For players 52 and 53 who will now count against the cap once the season begins

Less: $816,000- Maintaining an 8 player Practice Squad for the season (8 x 17 x $6,000)

Finish: $4.279 million- This is the Jets effective cap space for the season.

So for all of the fans of the team clamoring for the Jets to spend that $13 million and wondering why certain players are not being retained or signed this is why. $13 million for the Jets is really only worth about $4.3 million in actual spending room unless they decide to not trade Revis before the draft. And that $4.3 million is really the amount you probably want as the in-season cushion to make sure you can operate effectively and deal with those costs mentioned above dealing with injury replacements, settlements, and other emergency needs of cap dollars. Basically the Jets are limited to signing minimum salary benefit players until a decision is made on Revis. Those MSB players will only cut into the cap by about $150,000.

While the Jets are unique in that they need to plan for a trade of a player the method above is relevant for most teams in the league. If Revis’ trade was not a possibility it would be around $8.76 million which would give the Jets really an opportunity to sign maybe 1 player of note with the $13 million in reported cap room. So that is why sometimes the cap numbers that I put on a page or you see reported elsewhere don’t really mean spending money, which is what everyone thinks they mean. You have to adjust for what is going to happen in the season.

As you look at the cap estimates I have there are a number of teams who don’t have the real cap space to actually function in August and September. Teams like the Chiefs, Rams, Redskins, Saints, and Giants are going to need to restructure more deals or make more cuts in July and August to be able to navigate the 2013 season. Teams such as the Lions and Titans are probably finished without paycuts. Teams like the Broncos and Patriots may be able to add an extra player before shutting the door on free agency. The reality is there are only 5 or 6 teams left that can actually spend on some of the more quality players who are still floating in free agency. Money is really that tight in the league right now.

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  • Marc

    Teams will also need $$ if they have any plans to try to extend players prior to going into free agency in 2014. For example, the Patriots have Brandon Spikes, Ryan Wendell, Rob Ninkovich, etc expiring after this year. They have in the past extended a few of such players prior to, or during the season. Even players such as Gronkowski & Hernandez well in advance of FA have been extended early. I assume such transactions might also use current year cap space.