CBA Suggestion Number 7: The Elimination of the Funding Rule

Every now and then you will hear about obscure CBA rules and perhaps none is more obscure than the funding rule. Article 26 (Salaries), Section 9 (Funding of Deferred and Guaranteed Contracts) discusses the funding rule which is a requirement that any guaranteed, other than injury guarantees, needs to be set aside in an escrow account, by each NFL team. This is one of those rules that has helped prevent players from negotiating guaranteed salaries in future NFL seasons because it requires so much liquidity up front by NFL owners.

There was a time when the rule probably made sense to have. The NFL, after all, wasn’t the billion dollar juggernaut that it is now. There could have been a threat to players accepting deferred compensation or expecting guaranteed salaries to simply have their money vanish if a team was insolvent and incapable of meeting their obligations. Those times have now changed.

With franchise valuations soaring into the billions and contract values not even keeping up with the growth in the salary cap there is no threat of the league ever being in a position where they would be unable to pay their players the full value of their contracts. Instead of protecting the players the rule has now hurt them as it becomes involved in negotiations. It’s not like you can even argue it to try the force the issue- the rule exists and the only way around it is to use injury related guarantees that vest at a later date, typically starting in the second year of a contract.

Not surprisingly injury guarantees are at an all-time high at around 50% of the contract value of free agent signings. Full guarantees lag under 40%. The funding rule isn’t the only reason why that is the case but it is one of the reasons and one that should be easily eliminated.  With that rule eliminated it will at least give the players side of a negotiation a fairer ground to stand on when discussing guaranteed salary rather than simply being told it can’t be done because of the funding rule that is in place.