A few weeks ago I wrote about the potential for a salary cap disaster in 2021 due to the Covid crises with the main take that the NFL and NFLPA need to start negotiating now to get a better handle on the situation to prevent a rash of releases this summer and again next February. Per NFL.com’s team it sounds as if they are doing just that.
Multiple sources say the NFL and NFLPA both acknowledge that important negotiations are coming quickly to determine how to handle yearly salary caps for 2020 and beyond, considering there are likely to be steep revenue losses with limited or no fans in the stands.
Overall the article pretty much confirms what I speculated on weeks ago- there are rules in place that could cause a massive cap pullback next year, that the league is looking at a massive loss in revenues this year, and that its not really feasible to go into the season without a plan in place.
The article outlines a few ideas being batted around. One is to smooth the cap by borrowing against future years. We discussed that before and it makes some sense. Im not sure Id agree that a new TV deal will cause a massive spike all at once (the NFL has generally avoided massive spikes in the salary cap since their disastrous 2006 CBA extension), but the cap does always go up so its fair to smooth things out that way. Remember back at the start of the prior CBA the salary cap was flat for 3 years before it began to increase. Teams dealt with that accordingly and there was minimal guidance for that situation.
Another option is eliminating performance based pay. PBP is basically a pool of money that is given to players for playtime that goes well beyond their salary level. I don’t see how the money there is significant enough to make a dent in the potential losses so I will assume that they meant as part of the “smoothing out” the PA will opt to eliminate the PBP for a few seasons.
The second idea was surprising and that was a “salary giveback” this season. That would seem very difficult to accomplish in part because of how different the NFL’s contract system is. The way it was written made it sound like we would be talking about reducing P5s for the year. The problem is that some players have incredibly high P5s and other have low ones and in many cases those are for high earning players. In essence you could have two players earning $10 million a year giving up grossly different amounts. None of that would seem very fair nor something that could be negotiated in just a few weeks.
The NFL and NFLPA came to an agreement years ago on rookie contracts when there was a clear mistake in the rookie pool formula because someone probably didn’t sit down and do the math (cap nerds like myself picked up on it quite quickly) that the salary cap could rise and salaries effectively go down if the cap didn’t rise enough to keep up with minimum salary growth. Essentially there was an agreement to create a credit bank to borrow from the future to keep the present at the least consistent.
That’s all spelled out in the current CBA but it does give a bit of guidance as to a way in which the sides can agree to a salary cap freeze. The way I think this could work is that the NFL would “lock” the salary cap so to speak at $198.2 million for 2021 and allow for standard minimum wage growth (around $4 million) with a boost of a few million more. and allow only for a specific growth schedule each year that remains in the CBA. Here is an example where raises are limited to $8M, $11M, $14M, $18M, $23M, and so on… until the bank is “bought back” by the NFL cap. Here is an example where the cap takes a big dip but would be expected to grow by around $20M a year starting in 2023.
|Year||Locked Cap||Unlocked Cap||Shortfall|
A schedule like this allows the NFL to spread out the cap pain and never really have a massive spike which I would think is important to the NFL. There are a large number of ways to do this but something like this makes some sense and can be based upon whatever the NFL and NFLPA accept as a revenue growth expectation.
I’d also think the other possibility, perhaps in conjunction with something like above, is that the NFL asks the union for a credit of sorts on salaries paid in 2020 counting toward the thresholds for 2021 on. The cap is an accounting number. Loss of revenue is a real number. Losing $73M now to only gain it back in 5 or 6 years may not be acceptable under any circumstance. By applying a portion of salary paid this year (perhaps 50% of whatever the excess team by team or league as a whole is from the 2016 to 2020 bucket) to the cash minimums from 2021 to 2023 gives the sides a way to allow teams to pick and choose how much they allow the revenue loss to impact them. Doing something like that might save some jobs this season if teams are inclined to cut spending simply because they don’t have to spend this year.
Jason is the founder of OTC and has been studying NFL contracts and the salary cap for over 15 years. Jason has co-authored two books about the NFL, Crunching Numbers and the Drafting Stage, which are widely circulated in the industry and hosts the OTC Podcast. Jason’s work has been featured in various publications including the Sporting News, Sports Illustrated, NFL Network and more. OTC is widely considered the leading authority on contract matters in the NFL.