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Monday Money Matters

The NFL Salary Cap has risen again. Due to a new mechanism that was created in the most recent amendments to the Collective Bargaining Agreement in March 2006, there is now close to $1M more per team of available Cap room – around $30M league-wide -- than there was a week ago. Andrew Brandt

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The NFL Salary Cap has risen again. Due to a new mechanism that was created in the most recent amendments to the Collective Bargaining Agreement in March 2006, there is now close to $1M more per team of available Cap room – around $30M league-wide -- than there was a week ago. Although the reason for the increase is a bit technical, I thought I would give readers a look at why this increase happened – two different times over the past couple of months – and how the amount is artificially inflated due to the fact that 2009 is the last year of the Cap.

The Cash Adjustment Mechanism (CAM) was developed by the NFL and the NFL Players Association as a method to ensure Cap adjustments based on actual Cash spending on an annual league-wide basis. There are two types of accounting in the NFL  -- cash and Cap – and, contrary to much that has been written, the accounting is entirely different. Due to the ability to prorate signing bonuses and the different types of compensation that are TASB (Treated As Signing Bonus), there are multiple ways for teams to spend more cash than Cap by millions and, in some cases, tens of millions of dollars. This is how a couple of teams spent $150M in cash last season yet never went above the $116M Cap threshold.  As we know, the NFL does not have a hard Cap; it is more of a “yarmulke” or soft cap.

The CAM reflects cash underspending or overspending as compared to the Cap from year to year. There is a trigger amount, reflecting the percentage of Total Football Revenues (TFR) allocated to players – presently 59 percent. 

In the event league-wide spending on player costs exceeds that trigger point, then each team’s Cap room for the following Capped years will be decreased by a proportionate amount. 

In the event league-wide spending on player costs falls below the trigger point, then each team’s Cap room for the following Capped years will be increased by a proportionate amount.

In February, after initial calculations by the league showed a shortfall in spending below the trigger point, the 2009 Cap was thus increased in an amount of over $4M per team.  The increase would have been a lot less under normal circumstances due to its being spread out among the multiple years remaining under the Salary Cap (remaining capped years). However, due to the owners’ decision to opt out of the Collective Bargaining Agreement after 2010, 2010 became an uncapped year, meaning 2009 is the last capped year and receives the full CAM benefit of $4.05M per team of additional Cap room.

Now, after further review and accounting of  league-wide cash spending on players in 2008, the bookkeeping has shown that player costs were actually less than calculated in February, resulting in a further credit to each team’s Cap room of another $947,000.    Thus, adding this new adjustment to the one in February, the final CAM adjustment from the 2008 analysis has resulted in each team having approximately $5M of additional Cap room to play with (adding to the $7M increase from 2008 prior to the CAM adjustment.)

In a year preceding a year without a Salary Cap – as we presently sit here today – this is an interesting development. With the usual mechanisms to divert Cap from the present year to the next now unavailable due to restraints in place since 2010 is presently without a Cap – Cap room is at a premium for many teams, and this is another welcome bit of news. 

For other teams that are blessed with ample Cap room, there is now another $950,000 to use or lose as we approach a year with no Salary Cap to carry over remaining room.

CAM was designed to normalize Cash to Cap spending between the owners and players over a long period of Salary Capped football. In this strange twist of not having a Cap beyond this season, another $150M of new Cap room league-wide has been lumped into this one remaining Capped year.

Hope I didn’t confuse you too much. With 2009 potentially being the end of the Cap as we know it, and negotiations to come between the union and the ownership, things will get very interesting in the business of football over the coming months.

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Uncle Rico
May 18, 2009
09:48 AM

Probably seemed like a good idea at the time, but the CAM as it's described really seems quite useless. The only teams it really affects are the one or two teams tight against the cap this year, by giving them a bit of relief.

The rest don't really need the room, and I doubt they even want the room. I'm guessing a huge chunk of this shortfall was from all those teams rolling over junk LTBE credits, spending phoney cap dollars. Last year KC only rolled over enough unused cap space to keep them legal, and let the rest go up in smoke. Except for Arizona and maybe Pittsburgh, that's all that's going to happen with all this new found cap space. Up in smoke. How much unused cap space is out there already? The FAs are picked over, the rookies don't really take that much, and there can't be that many target extension quality players with one or two years left on their contracts. Opening up beyond that would only create a mess.

Since next year is uncapped, what's to keep teams from doing that again and rolling unused cap space off the uncapped cliff? And while it raises the cap, it doesn't raise the floor. What good is that? Guess Smith needs to make sure all this money doesn't get lost in any new CBA.

We get headlines like Haynesworth and Stafford, and the perception is player costs are way out of control. Then we have the economy, plus cost control moves like staff and benefits reductions. And it looks like the owners are hamstrung by the CBA. But then we get these cap adjustments where the $160m they underspent on players dwarfs any of these other things. Apparently player costs are only out of control at the very top for FAs and Rookies. Below that (Max Starks aside), not so much.

So are the owners really hamstrung by the CBA, or are they just poverty posturing as they head into CBA negotiations? Is it true Sally Struthers sent Jerry Jones a sandwich when she heard he was having trouble selling naming rights to his billion dollar stadium? Seriously tho, why doesn't he lend the name to a charity like United Way for a year or two?

JohnNdallas
May 18, 2009
10:50 AM

Andrew,
Thanks,for better explaining the reasons for these increases. But PFT reported over the week end that this latest increase doesn't effect the floor of the cap, if this was correct, how does that work?

Andrew Brandt
May 18, 2009
10:54 AM
Andrew Brandt

Rico-
Excellent points; Cap space has been much better managed in recent years. The problem this year is there is nowhere to offload unused Cap space, as Cap room in an uncapped year is irrelevant.

John-
The Cap minimum is not affected by CAM; it remains at approximately 108M.

Scott
May 18, 2009
05:06 PM

I know there CURRENTLY is no cap in place for 2010, but how likely is that really to happen? To me, that would seem disastrous...the NFL has successfully struck a great balance that seems fair to all cities/markets and gives fans of every team hope. Seems like once they have an uncapped year it all goes out the window and the NFL will become like baseball, with a few teams (Cowboys, Redskins, NY teams) operating at a decided advantage.

Andy
May 18, 2009
05:18 PM

No rollover minut494987es?

Andy
May 18, 2009
05:19 PM

that should have been
no rollover minutes?

Andrew Brandt
May 18, 2009
05:40 PM
Andrew Brandt

No, would be like having rollover minutes into a plan with unlimited minutes...

KEN
May 19, 2009
01:38 PM

Andy, is there any record of how much CASH each team spent on players last year? I'd love to see that list...

Jesmi
May 20, 2009
01:06 AM

How close are the Bears, and other teams, to the salary cap ceiling? Are teams required to make this info public or can they keep it a secret?

What happens if you breach your salary cap I'm guessing you would forfeit a draft pick or two?

Drew
May 21, 2009
10:39 AM

It seems highly unlikely that 2010 will remain "uncapped." There are too few owners who would support it. It will be a real tough bargaining position for the PA to try to push for no cap after all this time. And if the veteran players would agree to a rookie cap, that would make more $$ available to proven players. It seems most likely that the cap could significantly increase, or shift $$ away from unproven rookies, but an "end to the cap as we know it" is the least likely scenario.

It seems more like a technicality that 2010 is "uncapped." A more practical way of stating it is that the specifics of the cap for 2010 and beyond "are the subject of upcoming negotiations." The notion of an uncapped 2010 rests on the shaky premise that the PA has now completely changed it's comparative bargaining strength to that of the owners, and I don't see that has happened. They may be more aggressive than in the past, but the entire universe would have to change for them to have the clout to force an uncapped situation, even for one year.

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