The NFL Salary Cap: The Future of the Cap

[Note by VanRam, 03/13/09 11:16 AM EDT ] We haven't talked much about the looming cap situation, mostly because I don't have the PhD in economic that it takes understand it. "Duh, me think cap good." But this is a great fan post and I wanted to bring it to everyone's attention. - VanRam

Hello everyone, I'm Collin, the Asso. Editor over at BigCatCountry.com, the Jaguars' blog. I've done this piece outlining the coming issues of having no salary cap... Enjoy.

There has been a great deal of discussion as to whether or not the elimination of the salary cap would mean an end to fair competition in the NFL. The answer to this question is a resounding NO, and there are a number of reasons why. 

The NFL hasn't always had a salary-cap:

The NFL functioned without a salary cap up until 1994, when the original CBA was instituted. I managed to find a graph that compares the distribution of wins among teams prior to 1994, up until now. The prevailing thought is that having an uncapped NFL would lead to a few teams that amassed tons of wins, and a large number of teams who were consistantly bottom feeders. We would not expect to see as many average teams as we do now, where much of the NFL finishes between 7-9 and 9-7. 

The blue line represents the number of wins prior to the CBA, and the red line represents number of wins after the institution of the CBA. Notice a difference? Neither do I...

It seems counter-intuitive, but the distribution of wins among NFL teams doesn't significantly differ from before the CBA was instituted. Could there be more to having a successful NFL franchise beyond how much is spent on player acquisition? Yes!

The Growth of the cap and the problems with a salary floor:

Second, no salary cap means no salary floor: The current salary floor mandates that NFL teams are to spend at least 84% of the entire salary cap, no matter what. When you have the salary cap expanding at such drastic rates, the salary floor grows with it. Here's a list of the amount the salary cap has grown each year since 1999. 

Salary Cap Per Team for NFL Player Salaries by Year

Wow... Just so you know, the salary cap this season jumped to $127 million. That means that over 90 million has to be spent on player salaries this season alone. When the cap is growing so exponentially, it really doesn't matter that it exists at all. Rich teams can afford to keep their key players when they have that much cash floating around and are required to spend a certain amount. They'll just manipulate the terms of the contract to make it cap-friendly. This means that most quality players don't even reach free agency because their respective teams have plenty of money to re-sign them. 

The Cap is a funny animal, it can be manipulated and forced into doing whatever you want it to do, as a result, it might as well just disappear altogether. A perfect example is when Dan Snyder spent over $100 million in the year 2000, at a time when the cap was only $62.2 million.

A special way of paying players called a signing bonus is used to avoid dealing with cap problems. A player may only get a salary of $500k, but a signing bonus of $10 million for a 5 year deal. You would think this means that his cap hit is $10.5 million that year because that's how much he was paid that year... Well, you're wrong. The signing bonus is pro-rated throughout the length of the contract, so even though the player was paid $10.5 million that year, his cap hit was only $2.5 million because the $10 million is divided by the length of the contract (5 years in this example), which comes to 2 million. Then we add his base salary of $500k, and we see how the cap cost reaches $2.5 million. 

You might say, "Collin, their irresponsible behavior will catch up with them soon enough!" In theory, you are correct. However, the cap has grown even more rapidly than predicted, and it has allowed teams to spend irresponsibility without consequences. It is almost pointless as it stands now.

Restricted Free Agency:

Third, a player would have to accrue six seasons of NFL experience before he would be a free agent, not the four that are required now. This means that once a player's rookie contract expires he'll still be a RFA for one or two seasons, depending on the length of his contact (The NFL only permits the top 16 picks in the draft to sign 6 year deals). This means the team would still own their rights and could tender them accordingly. Once tendered, the team would receive compensation if another team chose to offer the player a contract and his original squad opted not to match. That's right, the team he currently plays for can choose to match the offer and the player has no say in where he goes... Basically, if you draft well, you'll own the players rights for at least six seasons and if you choose to not match the offer the player recieves, then you'll get draft pick compensation. 

Allow me divert for a moment and explain the levels that you can tender a RFA (note that this is different than placing a franchise or transition tag on a player). The levels are First and Third round tender (meaning if another team signs him you get a 1st and 3rd round pick), First round tender, Second round tender, and Original round tender (you receive a pick from the same round that the player was originally drafted in). You can tender as many players as you want who are RFA, or you may choose not to. 

Without a salary cap, the draft increases in importance, drastically. Not only does it become the chief way to acquire talent for small market teams, the value of each pick also increases because you will own that player's rights for an extra two years. The most important person on an NFL team without a salary cap is the GM. Gene Smith is the the kind of man you want running your franchise.

Franchising multiple players:

Fourth, without a salary cap, a team would be able to franchise or transition two players instead of one. This means even if a player reaches his sixth season and is ready to hit free agency, he can still be franchised and it would again prevent him from leaving (Franchise and transition tags are different than restricted free agent tenders). Since you can franchise a player more than once, it effectively means you can keep a player for eight or more seasons without having to sign him beyond his rookie contract. You would be able to do this to two different players each year, meaning that you could effectively keep the core of your team intact as long as you draft well. If you can't draft, you are going to struggle big-time. If someone else offered him a contract you chose not to match, then you would receive two first round picks for a franchise player, but nothing for a transition player (except the ability to match the offer given).

Additional ways to level competition without a cap:

The top 8 NFL teams would only be permitted to sign free agents at the rate they lose them each year. On top of that, the league would keep the same scheduling parameters in place, meaning the worse a team does, the easier their schedule is the following season. Also, the draft order would remain the same, with the worst teams getting to choose first. These barriers would have the effect of inhibiting the ability of the top eight teams to improve themselves.

WHEW!!

I hope I answered some of your questions and have provided you with the kind of information that you can use to refute all those who say that the NFL will turn into the MLB without a salary cap... That's just not the case... If you have any other questions, just list them in the comments and I'll do my best to get to them ASAP.

-Collin