NFL And The NFLPA Are Trying To Reach A Side Agreement To Salvage The 2021 Salary Cap

Ian Rapoport recently reported that the NFL and the NFLPA would be meeting to discuss a side agreement to handle the potential impact Covid 19 might have on the salary cap this year and for 2021, as well as for subsequent years covered by the CBA.  Such a side deal might be comprehensive or just deal with the short-term possibilities. 

Those possibilities include no season at all, a shortened season, a season with no fans in attendance, few fans, full stadiums, or some combination thereof.  As far as I can tell, no one knows whether the big money, national TV rights packages, is payable to the NFL if there is no season, or if that revenue would be reduced due to a shortened season.  There were reports that the broadcasters still would have had to pay the NFL for the 2011 season even if there had been a lockout back then.  I imagine networks might have taken that into consideration with new their deals. 

Another possibility is that the first regular season game gets played but then there is a resurgence of Covid 19 resulting in orders to close down completely as a non-essential business for some or all of the rest of the season.  Vested veterans (primarily players on second contracts - that also correlates strongly with large salaries) who are on the roster for game one would have a strong argument that their salaries are guaranteed.  Typically, the contracts of first, second, and some third round draft picks are guaranteed at least for their first season. 

For now, the NFL can take a wait-and-see approach.  There is some evidence that teams have been doing just that.  There have not been as many contract extensions as there typically are.  Teams have not signed their draft picks.  Per Jason Fitzgerald at OTC, in 2017 and 2019 teams had signed 85.5% of their draft picks by June 7th.  In 2018, it was 81.9%.  For 2020, just 22.4% of draft picks have been signed.  That certainly could be because there will be no OTAs, thus removing that deadline.  The new deadline will be whenever prospects can report to camp.

It makes sense that the Packers have only signed some of their sixth and seventh round picks.  Late rounders often sign early, but they also receive very little guaranteed money.  A seventh round pick normally might expect a signing bonus of $90,000 and a sixth something in the area of $160,000.  Most readers have heard of slotting for rookie contracts.  Naturally, given the nature of the CBA, there is a way for teams to pay rookies less than the slotted amount.  I am not too worried about signing even the high draft picks: teams need to sign them, but the bargaining could be a little harder.

SCOPE OF THE LOSS:  

Assume for the moment that the NFL's national revenues are unaffected.  That itself is unlikely and at a minimum would require that the entire season and all playoff games are played and televised in the normal way.  Jason Fitzgerald at OTC in his article, "What Could Happen to the Salary Cap in 2021" calculates the affect on the salary cap for 2021 if teams lose a substantial percentage of their local revenue.  I will omit his methodology and calculations and simply give his results in the table below:

% Local $ Loss Cap Loss '21 Cap # GB 2021 Cap Space
100 percent (all) of local revenue $80.0M $118.2M (-$59.489M)
70 percent of local revenue $55.0M $143.2M (-$34.489M)
40 percent of local revenue $31.0M $167.2M (-$10.489M)
15 percent of local rev (my calculation) $11.8M $186.4M +$8.711M

Overthecap projects the Packers to have $35.99 million in effective cap space for the 2021 season, assuming the cap limit is $215 million.  That is 23rd in the NFL.  For context, the team with the 17th most effective cap space has $44.68 million available assuming a $215 million dollar cap limit.  That is not the spendable amount.  I have not included any rollover since that number is unknown.  The Packers currently have $13.87 million in cap space, but that will decrease by a little over $2 million when the team signs its draft picks, and it will decrease by over $3 million more when the 52nd and 53rd players count and the PS players are signed.  The team might sign another player or two yet.  I would not expect any rollover amount to be significant.

Even the best scenario above would make it difficult to sign more than one of the players scheduled to be an unrestricted free agent.  Those players include Bakhtiari, Clark, Aaron Jones, Linsley, King, Taylor, Funchess, Jamaal Williams, and Lewis.  The team would have to decide whether to place a tender at $2 million to $3 million a pop on their restricted free agents like Sullivan, Greene, Lancaster, Redmond, Tonyan, and Boyle.  I suspect that the Packers would be unable to retain most of the players noted above.  The bulk of the other teams would be in the same situation if the cap actually decreased.  

The NFL does not want that to happen and neither does the union.  I assume that NFL owners would all do what is best for the league as a whole.  On the other hand, teams like the Colts, Jaguars, Chargers, and Patriots, all of which have roughly $100 million in cap space available for 2021, might find a buyers' market enticing. 

Possible Solutions:

Ian Rapoport mentions smoothing out the salary cap limit by essentially borrowing against future expected cap growth.  That presupposes that the revenue loss from Covid 19 issues is a blip and that NFL revenue will increase over the years.  The idea is to keep the cap at $198.2 million for 2020, but artificially increase it by $4 million to reflect increases in the minimum salaries called for in the CBA and perhaps add a few million more so as to have some increases in salaries. It would not be surprising if teams that are hard up against the cap lobby for something more generous.  By means of a side agreement, the 2021 cap might be artificially set at $204.2M ($198.2M + $4M for increased minimums and $2M for general wage growth) even though the actual formula that determines the cap calculates out to $140M for 2021.  That $64.2 million would get paid back by smaller increases in the cap in the out years of the CBA.  In 2022, if the normal cap formula indicates that the cap should be $230 million that year, the side agreement might change that to $220 million, thus paying $10 million down on the $64.2M initial deficit.  Jason Fitzgerald in this article gives a nice presentation as to how this might work.

All the other solutions sound unworkable to me.  They include eliminating or reducing Performance Based Pay, and a salary give-back in 2020.  I do not think there is enough money in Performance Based Pay to make much of a dent in any serious loss of local or national revenue.  The salary give-back sounds like a nightmare to me.  

I just want the NFL and the union to work this out.  As a fan, I want to watch my team play football, preferably good football and with a team that is not gutted due to financial reasons.   

 

     

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Comments (9)

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Thegreatreynoldo's picture

June 10, 2020 at 07:01 am

I chose to use a photo of JC Tretter, who is the newly elected president of the NFLPA. I am sure that a bunch of attorneys will work on this for both sides, but the attitude of Mr. Tretter might be important.

Arggh! I published an article on a day Jersey Al wrote one of his Confessions of a Polluted Mindset articles.

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Guam's picture

June 10, 2020 at 07:20 am

Good work TGR. I think that you are spot on that the only mechanism that makes sense is smoothing or averaging over the life of the CBA. A dramatic one year reduction would cause chaos that would ripple through teams' rosters for several years. Smoothing at least reduces the chaos, but it will cause problems for teams that were betting a on big cap increase to resign their players.

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Coldworld's picture

June 10, 2020 at 08:05 am

Hopefully both sides are serious about this. It is ultimately in the interest of both to find a viable route to protect players and the game.

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Guam's picture

June 10, 2020 at 09:01 am

Agreed CW. I look at what is going on in MLB and shudder. The management and players couldn't be much farther apart. They clearly have no interest in the game and are only interested in protecting themselves. I hope that disease does not spread to the NFL.

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Thegreatreynoldo's picture

June 10, 2020 at 12:39 pm

The player give-back is particularly difficult in the NFL. In baseball and basketball, contracts are guaranteed. The league asks players to give back 25%, that is a sum certain (as far as I understand it - I don't follow MLB or the NBA). In the NFL, giving back 25% of what: base salary? Roster bonus already paid in 2020? Signing bonus?

For now, there's not much to do or wring our hands over. There is a small chance that revenue won't be seriously disrupted, but if it looks like it might be, fans will just have to wait for the NFL and Union to reach some sort of agreement.

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Handsback's picture

June 10, 2020 at 09:09 am

This is going to be a huge issue this year. The NFL has been lucky in that the virus timing and their season has seen minimum disruption. Because of the large number of players on teams, keeping them safe will be a priority. Which may also mean the play on the field may not be as good as it has in the past.
We will see how this breaks down.

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CheesyTex's picture

June 10, 2020 at 09:37 am

Absolutely great article, TGR. Thank you.

One "wet blanket" in all of this is that no one knows the lasting economic damage that will result to our nation (and the world) from CV19. Dire forecasts suggest a prolonged recession which could mean a prolonged lack of $ for the NFL -- lower local revenues, TV revenues, sponsorships, etc.

Adding to the "gloom and doom" scenario now is the possible backlash against the Black Lives Matter movement. We saw a lot of people pull away from the game in counter protest to the Kapernick led movement -- even our President said such protests were disrespectful to the Flag and that participating players should be fired immediately.

I guess my point is that, while the NFL is near and dear to our hearts, it is just football and these are uncertain times that defy accurate planning. In that context, it really does not matter whether or not highly paid athletes' $ are reduced or wealthy owners franchise values are diminished. So I hope both sides are smart enough to reach an agreement that will save the game we love.

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murf7777's picture

June 10, 2020 at 11:18 am

Excellent article TGR and thanks for taking the time to put this together.

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flackcatcher's picture

June 10, 2020 at 06:02 pm

Even with the best case scenario, both sides will take a terrific hit in the pocket book with or without on field game play this season. As you laid out TGR, this could get very messy for all concerned....

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