Minimum Cash Spending: Does It Mean Anything?Tweet
In recent days I have seen a lot written about the new cash minimums that are in effect for the NFL. The basic rule is that each team must spend, in cash, 89% of the unadjusted salary cap with leaguewide spending to equal 95% of the cap. Most seem to be of the belief that this means every team in the league this season has no choice but to spend $107.7 million in order to comply with the rules, putting teams like the Bengals with a cash payroll under 60 million into a position where they have to go on a spending spree to comply. I don’t believe that is the case.
As written in the CBA, the cash spending is not broken down into yearly amounts but rather into 4 year “buckets” where cash is amassed and they compared in 2016 with the necessary spending amounts. From Article 12, Section 9:
“For each of the following four-League Year periods, 2013–2016 and 2017–2020, there shall be a guaranteed Minimum Team Cash Spending of 89% of the Salary Caps for such periods (e.g., if the Salary Caps for the 2013–16 and 2017–2020 are $100, 120, 130, and 150 million, respectively, each Club shall have a Minimum Team Cash Spending for that period of $445 million (89% of $500 million))”
Intuitively this makes sense because of salary cap accounting. When you take a team like the Raiders who are expected to have a high dead money account on the books they don’t really have an avenue to necessarily spend in 2013 $107 million and still remain cap compliant. On the other side you cant penalize a team for spending large amounts of money in prorated bonuses this year and then have to scramble to meet cash spending limits the year thereafter.
So what this tells me is that no team is forced this season to spend a dime more than they want. They simply have to make up the difference in one of the next 3 years. Considering that this seems to be a weak free agent crop outside of the LT, WR and maybe S positions its probably wiser for teams to sit on their cap space and carry it over than to overspend on questionable talent just to meet a yearly target. So while the Colts may spend an extra $40 million this year to meet these minimums I don’t think there is any mechanism that forces them to do so.
Another aspect of the spending minimums that seems to go unnoticed, though, is the lack of penalty for not paying the players. The union got destroyed in their negotiations and to me this was just another prime example of a terrible deal. According to the CBA the penalty for being under the limit is to simply post pay what you owe sometime before September 15, 2017 for the current period. Maybe there is some side agreement about fines or losses of draft picks, but as specified in the CBA that doesn’t seem to be the case. You just pay back what you owe.
Why is this a big deal? While one would assume most owners want to win I think objective number 1 is to make money and number 2 is to win. While the two often go hand in hand I think it’s debatable that teams with ultra high payrolls are the teams that are guaranteed to compete for a Super Bowl. From an owners perspective if you think you can win on the cheap you can probably avoid these cash minimums until 2017.
While it may sound crazy look at it financially. Owner A’s option is to spend $10 million now and guarantee $30 million total to a player he has questions about to meet his cash minimums or just pocket the money in each of those seasons. Lets just assume he finds a conservative investment that pays 5% a year. That $10 million underpaid in 2013 is going to grow to $12,155,063 by the time the $10 million dollar bill is due in 2017. If he decided to do that each year the team will earn about $5.25 million total and then pay back the $40 million dollar “loan” to the players who were on the team during the seasons in questions. This is why unless there is an offsetting amount in fines the deal really doesn’t seem to force the issue of payment by certain NFL clubs that traditionally do not spend on their talent.
So I don’t think there is really anything out there that indicates teams are definitely going to spend money this year. They should wait until they find players that they know they want and feel confident in rather than chasing a number that they can seemingly just make up at a later date.