NFL Salary Cap 101
|Are you confused beyond belief about the NFL Salary Cap? Is it impossible for you to understand why some teams are WAY over the cap, while others are way under?
Fear not. The Commish is here to help. Our goal is to provide you with a quick course in Capanomics so that you can understand what is going on here. By the time we're through with you, you will have the knowledge and power to second guess your favorite team's General Manager!
The notion of the Salary Cap itself is a relatively simple one. Each team is granted a specific amount of money they can spend on player salaries. Unfortunately, the rules governing the manner in which the cap is administered are so cumbersome, it takes a team of attorneys to understand them. Indeed, most NFL teams have attorneys and accountants on hand whose sole responsibility is to monitor the Salary Cap. With so much convoluted paper to go through, the Commish has decided to give you the quick and dirty details of the NFL Salary Cap.
The NFL Salary Cap as we know it came about through the NFL's Collective Bargaining Agreement (CBA) back in 1993. The CBA was an agreement between the NFL Players Association (NFLPA) and the NFL owners to reach an equitable agreement in terms of the sharing of the revenue pie, if you will.
Basically, through the CBA the parties have realized that the goal of the players and the management should be the same—increasing the revenue pie instead of fighting over the existing amount—and the NFL has tailored the CBA to achieve that end.
The NFLPA was rewarded with the concept of Free Agency, whereby players have the freedom to market their skills after a specific period of service. As a system of checks and balances, the owners sought a means of cutting back on the escalation of the players' salaries. This is accomplished by -- you guessed it -- the NFL Salary Cap.
Compromise is an abundant theme found throughout the CBA. The Free Agency system is slightly limited by the team’s ability to protect certain athletes (franchise and transition players) from leaving by paying a salary equal to an average of the top players at his position. On the other hand, the salary cap is flexible by allowing owners to pay signing bonuses up front that "exceed" the cap, but the amounts are amortized over the life of the contract. More important is the agreement that the cap, which is defined as a percentage of revenues, will grow as team and league revenues grow. This aligns the goals of labor and management because as teams make more money, so do the players.
Let's look back at how the salary cap has escalated over the past ten years. For 2001, that amount was about $67.4 M. For 2002, that amount was $71.1 M, and in 2003 it was $75.007 Million. For 2004, even higher revenues pushed the cap to $80.582 Million, and in 2005 it reached about $85.5 Million. Originally, the NFL informed teams that the 2006 cap figure was going to be approximately $94.5 Million. However, once the owners and NFLPA voted to extend the CBA, which was due to expire after the 2007 season, their model for calculating the cap changed. Thus, the revised salary cap for 2006 was set to $102 Million.
Had the CBA not been extended, 2006 would have been the final capped season, and there would NOT have been a cap in place for 2007. Additionally, had the 2007 season carried on WITHOUT a salary cap, the NFLPA warned that they would never again agree to reinstate another cap. Mercifully, both sides averted out-and-out labor war with the extension of the CBA. For 2007, the cap was set at $109 M, and in 2008 it was $116,729,000. In 2009, the cap was approximately $127 M, which was up from the original $123 M projection.
It was at that point that the owners began to realize that they had, perhaps, agreed to a system of dividing revenue that was not in their best interests. After abiding by the 2006 version of the CBA for two seasons, the owners exercised their right to opt out of the agreement (as was their prerogative). Thus, the CBA expired after the 2010 season. Moreover, since the final season of the CBA was uncapped, 2009 was the final year of the cap under that CBA -- and the 2010 season was played without a Salary Cap.
With no CBA in place heading into 2011, the NFLPA de-certified, and the owners responded with a lockout. Although the lockout took place all Spring and Summer, the owners and players finally reached an agreement in late July -- and by Aug 4, 2011 a new CBA was signed, sealed and delivered. The new CBA reinstituted the Salary Cap, but made some modification in terms of methods for calculating the cap. For 2011, the baseline cap for each team was $120.375M, and in 2012 it was $120.6 Million. For 2013 it is set at 123 M..
The NFL Salary Cap has been in existence since 1994, and it will continue to rear its head at least through 2020, thanks to the new extension. On August 4, 2011, the NFL Management Council and the NFLPA agreed on the 6th extension to the original CBA.