Sunday, June 15, 2014

Salary Cap Math 101: Salary Cap Effect on Trades

       This article discusses the basics of the NFL salary cap, as an aid to the armchair analyst in the Hot Stove League.   I'm just a fan and don't necessarily know that much, but I do know that the salary cap affects the moves that each team can realistically make.  
     Even professional sportswriters sometimes make the mistake of believing rumors that absolutely violate common sense.  
     Here's what you need to know:
     1.  Every team in the NFL has a limit to how much salary they can spend in a given year.  It should be obvious that good players are usually paid more money than less talented players, so if your team is spending a lot of money on player salaries, that is usually a good thing

    2.  There is a huge difference between salary  and bonus (guaranteed) money.  For example, if a player has a five year contract for $50 million dollars with 20 million guaranteed, then the annual charge is $10 million dollars for each year ($6 M salary and $4M guaranteed bonus).   However, suppose the team decides to trade the guy after year 1.   In this case the team clears $6 M of salary in year 2, but ALL of the remaining bonus gets charged to the cap or $16 M). It's not a fine that the owner can just write a check for.  The team has to actually CUT $16 worth of payroll in Year 2 which is a disaster for that year.  See below: 
Case i:  Player plays out his contract as planned.
Year 1  Year 2   Year 3  Year 4  Year 5
$10 M   $ 10 M    $10 M $10 M   $10 M

Case ii:  Player is traded after year 1.  
Year 1  Year 2   Year 3  Year 4  Year 5
$10 M   $ 16 M     $0 M    $0 M      $0 M

Year 3 and out are ok because the obligation to pay the guy is over, but basically in Year 2 the team is going to have to cut some really good players to cover the trade.  In this example they have to clear 16 million dollars in salary spending just to get rid of the guy.   

So in other words if a guy has bonus money in his contract, the team that trades him is going to get a big salary cap penalty for the year in which  the trade is made.   Got it? 

Let's consider a real example.  This year this was a rumor that the Cowboys were trying to trade Tony Romo in order to move up in the NFL draft.  Could that be true?  What you do is look up Romo's salary cap situation from a site like, and you find the following line  (  ):



Rom was paid a preposterous bonus, meaning that if the Cowboys were to cut or trade him this year, it would lower their salary cap in 2014 by an incredible $29,908,000.  That's how even amateurs like me knew that the Cowboys simply could not trade Romo no matter how much they might want to. They simply can not absorb the salary cap hit that they would take.  Hence any trade rumor involving Romo is 99% likely to be false unless Tony decided to restructure his contract to facilitate the move. Even then, it is nearly impossible in 2014 given the magnitude of the money involved.   Romo would basically have to give back 20 or 30 million dollars to get traded.  That's not very likely.  

Jerry Jones is one of the dumbest GM's in history, and loves to give guaranteed money away, which is great for guys like Tony Romo.  But you should disbelieve any rumor that Romo is going to be traded because that is almost impossible due to the salary cap.  

If you look at the Salary Cap, it is easy to see that the Cowboys are the worst managed team in the NFL.  Hopefully, Browns' owner Jimmy Haslam 3 will see how Jones has screwed up his team and avoid the same temptation.   

In any case,  for a trade to go forward, the principals have to have a relatively small amount of money tied up in signing bonuses (i.e., guaranteed money).  Either that or the trading team would have to be way under the cap.  For example, the Browns or Raiders could trade away a major player if they chose to because they can absorb the current year salary cap penalty.  At the same time they are able to pay large (non-guaranteed) salaries in 2014 because of their low payrolls compared to the cap limit. 

One guy that might be available from the Browns is Ahtyba Rubin, even though he is a very good player who can play end or tackle in either a 3-4 or 4-3 alignment.   The Browns could save $6.6 million dollars versus the cap if they could trade him (versus his total salary plus bonus of 8.2 M this year).  Or, because they have the cap room, they might just keep him or try to renegotiate him down.

Ahtyba Rubin has a big salary cap number, and might be used in trade even though he is a very good player.  

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