The NBA is finally starting to process the fallout from an unprecedented summer last year. The league’s salary cap was $35.5 million in 2000–01 and then steadily rose to a 2008–09 level of $58.7 million, where it stayed, give or take $1 million, for six seasons through 2013–14. In 13 years, the cap rose about as much as it did just last summer, when the NBA’s big cap boom rocketed the figure from $70 million in 2015–16 to $94.1 million in 2016–17. It was unlike anything the league had ever seen. With newfound money, teams splurged, overspending on the likes of Evan Turner, Timofey Mozgov, and Joakim Noah. You could say those teams were negligent — and you’d be right — but they operated under the assumption that the cap would keep surging. It didn’t: A shorter-than-expected 2017 postseason caused a limited increase in the 2017–18 cap, to just $99.1 million (projections last year had it as high as $108 million).
That isn’t to say we’re headed for an NBA recession. Some teams will always spend lavishly. The Knicks signed Tim Hardaway Jr. to an offer sheet worth $71 million over four years, only two years after trading him for Jerian Grant, who they traded for Derrick Rose, whose cap hold they’ll have to renounce to sign Hardaway. Phil Jackson’s gone, but the Knicks are still off their rocker. For the most part, though, players are getting what they’re actually worth: The Heat may have lost all of their cap flexibility, but they’ve locked up Kelly Olynyk and James Johnson on fair contracts worth approximately $50 million and $60 million, respectively, over four years. Projections for the salary cap in the two seasons following 2017–18 are at $102 million and $108 million, respectively. But these increases are tame compared with the disproportionate hike we saw last season. Another big bang isn’t coming, and teams must adjust. Under the NBA’s financial climate earlier in the decade, making big moves often meant finagling contracts to create flexibility or using extensions, since having cap space wasn’t a given. Most teams didn’t hand out massive deals like candy because they couldn’t. And now that much of the league has used up its onetime gift of surplus cap space from last season, teams will once again have to check their spending habits closely.
Players Can’t Take the Market for Granted
Though we’re seeing players like Kevin Durant and Dirk Nowitzki take less money to free up salary for other players or ease their team’s luxury tax burdens, for the most part players are concerned with maximizing their earnings during their short lives as pros. Take George Hill, for example. In February, Hill declined a renegotiation-and-extension that could’ve paid him an additional $13.6 million last season and potentially up to $74.7 million over the next three seasons. ESPN’s Tim MacMahon reported that Hill had been advised he could get a much better deal in free agency. Hill lost his bet: He signed with the Kings for three years and $57 million, with a third-year team option and a partial guarantee. A steep miscalculation occurred somewhere along the line, leaving Hill roughly $30 million short of what he could’ve had with a renegotiated deal with the Jazz.
There will be more players who receive bad financial advice and end up taking major losses. That’ll never change. But Hill’s situation serves as an example for future free agents, and teams: The market might not be there even when you’re expecting it. Teams simply aren’t going to have the money to burn like they did in 2016. Looking ahead, half the league could be in the luxury tax next summer. This means many clubs will be restricted to using exceptions to make moves, or they’ll have to seek out sign-and-trades if they have salaries to match.
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Bona fide superstars like Paul George and Chris Paul will always find max contracts, but second-tier stars like Isaiah Thomas, or high-end role players like Derrick Favors, might not find the market they were hoping for had they hit free agency in 2015 or 2016. Thomas often tweets about Brink’s trucks as an expression for his upcoming payday, but when Kyle Lowry isn’t getting a full max deal and Hill can’t sign for even three fully guaranteed seasons, there are no assurances the market is strong for a 5-foot-9 point guard nearing 30 and who is one year removed from a major hip injury. All it takes is one team, but destinations are limited for those non-transcendent players once they hit the market. The middle class is getting squeezed one year after it was being rewarded more than its members could ever dream.
If teams do want to splurge in free agency, they’ll need to strategically create cap space, just like they did … not too long ago. After signing and trading LeBron James to the Heat in 2010, the Cavaliers prepared for a chance at getting him back in 2014 by clearing cap space and accumulating assets (and getting extremely lucky in the draft) to make themselves a viable home for LeBron. As Adrian Wojnarowski said on The Ryen Russillo Show, teams are already trying to figure out how to get Giannis Antetokounmpo out of Milwaukee, and the same can be applied to Anthony Davis, or even John Wall after he hesitated signing an extension this summer with the Wizards. Forward-thinking teams that forecast the availability of a star will have the chance to strike by gathering assets in the form of picks and young players, and by signing short-term contracts that could potentially be used as necessary filler to facilitate a trade.
The same long-view logic applies leaguewide, of course, and not to just superstars. Agents can look ahead and figure out the year when their clients would benefit the most, too. As cap guru Nate Duncan recently pointed out on Twitter, 2020 is when the big-money deals of 2016 will be off the books, meaning more money will be available for another set of lucrative contracts. Players looking to get paid might want to think about timing their unrestricted free-agency period to come that year, since there’s a chance that teams will spend lavishly after a few years of a tight budget.
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In the meantime, teams will need to spend smartly and sign contracts that maximize their position, given the cap climate. Teams with two max-level stars — like the Wizards and Pelicans — will need to dip their toes into the luxury tax pool, or even belly-flop in, to maintain a competitive roster. The Wizards will more than likely match the max offer sheet Otto Porter Jr. signed with the Nets on Tuesday, and the Pelicans just handed out a huge deal to Jrue Holiday. Neither player really moves the championship needle, but their teams have no other choices.
Teams across the league will monitor the situations of Wall and Davis. But they’ll also need to be ready for when those players are available, whether that’s through free agency in 2019 for Wall or in 2020 for Davis, or with the right package before that. Teams that will be under the cap, including the Lakers, Hawks, and Suns, are loading up on cap space, putting themselves in position to pounce on opportunities. Teams over the cap, such as the Rockets and Celtics, retain similar flexibility, even after their splash acquisitions this summer, with their mixture of assets and movable contracts.
The NBA’s cap bubble may still be rising, but it might as well have already burst. Teams won’t be gifted max-contract space by the basketball gods like they were in the summer of 2016. They’ll need to create it. The smartest teams that cleverly manipulate their contracts to best take advantage of the new cap will be rewarded. It’s back to normal for the NBA.