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How Can the NFL Prevent a Salary Cap Crisis?

A projected loss of revenue because of the pandemic could have major ramifications on next season’s salary cap. The league and the players are negotiating solutions to deal with the shortfall.

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The NFL and the NFL Players Association are nearing agreement on a set of health and safety protocols for the upcoming season to cope with the coronavirus. Beyond that, there’s still the matter of how to pay everyone.

The NFL is going to lose revenue as multiple teams have already announced they won’t have fans at games this year. Projections of the shortfall range from $2 billion to $5.5 billion, with multiple league and NFLPA sources whom I’ve spoken with using $4 billion as a working estimate. The NFL’s new collective bargaining agreement, which was agreed to in March, includes a formula that adjusts the salary cap annually based on the previous year’s revenue, meaning that if revenue is way down, the 2021 cap number will be too, unless the league and NFLPA can reach an agreement to override that stipulation.

“Some estimates are that it could be $70 million per club as an impact on player cost,” NFLPA executive director DeMaurice Smith said over the phone last week. “That means the salary cap next year could be something around $120 million.”

Teams and players don’t want that. The salary cap this year is $198.2 million per team, up $10 million from last season, plus $40 million per team in player benefits. The salary cap has gone up at least $10 million every year since 2012, and front offices have gotten used to negotiating deals assuming future growth. The cap dropping by tens of millions of dollars would have a dramatic impact on teams’ ability to construct their rosters and would almost certainly result in players losing jobs. The NFL and NFLPA have recently been discussing ways to avoid that outcome.

“The fundamental question that our leadership is dealing with is whether we have a world where we stick with option A, and there’s a significant downfall on the cap next year, or whether we figure out something that makes sure that that doesn’t happen and is in the best interest of all of our members,” Smith told me.

The second option proposed by Smith is known as “smoothing over” the salary cap. The term became popularized in the sports discourse in 2015 when the NBA and NBPA were negotiating how to handle a massive influx in revenue from new TV deals. Players wanted that new money spike reflected in the salary cap immediately; owners wanted to see that happen smoothly. (The players ultimately won out—the cap jumped $24 million from 2015 to 2016.) And thus new sports jargon was born.

To say that all the cap needs is a bit of smoothing over makes it sound too easy. It’s not a Zen garden or a Maine Coon kitten coming in from the rain with its fur mussed; solving this problem will take more than sanding a few rough edges. It’s become an essential skill for front offices to adjust to and take advantage of the ever-growing cap. If this season’s revenue shortfall is close to expectations, planning for 2021 will require a new strategy.

The NFL’s initial proposal to the NFLPA involved holding 35 percent of player salaries for 2020 in escrow as a way to avoid gutting the 2021 cap. According to an NFLPA source, the NFL’s proposal included calculating the total losses at the end of the year and, if they were less than 35 percent, cutting the players a check for the difference. If the losses wound up more than that, the dip in the 2021 cap would still be far less significant. It was a nonstarter for the players.

“Basically,” NFLPA executive Don Davis told players, “we told them to kick rocks.”

The players would prefer to make up for lost revenue by borrowing from future years, especially those beyond 2022, when new TV deals are expected to increase revenues. The initial counterproposal the NFLPA made to the NFL involved keeping this year’s cap as is and spreading the cap hit from the revenue loss over 2022 to 2030, a desire NFLPA president J.C. Tretter, a center for the Cleveland Browns, also outlined in a letter to agents sent this Wednesday and obtained by the NFL Network.

“If we had our preference we would never want the players of this year, and to a certain extent next year, to unfairly bear the brunt of a massive decrease in revenue in football,” Smith told me. “They are taking the most risk by coming back to work at this point in time.”

That’s the central sticking point: The players want the losses to be felt gradually over time, rather than those taking the risk of playing this upcoming season bearing the brunt of projected losses. The league’s initial proposal would have the players shoulder their part of the losses more immediately.

The CBA entitles players to about 48 percent of league revenue through the salary cap and benefits. That percentage doesn’t change even if the overall amount does. The question essentially becomes whether the owners will extend players a line of credit and for how long. There’s good reason to believe the two sides will find a compromise. A precipitous drop in the cap would be terrible for players, but it would be bad for teams, too.

The teams that would struggle most if the cap dropped $50 million to $70 million next year are the ones with the most money already committed in 2021, especially those who have limited flexibility in contract structures to push some of those commitments into the future.

The Eagles currently have a league-leading $267.3 million committed to the 2021 cap, while the Saints come in second at $250.1 million. The Saints might actually be in rougher shape since the way they’ve structured many of their players’ contracts limits the team’s ability to continue making cap space. If Drew Brees retires after this season, leaving a future cap hit, they’ll have additional cap stress.

For some of the Eagles’ big contracts, like those belonging to quarterback Carson Wentz and defensive tackle Fletcher Cox, the team has the option of converting large chunks of salary into signing bonuses, which it can prorate over the next several years to lessen the salary cap hits. Philadelphia has other players, like wide receivers DeSean Jackson and Alshon Jeffrey, whom it could move on from and lop millions off the cap fairly quickly.

According to Jason Fitzgerald of Over the Cap, a website devoted to analyzing the NFL salary cap, midtier veterans are the players who would suffer the most from a big dip in the cap. The stars are too valuable, and the rookies have their contracts set and guaranteed in the CBA; veteran guys making a few million per year and who are beyond the guarantees in their contracts are left vulnerable.

“What’s going to happen, I think, is you’re going to see a big reshuffle of the rosters,” Fitzgerald told me. “You’ll see these types of veterans that would normally make the cut making, say, $4 million to $5 million, they’ll get cut and they’ll probably pick up somewhere else but they’re probably going to have to pick up pretty much for the minimum salary.”

Other players who would lose out are those entering free agency. History tells us teams will find money for quarterbacks and big names—pending free agents like 49ers defensive end Joey Bosa and Ravens offensive tackle Ronnie Stanley should be fine, even if big deals take slightly longer to materialize.

However, there might be less appetite for someone like 49ers cornerback Richard Sherman, who is still playing at a high level but is 32 years old. Xavier Rhodes, the former All-Pro cornerback who took a one-year deal with the Colts this offseason in hopes for a return to form and a bigger contract next offseason, is another example of a player who might be worse off.

“The bank’s not going to be there next year,” Fitzgerald said. “You’re going to end up taking another deal like that to show it again is what will happen.”

Avoiding a bad marketplace next offseason seems like a good incentive to get a new deal in place. There’s motivation to make it happen soon too, since the uncertainty around the cap has already prevented deals from happening.

From the start of April, after the initial rush of movement around the beginning of the league year, up through the franchise tag deadline on July 15, only eight players—Panthers running back Christian McCaffrey, Texans offensive tackle Laremy Tunsil, Saints quarterback Taysom Hill, Patriots safety Patrick Chung, Chiefs quarterback Patrick Mahomes, Chiefs defensive tackle Chris Jones, Browns defensive end Myles Garrett, and Titans running back Derrick Henry—signed extensions with their teams. Last year, according to Spotrac, 31 players signed extensions during that time frame. Eight is the lowest number of players to get long-term deals from their teams during that time frame since the 2011 lockout year.

Fourteen players were given the franchise or transition tags this offseason. Only two, Jones and Henry, signed long-term extensions before last week’s deadline. The 12 remaining players who will play under the tag this year are the most to do so since the tag was first implemented in 1993.

Fitzgerald said that were he in charge, he’d spread the salary cap losses over the next three years. His argument is that spending in the CBA is already broken down into three-year windows, making it a reasonable compromise for the owners without making the pain too acute for players and personnel departments.

“If you bring the cap down by that much just for a couple of years, teams should be able to deal with that and the players won’t get too hurt that way,” Fitzgerald said.

Earlier this month, the feeling around the league and at the NFLPA was that agreements on the health and safety measures needed to come before the finances and that, if necessary, talks on how to handle the salary cap could take place during training camp or even the early part of the season. Health and safety is still the top priority, but economic talks have ramped up over the past two weeks.

NFL Network reported last week that a deal may come together before camp begins on July 28. It’s an ambitious goal, especially for such a significant undertaking: Smoothing the cap is more complicated than it sounds.