The NFL and NFLPA still have a lot to figure out before the start of the 2020 season, and while player safety remains priority one, there are major concerns surrounding the economic fallout from the season, as it could have long term implications.
One potential area of impact will be on future salary caps. Each offseason the NFL salary is determined based on a complicated formula that is derived from how much profit the league generated the year prior.
Here’s an overly simplified explanation. The league determines how much profit it made in year X, then allocates 48-percent of that number to the following years player cost. Player cost is split into two parts, benefits (health insurance, disability insurance, etc) and salary (wages). After removing money for benefits, the remaining salary portion determines the salary cap.
Over the past decade, the league has made sizable profits, and in turn, the salary cap has risen. In 2011, the salary cap was $120 million, saw a slight uptick to $120.6 million in 2012, then increased to $123 million in 2013. But over the last seven years, the salary cap has risen by at least $10 million each year and currently sits at $198.2 million for the 2020 season.
With the NFL expected to take losses due to COVID-19 — potentially up to $3 Billion if fans are not allowed to attend games — future salary caps could take massive hits.
NFLPA executive director DeMaurice Smith said on a call today with agents that the union has had preliminary calls with the NFL on projections for the 2021 salary cap and it’s safe to say a season without fans would have at least a $3 billion impact on revenue.
— Tom Pelissero (@TomPelissero) June 15, 2020
Neither the NFL nor the NFLPA wants to see the salary cap take a step backward and the two have each proposed alternatives for addressing the issue.
The NFL proposed putting 35-percent of the player’s salaries in escrow — holding off paying a portion of the player’s salary for a later date — affording the league the ability to keep profits and salary cap at a reasonable level. But unsurprisingly and understandably that was met with resistance from the players/NFLPA.
The NFLPA offered a counter-proposal:
The NFLPA sent the NFL an economic counterproposal, per sources:
– No escrow of 2020 salaries
– Flat salary cap of $198.2M for 2021
– Spread revenue loss this year over 2022-2030 caps
– All fully guaranteed money paid even if games are canceledCall scheduled for Monday.
— Tom Pelissero (@TomPelissero) July 11, 2020
“All fully guaranteed money paid even if games are canceled” seems like something the owners are unlikely to accept, but the other three points have merit.
If the salary cap holds at $198.2 in 2021, then most teams will be able to sustain the COVID-impact. But if the cap drops, then most teams will be scrambling to make roster adjustments to become cap compliment, meaning some teams will be forced to make big cuts to player contracts.
The problem here stems from nearly a decade of high profitability, along with teams/players anticipating the cap to continue to rise in large chunks, and contracts being designed with a rising salary cap in mind.
When looking ahead, if the salary cap remains at $198.2 million and all teams are able to rollover their current 2020 cap space (highly unlikely), there would still be three teams who would enter the 2021 offseason over the salary cap: the Philadelphia Eagles, New Orleans Saints, and Atlanta Falcons.
Fortunately for Detroit Lions fans, after struggling with the salary cap for years, general manager Bob Quinn — and cap specialist Mike Disner — have put the team in a solid financial situation.
Currently, the Lions have 89 of their 90-players under contract — only seventh-round pick Jashon Cornell remains unsigned — and have around $21.6 million available in salary cap room for 2020.
Most salary cap tracking websites have the Lions at $29.1 million in cap room but after signing Jeff Okudah, D’Andre Swift, Quintez Cephus, and Jason Huntley this week, that number will end up around $7.5 million less as those contracts haven’t been processed yet.
If the 2021 salary cap stays at $198.2, the Lions’ would enter the offseason with roughly $34 million in available space, and depending on how much of the 2020 cap remains for rollover purposes, the Lions could once again be sitting on $50 million available for spending.
This rough estimation would put the Lions salary cap space in the upper half of the league for 2021, while also setting the team up to stay there for the foreseeable future, regardless of how far this year’s anticipated losses extend.