The salary cap debate (sorta long)

The salary cap debate (sorta long)

Post by scott johns » Wed, 06 Jul 1994 15:40:47


With all of the discussion going on about the negotiations between the NBA and
the Players' Association, I thought I'd throw my two cents in.  So, here goes...

The Salary Cap:

        Currently, the NBA uses a system which states that no teams' payroll
        may exceed the figure arrived at by computing 53% of league revenues,
        and dividing by the number of teams.  Currently, this figure comes out
        to about $16 million (could someone provide the exact figure?)  
        However, the NBA and the Players' Association instituted several
        exceptions to the cap which have been gleefully exploited by teams in
        an attempt to improve themselves--the result being that 26 of the 27
        franchises are "over the cap"--meaning they have payrolls in excess of
        this figure.

        Problems with the current cap:

        The salary cap, as it is implemented, has several problems (not
        including the objections currently being presented by the NBA Players'
        association.)  First, it is exceedingly complex.  Very few people
        understand the cap fully; none, it seems, posts to r.s.b.p.  :(  
        Meaningful discussion of trades between the fans on this net is
        impossible, as the majority of the trades run afoul of the cap.  This
        brings up the second problem--the cap inhibits trades.  It is difficult
        for a team to improve itself when it can't make a trade because someone
        is a "base year" player, or when a team has to accept an unwanted stiff
        in a trade to "match salaries".  Thirdly, it is regressive.  Cleveland
        and Portland have the highest payrolls--around $23 million, $7 million
        over, while Dallas and Minnesota have two of the lowest.  However,
        the T'wolves and the Mavericks are no more free to make player
        transactions than the Cavs or Blazers are.  

        Union objections:

        The Players' Association has cited many of the above objections, and
        includes a few others as well.  One is an issue of fairness, as the cap
        in many instances prevents a player from negotiating the best deal he
        can get.  Another objection is that the cap was agreed to when the
        league was in dire financial straits.  Now that the league is healthy,
        the union argues, the cap is no longer needed.  (I will ignore the
        issue of whether the cap is legal or not, other than to comment that it
        would be illegal if imposed unilaterally, but it seems to be legal if
        agreed to at the trade table.  The NBAPA has accepted it in at least
        two previous negotiating sessions.)

        The league's position:

        The main pro-cap argument advanced by the NBA is that it helps to insure
        competitive parity in the league--that it prevents a team in a big
        market from "buying a championship"--spending so much money to acquire
        talent that the small-market teams cannot compete, and are forced to
        play at a decided disadvantage.  On one level it has worked--no team
        has been able to "buy a title", and no team has been forced to cut its
        payroll in order to stay afloat.  (In baseball, on the other hand, both
        the Padres and the Pirates have had to sell off talent to balance the
        books, and many suggest that Blue Jays two World Series titles were the
        direct result of signing lots of free agents.)  On the other hand, the
        NBA has not experienced what could be called parity, with a handful of
        teams dominating the leauge throughout the 80s and 90s.  (Baseball has
        shared its World Series titles much more evenly).  Another argument is
        that the NBA views the cap as a way to keep costs down, and limiting
        payroll will keep the league in excellent financial shape.  Maybe so,
        but individual teams have been quite happy to exceed the cap when they
        think it will benefit them, the health of the league be damned.

        My proposal:

        Obviously, maintaining the status quo is a bad idea--both because the
        cap as currently structured is a confusing mess, and because the union
        will not accept this.  On the other hand, abandoning the cap altogether
        is probably a bad idea as well--I think that baseball-style free agency
        would not be beneficial for the league.  Thus, I propose the following,
        which attempts to address all these points.  It is (fairly) simple, it
        does not restrict trades, it does not restrict the signing of rookies,
        and it only kicks in when one or more teams are in financial difficulty.
        The proposal is:

        1)  No team may enter into or renegotiate a contract with a player which
            would cause the team's totayl payroll (for players only) to exceed
            the greatest of the following:

            a)  The highest value of that teams payroll, measured at the end of
                each business day, with no trades or other transactions in
                progress, attained in the current year.  
                (Year is defined as the perioud of July 1 to June 30).
            b)  The highest value of that team's payroll, measured at the end of
                each business day, with no trades or other transactions in
                progress, attained in the previous year, times 1.05
            c)  The total payroll of the team with the LOWEST payroll in the
                league, times 1.5

        2)  The following are exceptions to (1).  A team may enter into a
            contract with a player without regard to any salary cap or payroll
            limitations if

            a)  The player is a rookie selected by the team in the most recent
                draft, and has not previously signed a contract with any team.
            b)  The player has just finished a previous contract with the team,
                which terminated within a year before the signing of the new
                contract and without the player being under contract for any
                other team in the interem, AMD of the previous contract was NOT
                terminated by invocation of any escape clause, AND if the player
                did NOT became a free agent due to the the team releasing him or
                placing him on waivers.

        3)  Trades and other forms of inter-team compensation may be made
            freely, and without regard to any salary cap or payroll limitations.

        4)  For all accounting purposes, a player's salary shall be determined
            by dividing the total value of the contract by the length in years.
            For contracts with option clauses, the value of each possible
            option is computed, and the greatest value is used.

        5)  No players' compensation may include other benefits such as
            current or future stakes in team ownership, "lines of credit"  
            based on the payment of this or any other current or future
            contract with team, or any payment for any services rendered other
            than the playing of basketball.

        6)  No team may attempt to enter into any contract which circumvents or
            attempts to circumvent the provisions of this agreement.  The
            commissioner will have the power to void such contracts and penalize
            teams which attempt them.  Any disputes regarding this clause will
            be resolved through impartial, binding arbitration.

        7)  The provisions of this agreement will not serve to invalidate any
            contract negotiated and/or signed before this agreement goes into
            effect.

-----

Basically what this says is the following:  A team may not sign or renegotiate
a player if the contract puts the team over the HIGHEST of the following:
The highest salary previously attained by the team that year; the highest salary
attained by that team in the previous year, plus 5%, or 1.5 times the value of
the LOWEST payroll in the league.  The effect of this is that while the league
is healthy, there is effectively no salary cap, so long as teams remain equal.
However, one team cannot go on a huge spending *** and double its payroll
overnight.  Also, if a team is forced to cut its payroll due to financial
problems, then a cap is imposed.  No team will ever be forced to reduce its
salary, and salaries can grow at 5% per year in the presense of a cap.

Part 2 provides the exceptions of signing your own free agent, and signing
your draft choices--these are exempt from the cap.  Also, the "opt out"
loophole is closed.

Part 3 emphasizes that trades may be carried out without regard to the cap.

Part 4 simply discusses how salaries are computed for cap purposes--I chose this
way because it is straightforward and fair.

Part 5 bans such things as the "line of credit" offered to Anfernee Hardaway,
the "personal services" contract that a football team tried to use to dodge
the cap, or any other ways of circumventing the cap.

Part 6 is the Chris Dudley clause.   :)

Part 7 is your standard grandfather clause.

Any comments?  Questions?

/sj/

 
 
 

The salary cap debate (sorta long)

Post by The C » Wed, 06 Jul 1994 20:00:13

Quote:

>With all of the discussion going on about the negotiations between the NBA and
>the Players' Association, I thought I'd throw my two cents in.  So, here goes...

Very good post. Thank you.

Quote:
>The Salary Cap:
>        Currently, the NBA uses a system which states that no teams' payroll
>        may exceed the figure arrived at by computing 53% of league revenues,
>        and dividing by the number of teams.  Currently, this figure comes out
>        to about $16 million (could someone provide the exact figure?)  

I thought it was 16.4 but I can't find anything with it in writting.

Quote:
>        Problems with the current cap:
>        The salary cap, as it is implemented, has several problems (not
>        including the objections currently being presented by the NBA Players'
>        association.)  First, it is exceedingly complex.  Very few people
>        understand the cap fully; none, it seems, posts to r.s.b.p.  :(  

According to the league no one fully understands it, Bob Whitsitt is the
closest according to David Stern and the league often would consult him on cap
questions.

If it is really that complex, then it has to go. There is no place for
anything that causes this much confusion for a team.

Quote:
>        Thirdly, it is regressive.  Cleveland
>        and Portland have the highest payrolls--around $23 million, $7 million
>        over, while Dallas and Minnesota have two of the lowest.  However,
>        the T'wolves and the Mavericks are no more free to make player
>        transactions than the Cavs or Blazers are.  

Since neither team is a contender it would seem that high salaries do not
equal good teams, however low salaries would tend to point to weak teams.

There is a simple solution to all this.

Through negotiations the league an players agree on an absolute figure for
payroll (say 60%), that is all there is period.

Give that money to the players association and allow them to set up a system
for distribution that meets with the approval of the players. They could base
it on some sort of ranking system, senority, stats, or any combination that
they can come up with.  They would have to have an arbitration panel settle
disputes, they could set up a pay scale based on draft rankings and senority,
and keep a "slush fund" of extra funds to give to those that are the
superstars.

This way it is up to a guy like Glenn Robinson to explain to a guy like
Scottie Pippen why he should make more money.

Once the money end is out of the picture the teams could make moves based on
talent level. Rank all the players, 1-348 (including expansion teams), and
force teams to match talent numbers with their Vets. The average talent level
would be 174. Teams must maintain an average of 165 - 182 (10% range).

Rookies could be excluded from these averages for the first year giving a team
time to evaluate the talent. You could phase in rookies based on draft
rankings and playing time, allowing a team that wants to the option of
grooming a rookie without harm to the talent level, while other teams could
toss the hot prospect into the fire right off the bat.

Trades would have to be balanced by talent level. If you have the #1 player
and you want to trade them you need to get a player within a certian range
(say 10 - 20%) or a combination of players to get into the range.

This is just off the top of my head, but goes to the idea that in this way
they could push for balance of talent, without regards to salary. The league
also solves their problem of paying rookies more then vets because the union
would set up a pay structure.

Would seem to solve all the problems if the details were worked out right.

 
 
 

The salary cap debate (sorta long)

Post by Raghu Ma » Thu, 07 Jul 1994 03:22:15

Just thought I'd add my own views to the mix.

This is something I have been thinking about for some time.

1. Divide players salaries into two parts - a guaranteed part and a
non-guaranteed part.

2. Put a cap on guaranteed salaries.

3. Index the non-guaranteed part to the profitability of the
league. This way, if the league is doing well, players get all of
their non-guaranteed salaries, if not then their salaries drop.

This way, players contracts need not be limited by a salary cap and
trades become a lot easier.

OK, how does that sound?

Raghu

 
 
 

The salary cap debate (sorta long)

Post by De PINHE » Thu, 07 Jul 1994 03:37:19

^^^

What brings on the new moniker?
This guy is about as Original as a washed up turd.

Pinhead

 
 
 

The salary cap debate (sorta long)

Post by The C » Wed, 06 Jul 1994 22:52:27

Quote:


>^^^
>What brings on the new moniker?
>This guy is about as Original as a washed up turd.
>Pinhead

Geez, does your mommy know you talk like that?

Not that I should feel compelled to explain, especially to the likes of you,
but I will just to show you for the idiot you are (like anyone has any doubts).

"The Coz" has been the way the nickname has been used since High School,
long before I ever started using modems or the internet. Unfortunatly when I
set up the interactive account the company just put "Coz" and not "The Coz".
This information is not changable by the users. When I use that account to
post (when I am travleing, etc) you will see messages from that account.

Now when I set up the Slip connection, and started using other software, I
regained the ability to set it myself. I did not know that I needed your
permsion to make a change, or that whatever changes that I make need your
prior approval.

So you can go back to eating your turds now, and can stop fretting over things
that don't matter.