With all the discussion the last couple of days about Larry Fitzgerald and his contract and the salary cap, it seemed prudent to hit on some points about the cap, how it works, and what some of the terms mean that are constantly being thrown around.
— The salary cap, in simplest terms, is the limit, in dollars, the sum total of the players on each team can cost each season. The projected cap for each team (it is finalized right around the time free agency begins) in 2014 is reportedly about $126 million. Teams, through certain cap strategies, can carry over some unused cap space from the year before, however, so that number might be slightly larger for some teams.
— In the offseason, a team’s cap number is determined by the top 51 cap numbers on the roster. Once the regular season begins, every player’s cap number — the 53 on the roster, the eight on the practice squad and anyone on injured reserve — counts against the cap.
— A player’s salary is counted against the cap each season, as is a pro-rated part of a bonus. Say a player signs a three-year contract for $2 million salary each year, and gets a signing bonus of $3 million. He gets $5 million in real money the first year — salary plus the bonus check — but his cap number that first year is $3 million ($2M plus $1M in pro-rated bonus.)
UPDATE: A bonus can be pro-rated over the first five years of a contract. Which is why, prior to this latest restructure, Fitzgerald had no pro-rated bonus money on his contract past the 2015 season. Because he signed an eight-year deal in 2011, the pro-rated part only worked through the first five seasons.
— Cap numbers can be lowered, like it was in the case of Fitzgerald. His cap number was set to be more than $18 million, which included $12.75M in 2014 salary and about $6M in various pro-rated bonuses. The Cards made $11.75M of that scheduled $12.75M salary into a bonus for March. Fitzgerald benefits because instead of taking that $12.75M 1/17th at a time in his weekly in-season paychecks starting in September (which is how players get their salaries, only in-season), he gets $11.75M of it in one big check in March. The Cardinals benefit because now, with his salary shrunk to $1M and the $11.75M pro-rated over the remaining five years of his existing contract is spread out. It shaves $9.4M off Fitz’s cap number now, but adds another $2.35M to his cap numbers for each of the final four years of the contract (because all five years absorb $2.35M of that $11.75M).
— When talking about a player adjusting his contract, there are basically four directions it can go: A player can get a brand-new deal, where he is never a free agent but the team rips up his existing contract for a better one. A player can get an extension, which usually keeps the deal in place for the current year but tacks on more years and adds, usually, a signing bonus. A player can restructure, which is what Fitzgerald did. The money stays the same, and essentially, paperwork is used to adjust what the money is called (and when it’s paid out) so it lowers/increases the cap number. And then there is a pay cut, which is exactly how it sounds. From time to time, players are willing to accept pay cuts — reductions in salary — that will obviously lower a cap number without future cap hits.
— Dead money is the cap hit left by a player once he is no longer on the roster. It’s something every team ideally wants to avoid, although it’s all but impossible to have zero dead money. Even an undrafted rookie with a tiny signing bonus leaves some dead money if cut.
— Dead money is accounted basically by all the leftover pro-rated money that hasn’t already been used. With Fitzgerald, for example, if he were cut (or traded) after this season, his dead money would start at $9.4M of cap space, or the remaining four years of pro-rated bonus money for his restructuring earlier this week. That doesn’t include his other pro-rated bonus money he already has (which would take his dead money to more than $14M next season.)
— The dead money is almost always hits the cap the first season and then is over with. The exception is if a player is a post-June 1 cut — or is designated a post-June 1 cut — in which case the team takes a hit of one season’s worth in Year One and the rest the subsequent season. For example, Adam Snyder was cut last season with $4M in dead money and four years left on his contract. Cards made him a June 1 cut, meaning they only had to take a $1M hit in 2013 (pro-rated of what was left.) This year, however, the Cards most absorb the remaining $3M in dead money from Snyder.
— Those are the basics. For a much more in-depth salary cap FAQ, this page is pretty good.
Tags: Larry Fitzgerald, salary cap
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