Projecting Cap Space Under Potential Labor Deal

The NBA and NBA Players Union are nearing labor peace, working towards an extension of the Collective Bargaining Agreement (CBA) by December 15. The goal for both the owners and players is to reach a new, long-term deal early, avoiding a lockout next summer.

Exact details of an agreement that has yet to be reached are obviously unavailable, but some of the working concepts have leaked. The basic split of basketball related income (BRI) is expected to remain unchanged from the 49-51 percent band in the current deal.

The sooner a new CBA can be hashed out, the better for teams who need to make decisions based on salary-cap projections for the offseason and the summers to come. Leading up to previous lockout years, teams were essentially working in the dark, hoping future rule changes wouldn’t blow up their plans.

With a new deal arriving, likely well before the February 23 trade deadline, teams should have the necessary information to plan ahead.

Already, the NBA raised its cap projection for the 2017-18 season to $103 million, with a $123 million luxury-tax threshold. The league had originally predicted a $107 million cap, but rolled it back to $102 million when teams began to spend at such a high level in July.

That extra million in cap may not be enough to offset some of the prospective rule changes that could additionally limit spending power.

The working assumption is that minimum salaries, exceptions and rookie-scale contracts for first-round picks will jump by roughly 50 percent.

When calculating cap space, teams are charged a rookie-minimum salary for every open roster spot through 12 players. The current CBA dictates next season’s minimum to be $562,493, but it could scale up by 50 percent to $843,740.

A team with eight players would have $1.1 million total in four roster charges based on the current rules. That would jump to $2.2 million with a higher minimum salary—offsetting a $1 million bump in the NBA’s salary cap.

Similarly, the top overall pick in the 2017 NBA Draft has a rookie-scale salary of $5.1 million for next season. If the new CBA raises that by 50 percent as well, the player would take up $7.6 million unsigned. Teams currently have the latitude to pay up to 120 percent of that scale amount, which is why some franchises delay signing their first-rounders until after they’ve used every-last bit of salary cap space.

Exceptions also count against the cap. Teams that might have had $7.8 million in cap this past summer would technically be over by virtue of the Mid-Level Exception ($5.6 million) and Bi-Annual Exception ($2.2 million). In that situation, the exceptions could have been renounced to allow the team to sign a player at $7.8 million. Otherwise the team could stay over and use the exceptions to sign two or more players at a combined $7.8 million.

Factoring in a 50 percent bump, the Mid-Level would climb to $8.7 million and the Bi-Annual to $3.4 million. Together, teams over the cap would have $12.1 million in spending power to spend, with $8.7 million being the most they could give in starting salary to a single player.

A team that might be $12.1 million under the cap would have the choice of staying over with their exceptions.

Maximum salaries may stay flat, given how much they’ve jumped with the NBA’s current $94.1 million salary cap, but the criteria may change. Currently, players with up to six years of experience project to max at $24.2 million, those with seven to nine top out at $29 million and 10 or more would start at about $33.9 million.

Another key factor in determining space is the various formulae to determine a free agent’s cap hold. When a player’s contract expires, they still take up salary cap space on a team’s books until they’re re-signed, renounced or ink with another franchise.

The new CBA is expected to raise the cap hold for players at the end of rookie-scale contracts. Instead of giving Kawhi Leonard an extension, which would have limited the San Antonio Spurs’ spending power in 2015, the team let him become a restricted free agent with a $7.2 million cap hold. After using their space to bring in LaMarcus Aldridge, the Spurs gave Leonard a deal starting at $16.4 million. That $7.2 million would jump to $8.7 million (300 percent of his previous salary instead of 250 percent).

Victor Oladipo’s cap hold would have been $19.7 million next summer at 300 percent of his $6.6 million salary (up from $16.4 million). Instead, the Oklahoma City Thunder gave him an extension starting at $21.0 million.

As far as standard free agents not coming off rookie-scale deals, it’s unclear if the cap holds will climb, and if so by how much?

Finally, the new agreement is not likely to contain another amnesty clause, a mechanism in the current CBA to erase a single contract from a team’s cap (although the player still receives their salary).

The following is an estimate of the maximum cap space teams would have if they let all their free agents go. Rookie-scale contracts and empty roster charges are multiplied by a factor of 1.5. The working assumption is that teams will finish in the same draft order as last season. Obviously, that won’t be the case, but it’s just a bit too early in the year to take the standings seriously.

Teams can make trades or buy-out players to open up additional cap space. Several players have non-guaranteed salary, or team/player options. In most cases, to get to maximum cap room, the assumption is all players without 100 percent locked in salary are off the books.