How COVID and a once-sound accounting strategy sunk Cowboys 2022 cap

The Dallas Cowboys haven’t won anything substantial in almost three decades, and this January’s unceremonious exit from the playoffs in the wild card round only exacerbated the fanbase’s frustration. The malaise from another exit before reaching the NFC championship game, much less the Super Bowl, has lingered for weeks, and an offseason full of black eyes on the organization has only led to more infuriation.

To make matters worse, over the last several weeks the chatter about moving on from one or even multiple star players crescendoed and was fully realized with Saturday’s trade of Amari Cooper to the Cleveland Browns. The return, a fifth-round pick and a swap of sixths, was not what many fans feel was an adequate return for losing a No. 1 receiver. This is despite the clear connection between the remaining $60 million the acquiring team was committing to lessening what level of draft compensation they’d be willing to part with.

The Cowboys on the other hand, had no real options other than moving on from Cooper.

With decades-long frustration ruling the thought process, fans have worked themselves into a furor over a perceived mismanagement of resources. Are they right, though? Is the anger justified or is there a rational explanation for how Dallas is here?

The need for space

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Dalton Schultz, Michael Gallup, Randy Gregory, Jayron Kearse, Leighton Vander Esch, Damontae Kazee and Connor Williams are all starters who became free agents. Cedrick Wilson, Malik Hooker, Keanu Neal and Dorance Armstrong were all key rotational guys who are also free agents.

There are simply too many holes they will need to fill on their roster and they only had $3 million and a single top-50 draft pick to do so with.

Once teams get outside those top 50 picks, getting an immediate starter is a question mark. So what could Dallas do? To create a lot of room, moving on from Amari Cooper, La’el Collins and DeMarcus Lawrence has to be considered.

A combination of restructuring those deals could have created some of the room releases or trades do, but not without significantly hampering Dallas’ ability to have cap space in 2023 as Trevon Diggs, CeeDee Lamb are eligible for extensions. Or 2024 when they’ll have to make Micah Parsons the highest paid non-QB in the league.

Understanding how Dallas does contracts

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Most NFL teams give out contracts based on speculation. How will this player perform over the length of the deal? How will they fit in our system?

Dallas, however, looks at non-rookie contracts as promotions.

They have a “This player has been a model employee over the course of their contract, let’s reward them for past service,” mentality. In non-sports industries, this is a standard approach. In sports? Not so much.

This is why they don’t want to sign outside free agents for any real money, because they haven’t yet contributed to the financial success of this organization.

It’s sort of ironic how a family that built their fortune on oil speculation has become so averse to using it in football, but maybe that’s because father Jerry Jones is the speculator and son Stephen was raised in money and is more mentally tuned to trying to preserve the fortune than the risk-taking that went into building it.

When a home-grown player performs well through his rookie contract, represents the organization properly, they are rewarded by a big deal. If the player’s performance in later years doesn’t live up to the terms of the deal, so be it. That means that they won’t earn another contract or will be released out of their current contract, cap hit be damned.

External free agents may have earned their impending big contracts in the league, but they didn’t earn it for this organization. They will not be rewarded for that in Dallas, at least not easily.

This is the Cowboys’ free agent philosophy in a nutshell. Long-term personal impressions are a major factor in their evaluating what they would pay for any free agent and without that information it is incredibly difficult for them to justify to themselves signing outsiders for big money.

How COVID changed it all

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The NFL salary cap was humming along at a solid expanding clip through the 2019 season. Each year since the league emerged out of the fallout from 2010 lockout saw increases between $10 million and $12 million.

Here’s a look at the year by year totals from 2013 through 2020.

That 2020 cap was originally projected to be a little bit higher, but more on that in a second.

In addition to this standard level of growth, there was the expectation that the cap would grow to having even bigger jumps starting in 2022. Legalized gambling tied into stadium experiences and the next round of television contracts would cause a significant increase in revenue, and as the annual cap is a percentage of revenue, salaries would balloon, too.

I spoke about it at great length in this piece that compared the NFL to the NBA’s salary explosion due to their new labor deal, when the top salaries increase 70% over just five seasons. The riches were going to be out of control.

And then the pandemic hit.

The 2020 salary cap was close to being set when the world began to shut down. That year’s cap came in at the bottom of the projection range, and the next several seasons were drastically impacted by the loss of revenue as stadiums sat empty and game-day experiences of buying overpriced concessions and jerseys vanished.

Things were so bad the NFL instituted a cap floor for 2021 to mitigate the losses and roll some of them over into 2022’s cap situation.

How much cap space was lost and why did it hurt Dallas so much?

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Prior to the pandemic, estimates were that the 2021 cap was going to come in at least at $210 million.

Instead the 2021 cap was $182.5 million, a loss of at least $27.5 million of projected cap space. Using the prior cap increases, the 2022 cap would have at least been $220 million ($10 million increase from 2021 projection), but it’s currently set at $208.2 million, so that’s another $12 million loss.

Remember, unused cap space rolls over, so it’s fair to add all these spaces together. We’re already at just under $40 million of cap space lost, at a minimum.

Throw in that the 2022 season was also the first year of those projected gambling/TV increased revenues and it is clear in the jump from $182.5 million in 2021 space to $208.2 million this season there is certainly some of that impact.

The NFL offset pandemic losses from 2020 over the two seasons.

There’s clearly another set of millions that the cap would’ve grown above the standard $10 million annual increase. Let’s conservatively say that on top of the annual $10 million increase we accounted for earlier, the gambling and TV money would have bumped that up to $15 million or more.

The pandemic cost NFL teams at least $45 million in cap space across 2021 and 2022 and it hurts teams like the Cowboys more than others.

Why did it hurt the Cowboys more than most teams?

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When a team does contracts, they look at the impact on the cap for several seasons, not just the first year. When the Cowboys do contracts, they build in restructures and operate their annual budgets on this ability to remain as close to the cap ceiling as possible.

While Dallas hadn’t won in a while, this was an effective and efficient strategy. When money is restructured and the cap hit is pushed off into future years, it works in the following way.

If $1 million of cap space is 1% of this year’s cap, then pushing that $1 million off for 5 years means it takes up a smaller percentage. It’s basically printing money as long as the salary cap continues to increase.

Before the pandemic there was zero reason to think that wouldn’t continue.

But the pandemic not only stopped the cap from increasing, it took it backwards.

Money that Dallas paid in 2018, 2019 and 2020 in restructure bonuses, instead of taking up a smaller portion of a future cap year (2021), that dollar was now worth less because the cap was smaller.

And there were many.

Zack Martin’s deal was restructured in 2020.

After not restructuring his deal for the previous two seasons, Tyron Smith’s deal was shuffled in 2020. DeMarcus Lawrence restructured $15 million in 2020.

Ezekiel Elliott had an option bonus for 2020 and that could’ve been the end of pushing his money forward, but the loss in cap space in 2021 forced Dallas to restructure him last season, too.

All of those restructures had allocations that added 10s of millions of dollars to the 2021 cap that contracted instead of expanded, and now Dallas has to account for it.

Fans complaining wanting the club to go all-in this offseason haven’t been paying attention. Dallas has been trying to extend their window for the last two seasons and they have no playoff wins to show for it.

Why Dallas, Part 2

(AP Photo/Ron Jenkins)

In addition, with the loss of ~$45 million in space, Dallas was caught with difficult decisions to make. They had already built multiple contracts back to front, with heavy expense later in the contract. Their strategy of delaying paying Dak Prescott comes into play, here too. It they had known things would become so tight in 2021, they likely relent on a few million in 2020 negotiations.

That extra $45 million in space makes Amari Cooper an easy keep and allows them to re-sign Michael Gallup and Randy Gregory with ease, while also being able to bring back Jayron Kearse and Cedrick Wilson.

Without it, the Cowboys find themselves trading Cooper just to have a chance to bring back those other guys.

Cooper’s deal at the time was lauded for how little they put into the signing bonus, allowing the club to get out after two seasons. When they drafted Lamb less than two months later, giving them a future No. 1 WR no one expected to be available to them where they were drafting, the writing was all over the wall as the Jones family drafted from a yacht in the ocean while the pandemic raged.

So what's next?

(AP Photo/Roger Steinman)

I’ve already written how I feel Dallas is considering making a big push to compete on the back half of Prescott’s contract, starting in 2023, with a core of Lamb, Parsons and Diggs around him. They have a tough decision to make with Lawrence because clearly a team is better with three pass rushers, but releasing him (or trading) would help their future cap.

Yes, it would save $8 million on this year’s cap, but moving on from him this year would create $32 million on next year’s cap, for a total saving of $40 million.

If Lawrence plays this year, his $27 million cap hit stays and releasing him next offseason would only save the club $10 million off the cap.

The same philosophy applies to La’el Collins who would only shed $1.3 million of cap space this year but releasing him a year early means he clears out $15 million on the 2023 cap for them.

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