After spiking from $70 million last season to $94.1 million for the 2016-17 campaign, the NBA announced Thursday that its salary cap will indeed pass the $100 million mark for 2017-18. It just won’t soar quite as high as initially expected, which could wreak havoc on the best-laid plans of NBA teams … including the one that just landed the biggest free agent on the block.
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The NBA’s salary cap projection for the 2017-18 season has dropped from $107 million to $102 million.
In a memo distributed to all 30 teams, which was obtained by Basketball Insiders, the NBA credits a “substantial increase in projected player spending for 2016-17” that will reduce the league’s projected shortfall to the players to $200 million. […] A reduced shortfall translates to a lower expected salary cap for 2017-18. The league also projects a tax threshold of $122 million for next year.
Here’s what “reduced shortfall” means:
The collective bargaining agreement (CBA) between the NBA and its players stipulates that players must receive between 49 percent and 51 percent of all basketball-related income generated by the league. To make sure that players don’t wind up getting more than their bargained share, the league withholds 10 percent of their salaries from their paychecks and deposits that amount into an escrow account. After the league year ends, the NBA balances its books and finds out whether players got more or less than their fair share in total salaries and benefits. If it’s less, the league cuts a check for the total difference, to be distributed evenly among the players — that’s the shortfall payment.
Here’s more on the nitty-gritty of the pay difference, from cap expert Albert Nahmad of Heat Hoops:
With its earlier salary cap projections of $107 million for the 2017-18 season, the NBA had been projecting an underpayment to players of $375 million for the 2016-17 season. That, in turn, caused a $12.5 million increase in the projected 2017-18 cap.
With the massive amount of new contracts doled out thus far this summer, player salaries figure to be far higher than the league initially projected – still short of providing the players their fair share, but significantly less short than previously estimated. The league is now forecasting a shortfall of just $200 million. That, in turn, would cause a $6.7 million increase in the projected 2017-18 cap.
What was once a $12.5 million increase is now a $6.7 million increase, which implies a $5.8 million drop in the projected salary cap.
In other words: Teams spent so much more money on player contracts this summer than the NBA expected that the league had to drop the projected increase in next year’s cap. That Timofey Mozgov contract really set one hell of a tone, didn’t it?
In an environment in which every team’s got nine figures worth of spending power, a $5 million to $6 million drop in total cap space might not seem especially gigantic to the layperson. But every dollar removed from teams’ pools — and especially every disappearing cent drawing teams closer to luxury tax territory — makes it a bit harder for teams to pull off the big moves they’ve been planning. The most notable case study here comes with the big winners of the 2016 free agency period: the Golden State Warriors. From Brian Windhorst of ESPN.com:
This will affect teams’ planning for 2017 free agency — specifically the Warriors. Kevin Durant is signing a contract Thursday that will allow him to re-enter the market as a free agent next summer. Because the Warriors will not have his full rights at that time, they will have to create $33.5 million in cap space if Durant wants a new max contract.
Stephen Curry and Andre Iguodala are also scheduled to be free agents next summer. The Warriors retain both players’ full rights, but it will be a challenge to re-sign them while also leaving room for Durant. That challenge was just projected to be $5 million more difficult.
It’s also possible, of course, that the Warriors will have to work to fit all their stars under the cap in a drastically different environment.
The 2011 CBA is scheduled to run through the 2020-21 season, but either the league or the players can opt out after the 2016-17 campaign by giving notice of their intent to do so by Dec. 15, 2016. While Michele Roberts, the executive director of the National Basketball Players Association, has said she sees no reason for a work stoppage, she also warned the NBA not to cry poverty in the aftermath of the league’s $24 billion broadcast rights deal, and has publicly discussed the likelihood of opting out of the CBA in October of 2014, with an eye on moving the players’ share of revenues up from 51 percent back toward 57 percent, where it stood before the owners wiped the floor with the players at the bargaining table during the 2011 lockout. NBA Commissioner Adam Silver, too, has pumped the brakes on the likelihood of a labor stoppage after the 16-’17 season, but has also spoken about his preference for a hard salary cap and cautioned that, before the new TV deal windfall hit the system, “A significant number of teams are continuing to lose money.”
That frosty public negotiating has seemed to thaw in recent months, with multiple plugged-in reporters expressing optimism about the possibility that neither owners nor players will want to derail the revenue-generating gravy-train ride the NBA is on right now. Nestled within Windhorst’s report on the cap-projection downshift, though, is some cloud cover for hopes of labor peace and sunshine (emphasis mine):
It is noteworthy that these projections are based on the current collective bargaining agreement. Both the NBA and the players’ union have an option to end the agreement by Dec. 15 and are expected to do so. The sides have been in talks about a new agreement for months and new terms could change all the projections.
Such future uncertainty makes long-term planning awfully difficult if you’re an NBA team. Whether a new labor agreement would help or hinder the Warriors’ chances of keeping together their newly assembled All-NBA core of Durant, Curry, Thompson and Draymond Green remains to be seen … which is why it would seem to be a pretty good idea for them to go ahead and win this year’s title. Y’know, just in case it’s the only one they get a crack at.
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