There is a sort of allure to the prospect of working in professional basketball operations. This would qualify as my dream job, having the responsibility of building the best roster possible with limited resources and limited time. It's obviously a difficult exercise, since you can't just sign any player you desire. There are a multitude of factors to consider including current salary, future salary, player fit, draft picks, and so much more. You see all the deals going down in this free agency period, but what does it all mean? Most are tempted to look for a dictionary when the experts start hitting you with technical jargon like "Bird Rights," "Stretch Provision," "Repeater Tax," etc. It is my mission within this ongoing series of posts to get you all up to speed on the technical details of how the NBA operates. You see, there has to be an overarching system of rules and regulations in an effort to maintain order and competitive balance.
I know what you're thinking..."Competitive balance is a thing of the past in the NBA! Just look at the Warriors roster! No one has a chance to compete with that!" While you would be correct in your assessment that the Warriors are head and shoulders above most of the league in terms of ability, they are a unique case that has been built through exceptional talent evolution and a bit of luck, to be honest. As a whole, the CBA does a good job of keeping the playing field fairly even. No team can simply spend their way to success. There is a strategy that all teams must follow to be successful at any point in their existence. All that to say there are countless rules the league office has implemented to prevent loopholes. It takes a special mind to grasp all of these concepts and efficiently implement them into a dynamic system like the NBA. I don't fully understand all of these concepts myself and I will never attempt to deceive anyone who reads these posts and try to convince you otherwise. I simply want to give all who share my passion of professional basketball a place to go if you would like to understand some of the advanced aspects of the league a bit better. If you really want to get into the heart of the league rules, please check out the Larry Coon FAQ. He is much more knowledgeable on these matters.
Now that I have the easy part out of the way, let's move on to the meat of the matter. I will structure each addition of this series with a short introduction as I did above, then move on to the body which will be a summary of terms/concepts, followed by some examples to help drive the point home. I will skip over explaining why the salary cap itself exists, because that's pretty self explanatory. I will however give explanations on more advanced functions of the salary cap such like the repeater tax and options teams have for going over the cap. Let's dive right in to the first topic of the day:
Definition- The NBA operates under a "soft cap" salary system, which means teams can exceed the predetermined salary cap number by using special provisions, or exceptions. All teams are given this provision in the same quantity, but they can be limited if the team exceeds the luxury tax threshold.
Explanation- One concept that must be understood when studying the way the CBA works is that there are always exceptions to the rules. Quite simply, there is a loophole for everything. Front Offices across the league are consistently plotting on how to achieve total dominance in the league by gaining any edge and advantage they can. The easiest way to do this aside from incorporating a revolutionary tactic on the basketball court is to force the rules of the business to work in your favor. The league favors a soft cap system as opposed to a hard cap because it gives teams an avenue to improvement in almost every scenario. (Side note: Although the is no hard cap and the soft cap is quite forgiving, teams cannot spend endlessly. There is another limit called the "apron" $6.1 million over the luxury tax level for 2018-2019 that prevents teams from making any kind of roster addition. I will go deeper into this mechanism in a later article.) The main reason the CBA is as complicated as it is can be blamed on the fact that a soft cap system is in play. Exception add a completely new layer of details and refinement of the rules that have been introduced over the years, especially since the 2011 lockout where the luxury tax originated. There are several types of exceptions that vary in total salary and years. In addition, not every exception can be used every season. In other words, there are exceptions to the exceptions. It can be confusing to be sure, but don't worry. Things will get a lot clearer once the official article on exceptions is realized. Treat this as an appetizer of sorts.
Example- On July 2, 2018, The Portland Trailblazers signed unrestricted free agent Seth Curry to a one-year deal totaling $2.75 million. The Blazers are over the luxury tax, so they had to use a diminished version of an exception to sign him. This is called the "Mid-Level Exception" and will be covered shortly in a follow up article. If the league used a traditional hard cap system, the Blazers would have no space to sign him.
Bird Rights: (Larry Bird Exception)
Definition- The exclusive ability for a team to offer more years and money to a current or upcoming free agent on their team than the other 29 clubs in the association.
Explanation- This term originated with the Celtics legend receiving a then monstrous seven-year contract extension to remain in Boston in 1983. Under this high powered exception, the team that drafted a player (or has had them on the team for at least two seasons) approaching free agency has the benefit of offering a deal with more years and more money than any other club in the league. This right to offer a player extra money in their next contract is transferred when said player is traded and even has different tiers. If a player has played for his team for two season, the team gains partial (early) bird rights to the player. Once a player hits three season with his team, that team gains full bird rights to that player. Imagine you buy a car in cash then proceed to sign the papers and collect the title to obtain full ownership of that car. It's 100% under your ownership right? No one else can rightfully claim that they own it. If you sell that car later on, the new owner gets gains those rights through the title. In the matter of Bird Rights, you simply have to
Example- On June 30, 2017, the Indiana Pacers delt Paul George to the Oklahoma City Thunder for Victor Oladipo and Domantas Sabonis. Paul George had been with the Pacers franchise his whole career, so Indiana held full bird rights on George and had the ability to offer him a "superman contract." More on that later. By trading him, the Thunder gained the right to offer him more money in free agency, but he lost the ability to get a superman contract since his new team only has partial bird rights.
Minimum Salary Requirement:
Definition- This rule states that every NBA team must use at least 90% of the total salary cap when paying their team for the season. This threshold must be achieved before the final day of the regular season. For 2018-2019, that amount stands at $91,682,100.
Explanation-Did you know that there is a minimum amount that must be spent on a NBA roster? Technically, the team can spend as little as it wants initially, but if the 90% of the cap is not hit by a certain date, the amount they are short by gets distributed to the current members of the team. This is another tactic employed by the league to maintain the precious competitive balance you've been hearing so much about lately. If teams were allowed to go too low in total salary payments for their players, it would allow teams to have insane cap space the following season and would be in position relatively speaking, to sign several maximum salary players at once. Let's face it, no one wants to see that come to pass.
Example- Last season only two teams were guilty of failing to reach the minimum number: The Chicago Bulls and the Dallas Mavericks. The Bulls final salary number was $9 million short at $90.1 million. The Mavericks final bill only reached $85 million, so they came up short by around $13 million. The two squads paid an extra $3.4 million and $3.3 million because of their violations respectively.
Definition- This is a predetermined amount of money far higher than the normal luxury tax number. If a team exceeds this number at any point, they are subject to additional charges that become more extreme as the margin of separation increases.
Explanation- This concept was introduced into the CBA following the 2011 lockout. In the wake of the Miami Heat's Big 3, the league decided there needed to me more punishing consequences for blowing by the soft salary cap and abusing it by signing multiple marquee players. There are multipliers in place that multiply a teams total payroll by a specific amount once certain amounts over the tax are reached. They can get so severe that a team could pay $4.75 for every $1 they add on in salary. Pretty harsh right? Well it's by necessity. In another struggle for competitive balance, the league must take steps to keep general payroll down since teams can exceed the cap to sign players as long as they have their bird rights. Furthermore, there is a "repeater tax" rule that activates if a team remains in the luxury tax area for at least 3 of the previous 4 seasons. This increases the tax rate to an even higher level.
Example- The Oklahoma City Thunder are a poster child for these penalties and the Golden State Warriors will soon take their place. The Thunder currently have a payroll of $149 million. However, they have triggered the most aggressive tax penalties since they are $25 million over the luxury tax limit. In addition, they are subject to the repeater tax rule. When you add it all together, the Thunder have a tax bill of $91.5 million since they have to pay $4.75 on the dollar. If you add that to their already high salary bill of $149 million, they will pay their team $240 million total as things stand today.
As you can see, the CBA is a highly complicated set of rules and regulations that can't even begin to be evaluated in one article. However, if we're willing to take a bit of time and effort to break the contents down into smaller pieces that are easy to chew on, things begin to come into focus faster. Stay tuned for more detailed studies on several terms identified in this article in the coming weeks.