NBA Salary Cap

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NBA SiIary Cap FAQ
Page 22 of 78
11,1
(‘XC p1 Ion ciii ciii y hi
10 ye Ii (Cone Ia iu We A tc-
cnint cci 0 the I no m for which the player was ilaying when his Injury or illness wa; known
r,r reasons My liou Id
m C n not trade fur an injured player and subseclue ntly apply br a Disabled Plciye r exwpt
ion icr Iii it piay C C.
II a Iciin,. jiliplInibun (or lIl?ibled pkiyer exception is denied, liii- learn must waft
90 clays before submitting another request related to the
ow ii cyc r, ann (I a-n only (01 0 I ew in iuiy ir aggravation ci the sonic in iury Wi,ctt,er the
oppli rat 01) Was al,prov ed or denied the I ‘silo C, ii
apply ig,iin (including for (lii: same pniy) Lhe following season.
-
I Inc disabled player comes hack sooner tliiio expected lie may be activated mmml lately, and the
replacement player Is not affected.
Pool canto--ic (hi? Disabled Player exception wilO (lie salary cap rePel teams sometimes rereive
after iosinp a player to a r2reer-endi;ig Injury or
(h (se ,1ii Ccl ion ri lmt,t -r (.1). lii- Disabled ‘layer excel) t ion allows a team to
acci u;re a r eplatei inn it player. TIi 0 5db ii y Ca p eli ci i emtiV lea
i o,,trnct born ll,i tt’,,rn’-; book’.
also si-ic quistro,, nun her fl’ for more Information on the avolldhility and use of this exception.
RE INSTATEMENT
If a ‘lvii was banned from (lie league for a drng-reliited offense and later n-inst ited,
Ills p nor team may re-sign him for
iii, to In-; pe-vious .,ilai y.
——
i-i-
question number 10) iou more i ito rmiit,on on reInstatement.
Summary of Salary Cap Exceptions
Larry
Bird
Early
Bird
NonBird
NonTaxpayer Taxpayer
MidMidLevel
Level
Room
Mid-
i
Hi-Annual
Rookie
Minimum
Disabled
Reinstatement
Player
The Traded Player exception is not listed because it cannot be used to sign players.
2
2
lithe player was awarded to the team thrcug h a partial waiver claim under
the amnesty provision (see question number 68), his full salary
prior to amnesty is used as the basIs for detennining the amount that can
be otfered under the non-8rc and Early Eird exceptions.
in the previous CBA the Mid-Level exception was Iced to the average salary.
This is no longer the case-.
26. How do exceptions count against the cap? Does being under
the cap always mean that a team has room to sign free agents?
Do teams ever lose their exceptions?
http://www.cbafaq.comlsalarycap.htm
3/12/2014
Page 12 of 76
NBA Salary Cap FAQ
05% nI the nip
ml?— Li
ii
lii
1I
$4’I.331 ipillilin
$‘‘.il! I nuIil,in
‘liii—! S ‘11ff0 nil the mu
2W’ -16 90% of II e: cup
/016-li “11% 01 the cap
jIll 1-18 90% of be cap
20111-39 ‘1(1% ul tile
UP
/111’)- 11) 90% of the cap
‘30% of the
/11)1)—?]
The team payroll Is not the same thin9 as lie team salary. The Learn saiai-y refers to the sum of the amounts applied to team salary, Including
e ‘ci p1 ayers loll salary (see np test on nun ihe r I I a a lull list). Lie team Pay roll refers to the ‘roiiles ado ally paid. For example, IF a Learn
Li crIes a player midway through the season hIs salary comes oft the tearii salary, h,il hi, nioney acl.ually jminI while he was a member of the
team counts toward the team pavIoll. the team payroll also Includes salaries charged to teams for players waived through the Amnesty
provIsIon (see questiouu iiuutiber hH).
If a Ie,ini doesn’t meet Its minimum payroll It is surcharged at the end of the season for the shortfall. That money Is dIstrIbuted among the
players on that team.
A,,,onjnls
paid
to Internaliooal teams (see questIon number Z) do not count toward the minImum team payroll.
as huyouts
what are the players’ salary restrictions?
16.
Ployers hove both mInimum and maximum salaries, and both are based on how long the player ia’; been in the league. The mInImum salarIes
stile upward each season starting In 21113—14, Here are the mInImum salarl -s
201.2-13
2011-12
-
-
T
2013-14
2014-15
2
2015-16
$816,482
$845,059
$SS13$Of8Sl399IS8t2939132’l3
$94? 776
3
885J20
4
$915,852
sç
$992,680
$385,12011916,0991__$942,163
$915,851
f
$94/,907
$981,01,0l5,4?l
2017-18
2016-17
fl5-;
i6Ls49o,s
$762,195s1624g5s188,s72’
1
I
iL
$905,249
$814,636
$980 431_[1
014
2018-19
2019-20
$936,932J
2020-21
$969,725 $1,003,665
1454.1 3z02ufT087
02_I$s
25067
$1,015,696 $1,051,245 $tooJ6J21ljoS,SJj
$1,037,745
$1,050,961
$1,125,816 $1,165,220 $1,206,302
$99Z68f$1,02/,424 $1,063,384 $1,10O,603j1439,123J $1478,9pJj1,22O,257 j $1,262,966 $1,307,170
j
$1,069,509 $1,106,941 $1,145,68Sj$t,185,784 [1,227,286 $1,270,241 $1,314,700 $1,360,714 $1,408,339
$1,146,331 $1446,333j1J86,459 $1,227,985 $l,210,964J$1,315,448 $1,361,489 $1,
Mt $1,458,461 $1,509,507
$1,452,738 $1,503,583! $1,556,209 $1,610,676
8
$l,223,166jI,223,1_j$1,265,977__$1,310,28j$1,356J46j $1,403,611
9
111,272,279 $1,316,809 $1,362,893] $1,41O,59j1,459,969 $1,51 liJ$1,S63,95&_$1,618,694
$1,352,181 $1,352,181 j $1,399,507 $1,448,490 $1,499,18jJ551,659J $1,605,967 $1,662,t7]1,120,352 $1,780,564
10+
Here are the
$l,2295 $1,229,2
league-wide maximum salaries. Note that there are exceptions to the maximum salary (see questIon number 17),
roefined maximum salary r2?..12
Years in NBA’
2012-_f_2013_14
$12,922,194 $13,668,750 [$13,7o1,25_?j
0-6
25°/o of cap2
7- 9
30% of cap
J $15506.633]$16402,Sj$16,44i,5001
35% of cap2
$18,091,071 $19,136,250 $19,t81,35j
10+
j
A free agent’s maximum salary In the first year of a new contract Is never less than 105% of his salary In the last year of his previous contract,
For example, a ten-year veteran free agent who most recently earned $20 miihion has a maximum salary of at least $21 million, even if that is
above the league-wide maximum. A free agent does nor need to remain with the same team in order to receive 135% of hIs previous salary,
although the team that signs him Is subject to the same salary cap restrictiouls as with any other free agent.
A first round draft pick who completed all four years of his rookie scale contract, or a second round draft pick or an undrafted player wno has
see
four years of service, is eligible to receive a h;gher maximum salary if he meets certain criteria (called the “5th Year 30% Max criteria’
question number jJJ.
--
• Named to the All-NBA First, Second or Third team at least twice
• Voted as a starter In the All-star game at least twice
• Named the NBA Most Valuable Player at least once
Players may receive salary advances, loans, and deferred compensation (see question number
1’+4n.Ik,rn,,,, ,k,,Fn,-. nn,,,In,.ln.n,,-,n.. h+m
1 for more Information).
2111flA14
NH/\ Naliiry Lap I”AQ
if die playi r I.
• II the
Liii’
play,
i
is,
Page 30 of 78
N on Iii rtt free
-
Non—Dud or
count).
at cot i
nd the I cii m a I ready used their Non—Taxpayer MI ti— Level
exception to sign another player
I any lint free ejent with three years In the league (this rule
applies only to players with one or two yeiin;
• II a teen len; two Nuii-itIril In-i’ ,igents with ow- or two years
uiw of them, bitt would in-v lie,
Teams
in ch’ t t
c.ip
il-. 0 use
ciii
cap
room to
1’ nit
I,,
of
iii
in
the hague. They can use their Non—Taxpayer Mid—Level exi:eptioii
to keep,
course.
rail w ii t I er Lh i’ tea m hi-. eon ii h cap room to
noon, to tin’ ,ivi’iige satiny in tile ofii-r sheet.
ri
offer a
cr1 n tnt, Ct wil h
a sobs tan I in!
increase in the (hi rd so IrOn, they compare the
II you west to know how I got hit ‘;ii P amount, you solve fur (1R 2.0451.)
/ 2.041.1< Is dir room the ream has tinder liii tip, so the
i-olin’ Pour—yr-ar rtintnicl plays ‘1k. I is lii- Non —Taxpayer
Mid—level Exception amount, which is the maximum
the team call offer in the
iii •.t ‘.u,mron, 1 hi, Ci 011(1 ,.casnul i.r.a ‘it,’!0 ruse, .omd he
first Iwo seasons together account fur E + 1.0455, which
is 2.O4bE. So the last
tw;,sr-ason [1,1 1 R-2.I)ISL, amP wito a 4.1% raise from year
three to year four, we can say (;f V is the year 3 amount)
V 4- 1.041Y
2.11451
—
•
—
LI
tIe’ ycir three .,inou’it is (4k
—
!.ulSE) 12.041.
TI a player signed pursuant to the (;liherr Arenas provision Is IcIer traded,
his trade value is equivalent to liPs cap amount, and new team
inherits I ht, same ran Dii as tin I cain that ti-aded him. in other words,
it the player goes to the team submittinri tire offer sheet and that
s-.ini later tr,um us lit ii, the ,iv vi age s,ul,iry of the coi tract is charge
d to his new teams cap. II instead the player’ origina
s
l team
tlitr oiler sheet, keep; tin player-, and su;isequentiy trades hen, the playeis
actual salary is charged to his new team’s cap.
nat coos
46. Haven’t some restricted free agents gotten away anyway? How
did this happen?
mr one, the terurn can simply dcci he nut to notch the offer sheet.
If this happens, the offer sheet becomes an official contrac
t with the new
tin, allei three days. The team can aim provide the league with
a written statement declining their right to match the otter
sheet, in which
cisc the piliyei bet onus., ni,einlrer of his new team right away.
It Is aumetirnes posslhht tu sign a iiayer 10 an offer sheet his prior team
can not match, as described in question numbe
r 45.
41. What If a restricted free agent has no interest in staying
with his original team? Is there any way he can
force the Issue?
If the player really wants ta leave, ho can sign his original teams
qualifying offer, which constitutes a one-year contrac
t at a scale salary. He
iriir.I taco pirry wih iris normal learn for one seascn arid Following
,
that season he wIT become a free agent again. If he
insets the tenui e
ririlui rement tie wilt he an unrestricted free arjent, and then rail sign with
any other team.
Tips strategy typic.rTly wouici not be effective for players who would
continue to be subject to restricted free agency.
For example, If a seconri
niiriirrl pick conipietes -i two-year contract, he will he a restricted free
agent at the end of hls second year. But if he acceot
s his ouaiitying offer
and plays an additional season with his previous team, he
wouid be a three-year veteran the following summe
r and therefome st:ll subject to
resrrcted I: cc agency.
45. Does a team receive compensation when another
team signs their free agent, like in some other sports?
Ne. A team that loses a free agent does not receive anything. it
used to be the case in the NSA a long time ago, but not
any longer. Perhaps
the most famous example of this is when the Lakers’ Gad Goodrich
draft pick as compensation, which turned out to be Magic Johnso
n.
signed as a free agent with the New Orleans Jazz. The Lakers
received
a
49. First round draft picks operate under a different set of rules?
Yes, There’s a salary scale for first round draft picks and their first contrac
ts. They do this because It was previously common for
rookies to hoid
out, not signing with their team until they got the contract they wanted
. There was also backlash 1mm the veteran players
with eo NBA experience getting more money than they wee. The
who saw rookies
last year without a sniary scale was 1990, when It
was rumored that first
overali pick Glenn Robinson was going to hold out for $100 million,
and he eventually signed a 10-year, $68.15 million contract.’
Beginning In 1995, salaries for first round picks were set accord
ing to a stdct scale, determined by theIr draft positio
n. The salary scale is
determined for all picks in ail seasons when the GSA is written
. Rookie scale centracts are always far two seasons, with
team ootions for the
third and fourth seasons, Scale amounts are previeed for
the first three years (two guaranteed years and the first
team option year), and tne
fourth year (second teen oatio’i year) i5 de’ined il tems of
the percentage raise cver the ycar-taree saiary (wth
conditions unchanged from the first option year). The salary
other terms antI
scale also dictates the amount of the qualifying offer should alt
restricted free agent (see question number 44) following his
the player become a
fourth season.
For exampie, here are the scaie salary figures for the #1 overall
draft pick in each season from 2011-12 through 2020-2
1:
(Season
2011-
20121201314
I
lstyear
salary
I
2nd year
salary
$4,296,90J79,800
I
3rd year team
option salary
4th year team option (°Io raise
over 3rd year salary)
Qualifying offer (°Io raise over
4th year salary)
{$4672,700
$42S5,9079,8Qj5fli70O
I $4,436,900
134,535,600
$4,836,3u0
I
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NSA Snhny Cap FAQ
14,592,200
$‘i,lglI,gou
$5,005,500
$1, 753,ntlo
$‘l 966,1100
$5,180,700
$5,t40,700
$5,362,100
fl
)tiltI-
1020
Page 31 of 78
$5,091,501)
$5,320,600
$5260/On
$‘;,soG,ooo
$5,744,000
$5,454,100
$5,699,600
$5,9’lS,OOO
$5,645,000
$5,899,100
10.0%
26.1%
30.0%
26-1%
30.0%
30.0%
26.1%
30.0%
126.1%
30.0%
fly romparison, the :111th and last pIck In the first rotinrl has a first-year scale solaiy figure of
$850,800 In 2011-12, old $1,120,300 In 2020-21.
A iI,,tini; of the salary figures for all draft ,icks Cud all years can 1e found flF[_F.
team may :lqn a player fnr as little r-.; 80% or as moth as 120% of ttie scale salary Figure.
Teams usually sprIng for the foIl 120%, but there
luive been exceptions. Teams river the salary cap use I he Rookie exception
to sign tne,r lest round picks (see queslina number 25).
As an example, for the first pick In the 20)3 drab, here are tim scale amounts for each season
(from the chart above), alonn with the minimum
lit I ijiax a-i um a nit) tints the p aye r Carl lie paId t’a cli se ,‘soil:
--
seasun
-
scale mnifu.imum saIMaxim in sary
‘01:1-ti
$‘l,636,900
$:1,519,Sltl
$5,3?6,lnO
2014-15
$1,636,600
$3,709,380
$5,563,920
1015-16
%4,836,300
$3,869,040
$5,803,560
1016-17
26.1% raIse
$1,878,859
LQyoioft3o%dhoveniw-i7sal?4$634zs17
$7,318,289
$5i776___
If the player Is not signed by January 10, the scale amount pro-rates (reduces In value)
each day for the remaloder of the season. hr example,
if Inere are 110 deys In the season, then the scae amount reduces by :1170th each
day starting January 13, uatil the payer is signed.
TIle exert percentage increase for the fotirth (second team option) year ann qunlilylng
ofier varies by I lie player’s draft position. For the fourth
(second team ophon) year It is 26.1% for the first pick, scaling up to 80.5% for
the 30th pIck. For the qualifying offer it’s 30,0% for the first
pIck, scaling up to 50.0°/i for the 3011, pick.
Teams have until the October 312 preceding the player’s second regular season
to exercise their option for the player’s third season. Likewise,
they have until tim October 3j2 preceding the player’s thIrd regular season
to
number fi for more information on options). If the team invokes both options
offer after the fourth season, then the player becomes a restricted free agent
agency). If the team declines either option, then the player enters free agency
exercise their option for the player’s fourth season (see question
(keeping the player for all tour seasons) and submits a qualifying
(see question number 44 for more intormation on restricted iiee
as an unrestricted free agent.
l-lowever, if the team declines either option and the player becomes a free agent,
the team cannot re-sign him to a salary greater than he
wook’, have recetved had the team exercised its option. In other words, teams
can’t decline an option year in order to get around the rookie
solary scale and give the player more morley. This applies to all types of signing,
IncludIng the Olid exception, the Mid-Level exception, and cap
poom.
The qualifying offer For a player coming oft a rookie scale contract is a defined
percentage over his fourth-year salary. The percentage Is set in
the rookie scale based on the player’s draft position. However, the player
moy qualify for a hIgher or lower qualifying offer based on whether or
not he met the ‘starter criteria’ in the previous season, or in the average
of the previous two seasons (see question number
).
A buyout to an International team or organization Is the only form of siqning bonus allowed In
a rookie scale contract (see question number 76).
Performance bonuses are allowed In rookie scale contracts, but only with
3Q0/,
respect to
of the scale amount (see question
number 13). Loans are not permItted with rookie scale contracts (see question numberthe salary above
nj).
Teams select players In the draft at theim own risk. If a player’s draft eligibility
Is contested, the league will Investigate. if the player Is
determined to he IneligIble, the team will hove forfeited the pick it used to
select the player.
Ion Rosenbaum analyzed the effectiveness of the salary scale system and concluded
that it has resulted in tIle annual redirection of $200
m1lllen from non-veterans to veterans. Rosenbaum’s paper cuaently is unavailable
online.
2
Or the next business day, if October31 (ails on a weekend or holiday. For 2011-12
the exercIse period Is December 9, 2011 to January 25,
2012.
50. What if the team and their drafted player cant agree
to a contract? What options does the player have? How long
does the
team keep his draft rights?
The player’s options are Ilmiteth What happens depends on a number
of factors:
7—
‘4-—
I.
httpJ/www.cbafaq.conilsalaiycap.htm
n 717fl1 a
Page 13 o1r78
NHA Sulary Cap FAQ
U ie N IA for direr or more :I’ acon’., and is; playlort under a one-year, 10-day fir rest—of—season contract at the
(hi limo: ,i’ii,iliur’;e’. U],- him (Or part if lii,, ,ii,iry——.ny amount above the itiiiiimtini sul,iry level (Or a two—year veteran’.
Ilir i’x,iiiplt’, In 31)11—I? tb: inii,IIi,iiii sale y ui a twisycir vieson Is a’,i, SF01, sri for a teii-ye,ir veteran, with a niininsuln salary ni
ni_jill, the i’.islin’ would n’iinhursi, tb. tim, $4077,)) only lie two-year minimum salary Is Included in the team salary, not the player’,;
till oilily. 1 hey do this, so telinis wolit thy liwily from sirjriiiiii older Veti,r;,iis simply because they are more expeilsive than younger veterans.
Whet, ‘I p1. yer iii:; been In
nhiiiiiitiOi
.:il:iry,
[I r: I r flu id dia Ft o Irks I love a mu Ri restrict lv Os, liiy utah’, Ii ised on Iii sir (Ira It p os tlon (see q uesti on number 49 for more Info rm,i tbon).
A pl,iyi-r Is created wIlli i year of service fur at Ii season iii whIch ho Is (in
Iii,: regular eatoul.
I
5
ii
learn’s a, live lisa or maclive list fur at least one day during
hey u-is a ditIi’ri’nt rip c ,lrtil,linn In ,let-rmlne this m,,x,miul, s,ulirius., which Is li,sed on 47.14% or Imliecleil FIR) rather than 44.74%.
ii /Dle, the sal,-,, nerlulkited ,‘ diFferent lot inula hr settlrlrj the salaly till) hIlt not riiaximijm salaries, So he two became net oupled, and
1111’. ,,,,,tiiiu,iii iii (lii’ lOLl ig’ei’ITI’iir. ow lIes reason tilt: miximlili 5:110, lu. are not iiclually 25°!o, 30% or 15% oF the cap, aiid ,nsteac
,n-i’.lulhlly lnwr’r.mou.lt. or r’x.Istsk’, cv’:sl tliniiqll (Ii, ,;,il;iiv captor jAil i-i) iS $58.04-i million and 25°/a of this amount Is $14511
olllhi,i, the 1)—I year m,,xl,nllm -‘lacy is; ;ictii.illy $l2,’)72, 7)4. In laldlbon, For 2012—13 a 5.80/0 increase in maximum salaries was agreed
to, even Iliough the siliry I’ll) slIyed the some as 2011—17.
1
flq’ team Is relnlhursed
two-year veteran.
even if the player Is wiiivrtd during the seoson, as loon as the player was paid more than lhe minimum salary for a
17. Are there exceptions to the maximum salary?
In molt-year rontricts only the i,rst season’s salary Is subject to the maxImum, but there are restrictions about how bIg raises can be
1mm ye:ir to yet (5.00 cluetiun number ‘‘fl.
Vi’’,.
In ,uiliIll 110, ii pity In his fifth season ran goal fy for more than thn 0—6 year (25%) maxim tim, and up to the 7—9 year (300,1.) maximum it he
ha’- mixer the “5th Vet rlO% Max rnterma” (see quest son number SO). However, a player’s eligibility for the higher maximum salary doesn’t bigly
be will actually receive liii,- iumount ——as with all salaries, it’s a mailer of negotiation between the player and his team.
‘,
18. What percentage at revenues do the players receive?
Cool nit I’, are individually negotiated liotween players and teams, and several factors control tile amnunt each player individually can receive.
cell,-ctively, the players ore guaranteed to receive ar least 51.15% of revenues In salaries 8 benefits for the 2011-12 season. Starting in 201%13 riley are guaran;eed to receive 50% of terecasted revenues, plus (or ;n-nes) 6O.S°/a of the amount by which revenues exceed (or tell short
uf) the forecasLs, with a lower ‘‘at ci 49% ci 58111,13 an upper l:m::of 51% o SIC,
‘are
the revenue I orecasts for 2012—13 throuti Ii 2020—21, with 50% of the forecast value (upon which the ooarantee Is based);
Season
SRI ForecastI500/o of Forecast
21112-13
$4,308_brlhon_bJ54 billion
Ills 3-14 $4.48! billion
$2 lieS billion
2014-15 $4660 billion
$2330 billion
2015 !6bt870
2(116-ti
bihlionT$2.435 h’i:cn
$5,089 b,hlion
2017-lB $5,318 billion
$25445 hiihion
$2659 billion
2018-19 $5,557 billion
$27785 billion
20t9-70 $5807 hilton
$2.9035 billion
2020-21 $6,069
$30345 bdhonJ
bihon
For example, fOR! ror 101 2-13 is 54.408 billion, the-i the players collectively are guaranteed $22145 billion, which comes 1mm:
• $2,154 billion, which is 50% of the $4308 billion forecast, PLUS
• $60.5 ml ion, which Is 60.5% of the amount by which ORE (54.408 billion) exceeded the forecast for 2012-13 (*4.308 hIlton)
If instead ORT for 2012-13 was $3.9 billIon, then the players guarantee would be $1.911 billion, which comes from:
• $2154 billion, which Is 50% of the $4308 billion forecast, MINUS
• $246.84 million, which Is 60.5% of the amount by which BR ($3.9 billion) tell short of the forecast
for
2012-13 ($4308 billion).
• [he escve eouols $190716 billion, whmch is below Pie lower b’mt, so the players wood receive 51.911 b’lhioi.
Here
is what actually happened in each season:
2012-13
Forecasted SRI:
$4308 bHlion
Actual SRI:
$4293 billion
I
I
t,.,..
‘i/IlflfllA
Ni A Salary Cap FAQ
Page 14 of 78
or shortfall:
Excess
GO.S/o of excess or shortfall:
$ -t million shortfall
I rr,Iliiori
SOlo of lurecasted BR!:
$2154 hull,,,n
PI.yers’ guarantee (50°/n of forecast plus/minus
$7,145 billion
60.5°/o of excess/shortfall):
‘19.96%
Actual guarantee percentage;
r.lnce intlivitluil sahin 15
lire negotinteil before tile season slarts (In many cases ycait before), and PR! is nor delermineil ml the cr1,500
airhirles, Ihen’ are mirciianisnel In place to adjust when ;,,l,,i es i;I’;; Ll,.-ir tinirl. If the players receive less than their guaranteed share tif
lull, the length) LI uSd1 I peu.k i the players association for the dufienrnr e, anti this amount is distributed to the players (this happened iii 21)11)II, under tl’ 20(1, Lila).
II ir’ eS (OW
5, t ‘Ill rIriJu st.
(lie liii, yers’ solar, c-s whe:i Lb t’y
Ci rn 0101 C
I Ii,,,, LI no r I iii, imiteed ,ili ire (sue question
I, UI
oh Cr
A new Ilenchts pnnl Is funded wIth 1% of PR!, which comes out of ti,:’ players share. The inol Is riced to fund post-rarer: henotuls anti
Ill III Ii es for players who have vested. The specifc Os nelits to be rovid d wi I: be lieu sit ate I ,y I is is-ti II? intl i yr us associal
if there Is
an escrow overage (see queston numbe 20) dna the escrow lund us un,,utit:-wil Lu bring salaries Is henehts dow,, to the players desionated
chore, they take the cmii :itler out
1
tit
titus benefits pooi.
1)gf forecasts were determined when the CPA was originally negotiated. This differs from projected SRI, which is determined each )uly (see
oUC5toII
iuinber 13)
19. How does the escrow system work? What is it for?
The escrow syslcm works lItinui-in-lij,nri with the players’ revenue puiwantee (see rlueslunn number ji) to control the amount of league
rev’! nu Cs ti 1st Jo Li) the I layers.
The escrow system tries to ensure Lhat salaries & benefits do not exceed the players’ guaranteed share of sRi. To do this, 10% of the players’
salaries Is withheld horn their paychecks and deposited into an escrow account. At the end of each season they compare the players
quisiuteed shauc or SRI to the amount- they were actually paid In salaries & benefits. If there was an overage (I.e., if the players were paid
more pre-escrow than they were guaranteed), then the amount of tile overage is returned to the teems from the escrow account. The players
tl,en receive any escrow money that remai us.
it Is also possible that they find themselves at the end of the season with insufficient escrow funds to cover the overage. Here ore some
examples to illustrate what could happen in the esc:ow process. In Example A there Is not an overage, In Example B there is an overage, hot
the escrow Is suUclent to reduce salaries to the designated percentage. In Examples C there is an overage, which the escrow Is Insufficient to
cover.
fl
—I
Example AjxamP!J Example c
54.308 billion $4,308 billion $4,308 luffluon
j
.52:154 billion 52.154 billion 52.154 bifluon
SRI:
Designated share:
Salaries;
$2.15_billion_,frZ30 bIllion
Benefits;
V2.oo_billion
$120 million
$12 million
$120 million
Amount held in escrow:
$200 million
$215 million
‘i
Overage (amount salaries & benefits
$0
exceeded designated share):
-
Given to players:
cr1 million
$116 million
$266 million
$0
$116 million
$234 million’
$99 million
J $230 million
‘so
.
Returned to owners:
-
,‘
-
In Example A, salaries & benefits are less than, the designated shau-e, so the escrow money isn’t needed. The players get Lo keep it all, in
addition to receiving a supplemental payment to meet their guaranteed share. In example a the escrow system successfully lowers salaries
back down to the designated share, and the players get to keep what’s left over- In Example C there Isn’t enough escrow money to lower
salaries back down to the designated shore. The players “owe’ $266 million, but the escrow account contains only $230 nuuilion. the owners
receive the entire balance of the escrow account, but the players don’t have to pay any additional money (see question number 20 for more
information on this situation).
Here is what actually happened In each season:
:-
:
2011-12
2012-13
BR!:
$3375 billion
$4,293 bill2J
Designated share:
51.727 billion
$2J45 billfon
Salaries:
$1.610 billion
$2,109 bllhfJ
Benefits:
$173.8 million $204.9_mlllf,j
Amount held In escrow:
$162 million
$212.2 million
Overage/underage (amount salaries & benefits
3 . 0 m’lhion
I
$7
exceeded designated percentage):
$ 168 7 mull 0 n
Overage amount retaIned by NBA:
$57.0 million
.
$168.7 million
‘1 tin Infli ‘I
NBA SaLary Cap FAQ
Page 18 of 78
e
hit NBA ,ii,,o had ‘I CW!OW’ sharing system In place
with the 7005 CI3A. It was funded entirely
vi r; 1
through luxury tax revenues, and paid an
ci $4 (I in II ion peril, on. Howi ‘vi’ r
01 in y cases I rims wEr it ge lb ni bark rnuriey
they had Put into the pool t i,emse lees, so the net
ri 1 us I II ,cit oil Of mo ni’y Wci:. mu cii lowe r hi in hi’
t
qm it st ci butlon Under be old dan tie arise n ‘Ic Cd
iv
mu cli less thai, uniter the new pian,
hi: Ijighisi iiidiuictiial ni npts ,,vu’r,igInei It inhlliiipi. With
wit hi
the
new plan, $181 million is projected to be reuistn
projt’ttetl to receive over $20 milton cacti, antI even learns
buted in 2013—11, with two teams
over $16 million c:acl,.
lb
tins Ic Itlt’i i hi’ I end Clii, plan ix eli, it
ii’ isis coot r ihcd
in; cqu.il percent ‘pt, of their total revenues
Into a common pool (minus ccii iii
(‘Xl enS es sLit I as ‘rend e in ‘ii d’s), lb ‘n roLl, Ce an all oca ti en
n
ecu’ I u a 1/30 share ol the pool’ Small market
liii ‘ret i ire i (inirliji il’ I,... Oi. in II I’V reu’Iv i’, an, I
teams with lower reveri ues will
will he pet tenet lii nec under the plan. La
rge
market
teams will ton Fri hure I nore than they
re i civ t1, and will ii, (tel 1)0 ye ci smiler ciii: pi.ii. Other
cuinponen hi of the pla ii
-
Ii,,
ii,pii
make,; re;, nit; ret; go nO 1111
for mi ‘etin g
aol Os follows
i’ve we henri marks •
hi, sect on the size of tile market (ha sed
hitipi’.i’liolit’, iii liii him’’. iiesiij,i,,Iirl ,ii;i,ket
on the 0 Limber of 1V
,e itp) in which they play. Ai;y leom that foils short
of its benchmark has to make tip the,
II S rant r 11,1111110 lii ci, th i’ L cii
In ut bin Won Is • teams are penalized for undei
pet
non
fling. Revenue bench marks Ian ge Iron
15% (New Orleiio:.) to lhU% (New York and brookl
yn)
ijilhi 0’ cc’ in
—
ol tin hiaiiu(I ,iver,lrJe revenues.
• Teaiiis filling ‘died
if their reveniii’ i’xpe lotions ire
ieqi,sreil to work with the league office
to develop and imp1ement a business
lmproveownt placi, wl:s Is oulci ni:iude
roping iint business operations, hi ring
or replacing stiti, or adopting new sales
team fails to satisfactorily implement such
strategies. It a
ii jjlail It cauld forfeit a portion
of its revenue shoring payments
(up to 25%).
• The peri:e,ltaoe of revenues teams contrib
ute to the poni Is hosed on the percen
tage of league-wIde rovenues that
I or example, if player salaries are 50% ut league
go to player salaries.
-wide revenues,
then earl, team would contribute 50% of its
revenues Into the poot.
• Teams in markets with fewer than 1 m,llun
TV households do not have to contribute more
than 15% of the:r revenues.
• Tunics in iruaikets with moi-e than 2,5 rnilhon
1V households cannot receive a revenue sharing
payment. Teams In markeLs with 2 millIon
to 7.’ nirIlion TV households receive a percentage
or a bill payment (for example, a team with
2.25 million TV households receives a SO°/n
pm yi iient). A tea in with I ewer thi in 2 million TV
Ii 0 usoilolds rect,ivcs a full payni e it.
• If a tram Is prufit;ible without revenue sharing
, It receives a smaller or zero payment. Any
payments from revenue sharing that would
lead ,, team to have a profit over $50 ciii limo are
eliminated.
• High revenue teams are limited In the amounts
they have to pay. No team pays more than 30%
of its profits In excess of $5
milton.
• The plan caiitalns on additional discietionary fund
of $15 million each year. Teams can apply for
assistance payments from these funds.
• Revenue sharing calculations
are performed and payments ac made the
Feuruary following the season. For example,
reconciliation for the 2013-14 srasun will occur
revenue sharing
February 2015.
The following chart is a simplified illustration of
what might happen tinder the revenue sharing
opi’ratiunal. learn A Is a low-rovenue, srn,ihi
plan In 2013-14, when the system Is fully
-n,orket team, and 1 eaii, 01$ a high-rovenue,
big-market team:
in
Li
cl revenues (minus expencesff84.O million
Profit before revenue sharing:
($20.0 million
cii
L$281
.0 million
lossUJ$165.O million
Percentage to fund pool:
55.8%
Amount contributed into pooh’:
$46.9 million
$156.8 million
Total pool size:
$2013 billion
$2,073 billion
$69.1 million
$69.1 million
Amount received (1/30
of
pool):
Net paid/received:
$22.2 million received_f3.7 million
paid
N/A
$48.0 million
Contribution limits:
Actual ornount paid/received:
)
$22.2 million receivej48.0_million paid
Prohmt after revenu2inoj,j2.2miiiion
$117.0 millIon
The revenue sharing pool Is always fully funded
, I.e., It is always funded to Its full amoun
t despite some teams having contrrbution
When there isa shortfall, the difference is made
limits.
up through luxury tax receipts and collect
ive league sources. This foil funding guaran
not apply to the 2011-12 season, due to the
tee does
effects of the 2011 lockout. In order to
ensure adequate funding of the revenu
100% of the tax revenues In 2011-1215 earmar
e sharing poe1,
ked to fund the revenue sharing plan.
Starting 2012-13 50% of tax revenues wihi
sharing with the remaining 50% distributed
fund revenue
back to nan-taxpaying teams.
The revenue sharing plan will be reviewed follow
ing the 2013-14 season to see If any
ndjustments
Ore
warrenred.
The poni itself really exIsts only on paper.
A ream that ‘contributes” $150 million
into the pooi and “receives” $70 million
in a check for the S80 million difference.
really Just sends
zs.
what are salary cap exceptions?
The basic rule of the NBA’s salary cap Is that
a team can’t sign a player or make a trade
unless the team is using an exception. In
that leaves the team’s team sa!ary above
a system with a soft cap, exceptions are
the cap,
the mechanisms that aliow teams to
cap. Some exceptions are available only for
function while above the
making trades, and are described In detail
starting in question number
for signing players are as follows’:
The
exceptions available
j.
LARRY BIRD EXCEPTION
rhiis exception allows teanis to exceed
the cap In order to re-sign their own free
maximum salary. Teams are said to have “Bird
agents, up to the player’s
rights” to players who qualify. To qualify
for this exception a player essentially
must play for
—
hlIn//inun,
nl-,nfon rnmfc.,loninn- k..-.
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