The NFL Salary cap is one of the most misunderstood concepts among NFL fans, and rightfully so. The 2011 Collective Bargaining Agreement, a 300 plus page document full of intricate details, is the founding document for the salary cap. At the time of its creation, the spending limit for all teams was universally capped at $120M. Five years later and the cap limit has grown to $155.27M. The rise of the cap-spending limit over the past several years can be mainly attributed to the lucrative TV deals the NFL has signed with broadcasters, thus massively increasing league revenue. In the NFL, business is booming.
With this intricate salary cap structure comes an obscenely long list of rules and procedures that guides teams in how to manage their financials. I have studied the CBA and NFL contracts fairly extensively and there are still elements that confuse me. So don’t be discouraged if something doesn’t initially make sense. There are many reasons why I encourage fans to have a reasonable knowledge and understanding of the salary cap. The reason why? There is a direct correlation between a team’s financial decisions and their on the field success. Even the smallest financial decisions made behind closed doors effect team culture.
Strategic cap management will allow a team to keep as many of their core franchise players together as possible. Despite the popular cap narrative used against the Seattle Seahawks, paying big money to your star players is not a bad thing. Paying big money to your not-star players is a bad thing. In this article, I hope to break down Seattle’s financials heading into the 2016 season.
Let’s Look at the Basics
As I’m writing this, I currently project Seattle to head into the 2016 season with$6,558,286 in true cap space. Of course this number could change pending any significant cuts or roster changes. Now what do I mean by “true cap space”? On websites like Over the Cap or Spotrac, you’ll see them projecting Seattle’s cap space a little bit higher. However, these numbers don’t give the full story. There are several miscellaneous expenditures that teams must budget for heading into the regular season.
The main expenditures every team must prepare for are injured reserve, practice squad, and future dead money. Every year, the specific numbers on these expenditures can vary. However, most experts typically budget $3M for IR, $1M for practice squad, and $1M for future dead money (from any player cuts). So remember how Over the Cap and Spotrac were projecting higher numbers in cap space? Subtract that number by $5M (the miscellaneous expenditures totaled) and then you get a number in the $6-7M range. Over the Cap and Spotrac aren’t wrong when they project those higher numbers in cap space – it’s just much more accurate to factor in those miscellaneous expenditures.
In terms of any needed cuts before the season, I don’t really see any glaring necessities. Seattle has some wiggle room heading into the 2016 season (more wiggle room than they did last year!). There are no non-core players Seattle can cut and free up a significant amount of space. And no, before you even ask, they’re not cutting Jimmy Graham before the 2016 season. If I’m just being totally honest, a major move to open up more room before the season would make no sense whatsoever. I recently spoke with Jason Fitzgerald from Over the Cap and he agreed with me:
“The team has around $8.5 million in cap space which is more than enough to handle the expansion of rosters and any in-season signings needed to cover injuries.”
Seattle is good to go heading into the season with $6,558,286 in true cap space. That’s more than most teams have.
Space vs. Flexibility
In our quest for reasonable knowledge and understanding of the salary cap, there is a very crucial differentiation that must be made. Understanding the difference between “cap space” and “cap flexibility” will give you a much stronger perspective of the salary cap. Cap space is defined as the difference between the cap limit ($155M) and a team’s cap spending. Cap flexibility is defined as the financial ability to quickly open up cap space with limited repercussions (dead money).
Cap flexibility is a much stronger indication towards a team’s overall cap health. Cap space tells you a little bit of the story but not nearly enough. Bryce Johnston, a former Over the Cap contributor, coined the term and defined the parameters to evaluating and ranking cap flexibility across the league. What does cap flexibility specifically entail? Now this is where it gets a little bit complex and I hope I don’t lose you here.
Teams can mortgage away their financial future through two methods. The first is signing bonus perorations. A signing bonus is an element of player contracts that pays the player 100% of the money up front, but is spread over the cap over a max of five years. For example, let’s say Player A signed a contract for five years and he had a $10M signing bonus. The player would typically receive $10M up front in his pocket. However, the team would take a $2M cap hit each year for five years. The signing bonus is purely used for cap gymnastics. Per the CBA, a signing bonus is spread out evenly and over a max of five years. Essentially, when teams agree to a signing bonus (which is fully guaranteed), they’re mortgaging future cap space.
The second method teams mortgage their financial future is through fully guaranteed base salaries. Base salaries aren’t prorated over several years like a signing bonus. But if they’re fully guaranteed, it takes the same effect as a team mortgaging their financial future. When a player is cut before the end of his contract and he still possess a signing bonus or a fully guaranteed base salary, the team takes on dead money (because that money is 100% guaranteed to the player). When a player is cut who has either remaining signing bonuses or fully guaranteed salaries left on his contract, that remaining guaranteed money is accelerated to the current year as a negative cap charge against the team. If it’s a pre June 1st cut, all future dead money accelerates into the current year. If it’s a post June 1st cut, all future dead money is split between the next two seasons.
Since coining this philosophy of cap flexibility, Bryce has now taken a job within the industry and is no longer permitted to continually update his cap flexibility rankings. As a result, I recently went through the tedious process of totaling every team’s future guaranteed base salaries and future prorated signing bonuses. I then found the average mortgage of a team, and then divided that by individual commitment. Bryce explains this process pretty clearly:
“In order to arrive at Commitment Index, I then found the average Commitments across the 32 teams, and then divided each team’s individual Commitments by this average. The resulting output displays each team’s degree of future cap commitment as a percentage of the average of all teams. Displaying the outcome as an index is appropriate because it emphasizes that the important consideration is where each team stands in terms of future cap commitment relative to all of the other teams in the league….
It is important to keep in mind what information Commitment Index conveys and what information Commitment Index does not convey. Commitment Index does not declare which teams are in the “best” or “worst” cap situation. Commitment Index does not account for the number or quality of future draft picks that each team currently possesses. Commitment Index does not attempt to quantify the amount of talent, or the average age, of the specific players that each team has signed under contract for future years… Commitment Index does, however, identify how much flexibility each team has with respect to its salary cap.”
Currently, Seattle possesses a just above average amount of cap flexibility, according to the league average. This comes in at a 97% commitment (100% being league average). Sixteen teams possess less cap flexibility than the Seahawks. Considering the level of talent that Seattle has locked up for the next three to four years, this is really impressive. The bottom line: Seattle has more than enough true cap space entering the season and their cap flexibility is above league average. This is another testament to the brilliant, strategic work of John Schneider and Seattle’s cap team.
How much are we paying these dudes?!
I’ll shoot it straight with you: Seattle is not afraid to pay big money to their own. When the Seahawks identify a unique, elite talent on their team – they typically pay big bucks to keep the player. Despite the popular narrative mentioned earlier, paying big money to your star players is not a bad thing. Many teams are still looking for star players to pay big money to. This is a good problem to have.
The top ten highest paid Seahawks players (I’m ordering this by cap hits) in 2016 are Russell Wilson, Richard Sherman, Earl Thomas, Jimmy Graham, Doug Baldwin, Michael Bennett, Cliff Avril, KJ Wright, Kam Chancellor, and Bobby Wagner. Russell has a cap hit of $18.5M, Sherman with a hit of $14.7M, Earl with a hit of $9.9M, Jimmy G with a hit of $9M, Doug with an $8M charge, Bennett with a hit of $7M, Cliff with a hit of $6.5M, KJ with a hit of $6.25M, Chancellor with a hit of $6.1M, and Bobby with a hit of just above $6M. It’s important to note that 70% of the top ten highest paid Seahawks are on the defensive side of the ball. It’s very clear that Seattle prioritizes spending in that area.
Per Over the Cap, Seattle currently spends $65,301,286 on offense and $83,081,763 on defense. These numbers will change come the start of the season but it helps you to understand the spending allocation tilt to the defense.
Who do the Seahawks still have to sign?
There are several players Seattle might be interested in extending come next offseason. However, Seattle made some big moves to keep their own this past offseason: extending Jermaine Kearse, Ahtyba Rubin, and Jeremly Lane. Luke Willson, Tharold Simon, Steven Hauschka, and Mike Morgan will all be unrestricted free agents come next offseason. In terms of Luke Willson, Graham’s injury and the Vannett’s play this year will likely determine his future as a Seahawk.
Garry Gilliam, Brock Coyle, Deshawn Shead, and Marcus Burley will be restricted free agents. Following the conclusion of the 2016 season, I think we’ll have a better idea of the players Seattle wants to keep. However, there are no major players (except for maybe Shead and Burley) that Seattle will surely want to extend next offseason. Seattle has done a masterful job of extending their own. Players locked up through 2018 include: Wilson, Wagner, Sherman, Earl, Baldwin, KJ, Cliff, Lane, Kearse, Rubin, and many more (including the rookies obviously). Jason from OTC commented on the Seattle’s core:
“I don’t think the Seahawks should have any troubles with their salary cap this year or next. All of their core players are locked up through at least 2017 and they should have enough cap room and flexibility to create it if they need to sign a player or two in free agency.”
How does Seattle sustain this success for the future?
In order to maintain a healthy cap situation, I would argue that Seattle needs to tread cautiously in making any big roster additions in free agency. If a big free agent becomes available, and a bidding war is incited between several teams, the Seahawks should be careful not to overpay. Teams often massively overpay for talent in free agency. The much cheaper process of sufficiently filling a roster is through the draft. Drafting cheap players into your system and extending the elite before they hit the open market is a much stronger method of balancing a talented roster and healthy financials. I asked Jason from OTC for his opinion on how Seattle can maintain their success and he agreed with my take:
“I think it’s to continue to draft well or find hidden gems that go undrafted. The Seahawks do carry high salaried players, probably more than anyone else in the NFL, which can make it more difficult to improve in free agency, especially in a bidding war. Drafted players are relatively cheap and carry high upside. Hitting on those players offsets the high end salaries they pay to their players.”
One interesting situation that Seattle will have to confront in 2017 is Graham’s contract. 2017 is the last year of his deal – in which he is slated for a $10M cap hit. That cap hit is comprised of a $7.9M base salary, a $2M roster bonus, and a $100K workout bonus. Approximately zero of it is guaranteed. If, and I say IF Seattle were to cut Jimmy for whatever reason in 2017, they would save $10M against the cap. I’m not advocating for this but merely presenting the financial reality of it. Overall, if the Seahawks remain consistent in their foundational financial philosophies, Seattle will maintain a very healthy financial outlook.