The Unintended Beneficiaries of the NBA’s Salary Cap Increase

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Photo by Stephen R. Sylvanie-USA TODAY Sports

By Max Weisberg

If you haven’t already heard, the NBA’s annual salary cap will see a gigantic increase on July 12th, 2016. The league projects that the cap — which is set at $70M for the 2015-16 season — will jump to $89M next summer. The massive 27% increase is due to a new television contract that will pay the NBA nearly $24 billion over the next 9 years.

Such an increase in the cap is unprecedented in league history. For instance, here is how the cap number has looked over the past five seasons (via Larry Coon):

Season Salary cap
2011-12 $58.044 million
2012-13 $58.044 million
2013-14 $58.679 million
2014-15 $63.065 million
2015-16 $70.000 million

In addition to the massive projected $19M increase from 2015-16 to 2016-17, the league also projects the 2017-18 cap to reach $109M.

So what will it all mean? It means that now is a great time to not only be an NBA free agent, but an NBA player as well.

As it stands now, 23 teams are projected to have cap room next summer with that number potentially increasing to all 30 teams depending on some cap holds and options. Of the 23 teams projected to have space, 22 of them are projected to have more than $8.9M in space.

Why is that $8.9M number significant?

$8.9M is the maximum amount a team can have in cap room next summer without falling below the league’s “salary floor.” The salary floor is the minimum amount that a team must pay its players for any salary cap year. In 2016-17, that number is 90% of the salary cap, or a projected $80.1M (i.e.: $8.9M in cap room).

If teams do not meet the salary cap floor, they must distribute the shortfall to the players on their roster. This means that if a team’s salary at the end of the season falls $10M short of the $80.1M salary floor next season, they must distribute that $10M to the players on their roster.

In regards to how that money is distributed to such players, the NBA Player’s Association must submit a proposal to the NBA to determine the distribution ratio.

With so many teams having team salaries that project far below the NBA’s salary floor next summer, we can only anticipate one thing: players will be compensated (via new contracts signed or shortfall distributions) much more than they were likely worth in the past.

For instance, the Philadelphia 76ers — a team highly unlikely to spend significant money on free agents next summer — could have $50M in cap room. This means that if the Sixers don’t add roughly $41M to team salary by the end of next season, they will be forced to pay their players an amount well over what they are worth.

More specifically, if we assume that Philly adds a player in 2016-17 similar to the Javale McGee acquisition last season, their cap room would hover around $30M. Unless they can add more players in a similar fashion to McGee, an evenly distributed $30M to 13 players would be roughly $2.3M per player.

For someone such as newly signed guard Scottie Wilbekin, that amount would nearly triple his 2016-17 base compensation of $875k (if still on the roster).

For reference, the only two teams to fall short of the salary floor since the 2011 collective bargaining agreement was put in place are the Orlando Magic ($1.9M) and Denver Nuggets ($774k) last season.

Team’s don’t often like to finish below the salary cap floor and pay their players more than they are worth. This is why we often see teams who are in danger of falling short of the floor acquire players mid-season such as Javale McGee, as mentioned above.

Though McGee’s entire $11.25M 2014-15 salary was charged to Philadelphia’s team salary last season, the Sixers were only responsible for actually paying him from the date they acquired him until the end of the season. Therefore, teams often use this loophole to avoid shelling out money equal to 90% of the salary cap.

But will this even be a viable strategy next season when nearly every team has cap room? Teams can still save money in this manner, but avoiding salary floor shortfall payments could be difficult if there are several teams looking to take this approach.

Not only will this odd phenomena of shortfall payments be an issue next summer, but with the cap projected to rise drastically again to $109M in 2017, we could see a similar situation take place.

Think about a player who signed a 3-year contract this summer at around $1M each season. If their team winds up under the salary cap floor in both 2016-17 and 2017-18, that player could end up doubling his base compensation in years two and three of his contract.

Though the talk has been (and rightfully so) about the effect that the new cap projections will have on both the free agent classes of next summer and the summer thereafter, some of the biggest beneficiaries of the new TV deal could be low salaried players on teams with significant cap room the next two years.

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