Breaking Down The CBA
Sports economists weigh in on the NBA owners’ latest proposal.
by Kyle Stack / @KyleStack
The NBA Finals are here and with the commencement of the last round of the postseason, that and the Draft are the only remaining major events before the league’s Collective Bargaining Agreement expires at midnight July 1st. Unless you consider blatant posturing to be an event, which it could very well become given the cantankerous relations between the NBA owners and the Players Association.
The two sides have had a salty relationship; not much has changed after the owners’ latest proposal, the details of which were noted in an April 26 memo the Players Association delivered to its players, as reported by SportsBusiness Journal May 16. The features of the owners’ proposal, which the players rejected, were as follows:
–The implementation of a “hard” salary cap of $45 million, which would represent a nearly 25 percent reduction in the cap from its 2010-11 value of $58.044 million
–The removal of fully guaranteed contracts under which a player wouldn’t be guaranteed more than 50 percent of a per-year salary up to $8 million and no more than 25 percent for any amount beyond $8 million
–A decrease in the maximum money and years for which a free agent can sign a contract. A qualified veteran free agent, also known as player who qualifies for the Larry Bird Exemption, would be able to re-sign a deal with his team for no more than four years and would have annual salary increases of no greater than 3 percent. These players can re-sign for up to six years with annual salary increases up to 10.5 percent under the current CBA rules. (A player currently must go three consecutive seasons without being waived or signing a contract as a free agent to qualify as a “Bird” rights player, although that could be subject to change under a new CBA.)
Likewise, a free agent signing with a new team would be able to sign a deal for no more than three years with annual salary increases of no more than 2 percent. These players can sign for up to five years with annual salary increases up to 8 percent under the current CBA rules.
–The assignment of NBA players into four categories: Category A (a minimum salary player), Category B (a rookie wage scale player), Category C (a maximum salary player) and Category D (a player trying to fit onto a roster for whatever money remains after the players in Categories A, B and C are accounted for).
There are more additions to the proposal. A May 11 SI.com report outlined the framework for the NBA’s version of a franchise tag, a team-friendly tool used in the NFL to keep a star player on a squad. The NBA’s version, as explained in the report, would differ from the NFL’s tag in that the player would have to give his blessing for the team to “franchise” him based on an unspecified set of contract enhancements that only that team could hand out.
An ESPN.com report on May 12 noted other features within the proposal, including a reduction in pay for the league’s rookie scale, the elimination of sign-and-trade agreements and a one-time amnesty provision that permits each team to say goodbye to one player’s contract. The report also stated that the proposed hard salary cap wouldn’t take effect until the 2013-14 season.
(A synopsis of the previous paragraph. The elimination of the sign-and-trade might seem odd given that smaller market teams can benefit from it. After all, the Toronto Raptors and Cleveland Cavaliers each acquired a $14.5 million trade exception from Miami for Chris Bosh and LeBron James, respectively. Yet the sign-and-trade is also a roundabout way for a team to acquire a star player if it doesn’t have enough cap room to sign him outright. Plus, it affords the star to max out the salary possibilities available to him.
The amnesty provision was first applied in 2005 for teams to avoid paying the luxury tax on one player’s fat contract, even though the team still had to pay the player’s salary; it’s known casually as the “Allan Houston provision” since it was Houston’s bloated $120 million contract with the New York Knicks that inspired the clause.)
While the franchise tag, sign-and-trade rule and amnesty provision are intriguing and surely deserving of their own stories at some point, this story will focus on the issues outlined in the SportsBusiness Journal report.