As much as a disclaimer should probably be placed before this piece stating “for informational purposes only,” it won’t. We’ll discuss the fundamentals of the NFL salary cap, promising to go nowhere near the severe inner workings that only a legit capologist could explain. First off, know that the 2014 NFL salary cap for all teams is estimated to be $126.3 million and not a penny over. Period.
Realize that the salary cap (collective team wage limit) has been previously determined by the NFL CBA (collective bargaining agreement), renegotiated in August of 2011, post-lockout. There are two major areas of said CBA that cover the cap: Article 12 Revenue Accounting and Calculation of the Salary Cap and Article 13 Salary Cap Accounting Rules.
Article 12, Section 6 (v) defines the salary cap as: The Salary Cap for a League Year shall be the Player Cost Amount for that League Year less Projected Benefits for that League Year, divided by the number of Clubs in the League in that League Year, adjusted by any applicable True Up, provided further that there shall be no True-Up related to the 2011 League Year, and there shall be no "negative" True Up related to either the 2012 or 2013 League Year.
Here’s where you will get a bit confused, but only by verbiage of the next section: Section 7. Guaranteed Player Cost Percentage: (a) In each League Year, the average of the current League Year's Player Cost Amount expressed as a percentage of AR and all prior League Year Player Cost Amounts expressed as a percentage of AR for each such prior League Year (the "Overall Average") must be at least 47% (the "Guaranteed Player Cost Percentage"). For purposes of this calculation, the percentages for each League Year other than the 2011 League Year shall be calculated as the Player Cost Amount calculated pursuant to the Final Special Purpose Letter for such League Year divided by AR for that League Year as determined in such Final Special Purpose Letter.
Have we lost you?
Okay. Two rules are simple. The amount of the salary cap is the same amount every league year (as determined by the CBA) for each franchise. No franchise may have a Team Salary that exceeds the salary cap. "Salary" as defined in the collective bargaining agreement is: the compensation in money, property, investments, loans or anything else of value to which an NFL player (including Rookie and Veteran players and players whose contracts have been terminated). Cutting certain players with existing contracts have penalties and affects the salary cap. It isn’t like getting fired from a job without a contract.
Included in team salary/cap is much more than “what a player makes that season year.” Players contracts, their tenders, drafted rookies’ salaries (fixed), UFA qualifying offers, transition/franchise players’ tenders, practice squad contracts, incentive bonuses (dependent on contract wording), termination pay, grievances pay, expansion bonuses, offseason workout pay, and “other” that is deemed players’ pay. It isn’t as easy as just a simple payroll of players.
Bear in mind that there is a minimum salary cap “floor” for each team (used to be 75% of cap; as of 2013 is almost 89%) must spend. The NFL maintains a “hard”/strict cap as well as floor. There are stiff penalties for violating/ circumventing the cap/floor guidelines. Some can consist of fines of up to $5 million for each violation and cancelation of contracts and/or loss of draft picks.
One last salary cap “fun fact” to remember: While the owners/NFLPA (NFL Players Association) created the cap in order to create alleged parity among the NFL teams and keep franchise costs down, they don’t play. Strict means strict. 2010 should serve as a reminder. When the owners opted out of the CBA in 2008, it led to a technically uncapped season in 2010. However, most NFL teams disbursed as if the cap remained. The league issued a warning against teams “front-loading” contracts during the season; The Dallas Cowboys, Washington Redskins, New Orleans Saints, and Oakland Raiders all disregarded the warning. In 2012, Dallas and Washington were penalized as the top two NFL teams by revenue in 2011 and were subsequently docked $10 million and $36 million respectively from their salary caps (over the ’12 and ’13 seasons) with the fine ($46 mill) divided evenly among the remaining 26 NFL teams (not New Orleans or Oakland) as additional cap space. Game on!
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