NFL Salary Cap Primer: The Steelers' 2011 Handicap and how the Six-Time Super Bowl Champs are Trying to Overcome It

Whoa. Quite a lot here. But as far as I can tell, this is just about the most thorough and informative stuff out there written about the NFL's collective bargaining agreement and its myriad provisions governing the league's salary cap. Of course, the information is presented within the context of the Pittsburgh Steelers and their cap situation. Take your time with this, or bookmark it if need be. But well worth a read. And someone please let me know when Steelers Depot steals this hard work without attribution sometime in the near future. Thanks.  -Michael B.-

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Anyone can post a list of salaries and the total dead money amount for an NFL team like, say, the Pittsburgh Steelers. The internet is chock full of bloggers who would like to believe they are adding value in this way. It would bother me less if they only had the correct information, but alas my high expectations are universally left unmet. I want the correct information because I am always looking for the hidden trends or  story lines; this trait stems from my initial interest in the stock market, and is now firmly embedded in my DNA when I try to dig in to hobbies or interests that revolve around data accumulation and analysis. To get good results you need clean data to analyze, garbage in garbage out. I love to add value and I believe this post will be one of the best ways to understand in detail the CBA rules on Salary Cap, the Steeler's Front Office strategy and the minefields that are always present for good teams.

I just wrote on the Max Starks re-signing and how it was accomplished with extremely limited cap space [ STARKS STORY LINK ]  and I was surprised how many actually care about this shit. I prefer to write on gambling odds, statistics and human interest but since no one reads my crap in those areas, I will stick with this:)  

The reason I wrote the first story was because someone here commented that Mike Florio of Pro Football Talk had reported we had only $750k in Salary Cap Space. Based on the numbers, it appears that Florio did have a little birdie from the Steeler's FO in his ear. As I dug deeper into this data I realized there is a good story to be told by tying the new CBA details directly to the Steeler's moves since the lockout ended . Like it or not, it does have a direct impact on the quality of play and the personnel decisions. THE NUMBERS NEVER LIE!

At the end of the day, Max Starks wanted to come back because he is playing for next to nothing, it’s definitely not about the money. Coach Tomlin was hoping to bring younger O-Linemen along, but after a mere four games into the 2011 season, it was clear that the Steelers were in need of help along the line.

In no way does Starks' financial remuneration suggest that the Steelers are cheap, we have REAL Salary Cap problems which are likely to bleed into next year (more on that later). I mean Max took the $810k veteran [table below] minimum for players with 7 to 9 "Credited Seasons" ("CS"). However, he won’t even be able to make the full $810k because the NFL ties Salaries directly to the 17 week regular season.  In other words you get 1/17^th of your Base Salary for each week you are actually on the team. Because Max was out of work for the first 4 weeks so he won't get paid for his time off instead he will make 13/17^ths of the $810k ($810,000 *13/17= 619,412 {$619,000 for the Salary Cap because all Cap Accounting is rounded to the nearest thousand}. 

NFL clubs are required to pay Base Salary either weekly or bi-weekly during the 17 week regular season.  And while the CBA allows a player to request payment over a fifty-week payroll cycle few if any have ever requested this option? Go figure:)

                                 NFL Minimum Salary for Club's Active/Inactive List (53 Man Roster)

The vast majority of NFL base salaries are not guaranteed but Max Starks still has some protection because of his 4+ "Accrued Seasons"("AS"), he has 7 going on 8 "AS". Had Max been on the 1^st game Roster he would be eligible for one-time "Termination Pay ("TP")" which guarantees his entire Base Salary for the year and if  a vet with 4+ "AS" is on opening day Roster and later cut not only do they get paid in full but their full salary still counts against the Cap. This is a real good reason the FO did not sign him prior to the first game, not only is our cap situation tenuous but we are worried about his neck. Had we signed him and he got injured we would be on the hook for the full $810k with the total counting towards the Salary Cap. Decisions, decisions, decisions….

NFL Salary Cap Accounting is wacky because every scenario has a but if or either or type rule. Max was not on the opening day Roster but he is still eligible for "TP" at a lower amount because it is a mid-season signing. He is eligible for the greater of 25% of the remaining pro-rata Base Salary or the one week Base Salary for a Veteran with 10 or more "CS". Here is an example if Max were to be cut after week 10 of the regular season:

$810k *13/17  =  $619,412  =  Base Salary or $47,647 / wk *7 wks = $333,529 * 25% = $83,382... 10+ "CS" vet min is $910,000 / 17 = $53,529... $83,382 is >$53,529 so $83,382 would be Max's "Termination Pay" and it counts fully against the 2011 Salary Cap.

This Crazy Gorilla Math appears throughout the CBA because the whole Salary Cap Accounting System is designed with many loopholes. The loopholes give you a way around the Cap but by taking them you are layering risk upon risk and setting yourself up for a future implosion. Even the very best like Kevin Colbert & Omar Khan aka THE WIZARDS OF CHUCK NOLL WAY are vulnerable when exposed to this dastardly 3D chess match.

With that said, the Max Starks "TP" calculation is a rounding error compared to a $120,375,000 Salary Cap. But when you are trying to sign that Hotel for $5mm and he is demanding a starting role it is still a very complex decision, especially with Cap challenges and prior to the first game. What's the injury and "lost step" risk for a 36 year old half deaf RT? I don't know about you but pulling that trigger is not easy. Furthermore, Cap numbers often move against you very quickly (think of our $5mm+ Cap Space sitting in our Injured Reserve Sauna).

Having a veteran team is a blessing and a curse, cut Aaron Smith today and his full $6.1mm Salary Cap hit remains yet we need to add another body and Salary to the Roster, I don’t know about you but that doesn't sound like a good strategy to me? And then some think he should just retire? Well, would you really retire if your Salary was guaranteed? No, you would just play it our and retire after collecting the $4.5mm (smart players know they need tons of dough for future medical procedures and nursing care:)

In the end, DEAD $ is DUMB $ and it is the ultimate scorecard, if you have a lot of DEAD $ like the Cowboys then you likely bet on many one trick ponies. Just ask a Dallas or Washington fan, they will tell you how it feels to constantly lose your bankroll on 50-1  free agent moonshots.  I compiled my own Salary Cap Data from various sources (Rotoworld, Spotrac, PFT, Forbes, PPG, etc.) and it is not 100% but I scrubbed pretty well. For example, a number of sites have Jerricho Cotchery with a Salary Cap hit of $600k but the minimum Veteran Salary for his "CS"s is $810k.

There is only one way that I am aware of that Jerricho could have a Cap hit of less than the Veteran Minimum and that is through a "Qualifying Contract" ("QC").  However, in 2007 Jerricho signed a 5 year extension with the Jets (thru 2012)  which included a $7mm "SB."  A "QC" cannot have  a Salary greater than the vet minimum and more than $50k "Additional Compensation" ("AC") between the voided and new contracts.  By definition, the maximum Salary Cap hit of any "QC" is $525k Base Salary plus $50k "AC" for a total of $575k, any contract with numbers above these amounts cannot be a "QC."  Any type of compensation other than Base Salary is considered "AC" so the Steelers were SOL when trying to fit Jerricho into a "QC." Obviously any FA with 4+ "CS" can sign a "QC" with any team because he comes with no "contract baggage." Hotel would have worked if he was willing to play for $960k ($910k vet min + $50k "AC") but he wanted $5mm and a starting role.

Hey, that was his price and he didn't waiver, obviously he didn't want to play as bad as Max Starks. Steelers have signed plenty of "QC"s because there is a cap discount with no monetary effect to the player [note: please see previous Max Starks Story for more details on "QC"s].

In NFL Salary Cap Accounting, when a player is traded from "team A" to"team B", his remaining "SB" Cap Liability stays with "team A." This is one reason you don't see a lot of player trades in the NFL because the situation has to be ideal for both teams. Even if the Steelers wanted to, they would have a hard time trading anyone who has a Signing Bonus Cap Hit .

I have seen some posts contemplating a trade of Rashard Mendenhall but if my figures are correct his 2011 Cap hit of $1,366,000 would remain and it would add $1,366,000 to the 2012 Dead money total. Rashard's Base Salary of $612.5k would be divided between us and the new team, so if we made a trade this week we absorb 5/17^ths of his Base Salary and the new team takes on the remaining 12/17^ths which would free up the grand total of $432k in Cap Space. Now based on my estimates we have about $1.739mm in Cap Space so if we traded Rashard we could add a player with a Cap hit no greater than $2.171mm without restructuring contracts or making cuts. Trading Rashard for a draft pick(s) could work as long as you are willing to eat the $1.366mm Dead money he will create next year. At the end of the day NFL trades are exceptionally hard to make work, Belichick does it more often but that is because the Patriots have historically stayed like $20mm under the Salary Cap. 

Bottom line, the NFL is not really designed to facilitate trades, if anything they have constructed major roadblocks. I am sure this factored into the Jets release of Jerricho because it created Dead money for them; based on his 2007- 5 year contract with $7mm "SB" Jets will eat a total of $2.8mm ($1.4mm this year and next) for the privilege of releasing him. Good deal for us, not so much for them but hey, is this payback for the steal we gave them named Santonio? :) 

(f)        Traded Contracts.

(i)        In the event that a Player Contract is assigned to another NFL Team, either by trade or pursuant to the NFL’s waiver procedure, the assignee Team will count as part of its Team Salary only that portion of the player’s Salary which remains unpaid and for which the Team may be obligated. The assignor Team will continue to count as part of its Team Salary only that portion of the player’s Salary which has already been paid by the Team and/or any Salary for which the Team remains obligated.

There is another Cap Concept that is critical to understand and it is called "Acceleration." June 1^st is the key date for Acceleration because if you remove a player from your Roster prior to June 1^st then all of his remaining "SB" and unpaid guarantees hit your Cap immediately. But if the change happens after June 1^st then only the "originally scheduled / contracted" amounts hit your Cap with all remaining amounts hitting the following year [see Cowboys Dead money Table for examples]. A career ending injury to a star could force Acceleration and it is always a concern. Think Peyton and the Colts.

It should also be noted that every NFL Contract is written using this contract [ NFL PLAYER CONTRACT LINK ] and every contract ends on the last day of the league year {usually last day in February}. This prevents tricky accountants from bypassing the rules through timing gimmicks.

We have very little Dead $ (almost too little) and below is a table of all the dead $ I am currently aware of, there may be more and maybe someone here knows of others that we cut during last two years who had "SB" money for this year or next. I am sure there are other Doug Worthingtons out there unaccounted for:)

Dead $ is the result of a player being cut while unamortized signing bonus and/or other guaranteed money remains on his contract. As you are probably aware, a "Signing Bonus" ("SB") is basically a pre-payment against future work. Once it is paid it is pretty much gone even if the player does not perform up to standard. Many teams have tried to take back "SB" and other guaranteed funds. Oakland with mega-bust Jamarcus "Jabba the Hut" Russel or the ATL when Mike Vick got caught fighting dogs and selling the loser corpses to Chinese Restaurants:) Raiders and the ATL even went to court to try to get their guaranteed monies back, courts said "NO DICE"! 

Basically, when you stroke a Signing Bonus ("SB") check that money is gone forever and even if you could sue what are you going to repossess? That hideous dirty yellow diamond encrusted platinum grillz or the I2, M color 8ct diamond studs? Maybe instead you snatch those designer 24's on that leased Maybach?  You do realize that 80% of NFL players are broke within 5 years or retirement:) "SB"s are easy to hand out but hard to get out from under. Think bad mother-in-law:)

The "SB" is necessary for a number of reasons, historically 80-90% of NFL Contract money is not guaranteed.  (although many 1st round rookie contracts were fully guaranteed this year because of the reduced rookie wage scale). So, the "SB" allows a player to get paid now and not worry as much about getting cut. It also allows a team to spend money above the Cap, often referred to as "Cash over Cap." If you really want to spend and have the ducats you can stroke huge signing bonus checks for unlimited amounts provided you stay under the Cap.

BUT there is a flipside to the huge "SB"s, eventually you will pay the piper with a ton of Dead $ like the Cowboys [see table below]. Our dead money is bupkis compared to the Cowboys and I know they have a lot more Dead $ than I list here. Their Dead $ situation is highly toxic and will more than double next year after they trim their 2012 Roster. OUCH! For Jerry, the 2014 TV Network contracts can't get here fast enough because his Salary Cap sins will be exonerated in 2014. Everyone, including the players are looking to 2014 to play that GET OUT OF JAIL FREE CARD. There will be no better time than 2014 to be a FA, time to get PAID!  I predict that many Dead $ mistakes will happen in 2014 because certain owners will have the Cap room and you already know they will go hog wild. I'm pretty sure that is another clusterf8ck for Jerry and Dan and rest assured by 2016 their fans will be complaining vociferously. 

Things are always relative, you might think our Salary Cap situation is difficult but when you compare it to the Cowboys mess you feel much better. If the Cowboys don’t have major problems next year I will eat my shorts, we are in CAP PURGATORY, they are in the seventh level of CAP HELL!

The Steelers are not balls out like Jerry Jones, he is known to roll the dice like a Texas Wildcatter, oh snap he really is one, he bought the Cowboys with OIL $. And remember when he landed "Prime" in a bidding war with Oakland and earned a Lombardi for his wager. He was all set to double down on Nnamdi but his Cap troubles prevented him from pulling the trigger. I bet he is thanking his lucky stars that his Cap challenges forced him out of the Nnamdi Sweepstakes! 

Even if you are ultra-conservative Cap Math can work against you because it very much like the reverse draft order, it is a clear handicap designed to thwart the best veteran teams. Tampa Bay has no Cap problems because the average age of their team is 25 and the Packers are in a sweet spot because they drafted a number of their DBs and have not yet gone to contract renegotiation. With the shortage of good CBs, Packers will invariably lose some of theirs as Cap casualties. The Cowboys spent way overboard with a Cap number of $146.4mm in 2010 so this year they had no choice but to wield the machete to what should be delicate surgery. Steelers had a different strategy and instead of drastic cuts they restructured player contracts before the August 4th deadline.

Hindsight is 20/20 but is it possible that the Steelers have taken loyalty a bit too far? Maybe they put off the real difficult decisions until 2012. Why weren’t  Aaron Smith and Casey Hampton not asked to restructure prior to some others? Well it turns out that to increase Cap Space for Max Starks, Aaron's contract was extended one year but it was only a minor adjustment which added $875k "SB" for this and next year by converting $1.75mm of this year's Base Salary.

Aaron and Casey were the top candidates other than Ben, their base salaries were each around $4mm.  Contrary to popular belief, this type of restructure is a no-brainer not only for the team but the player. The player benefits because he "converts" non-guaranteed Base Salary paid weekly into immediate cash money. Plus the team clears Salary Cap space so in the short run it is clearly a win-win proposition.

I believe the FO believes Hampton and Smith are long in the tooth or maybe they are both considering retirement. I don’t know but there is a reason behind these contracts not being restructured. Sure it could be that their salaries were guaranteed but that is very unlikely when a player is nearing the end of a contract. Maybe you have a different theory? I think the Steelers looked at 2012 as a possible transition year if this team under performs this year. Why? Well, in business matters often it is better to "clean house" at one time and not drag it out. After a period of under performance, companies are known to bring in a new CEO and let him "clean house."  While the Steelers would never do this to their management, if they feel that this team is "long in the tooth" they will pull the trigger and "get younger." 2014 would be the best year to accomplish this as the Salary Cap will rise between $35mm and $50mm but the FO may be forced to "get younger" sooner if there are injuries to key stars like Deebo or Troy.

This year, we greatly increased the "SB" Cap Hit with the ten or so new & restructured contracts. In defense of the FO, this year there were not a lot of options to get under the Cap. And they spread it around evenly, notice not many of our older contracts (other than Ben) have a ton of "SB" remaining. But you also have to consider that other guaranteed funds like (Option, Roster, Workout, Incentive, etc.) may be lurking in the mist. That might be another $20-$30mm potential Dead money. In my opinion, James Harrison age 33 is the weak link here although at $12.5mm in remaining "SB" management is clearly hedging. His injury risk has to be higher because of his style of play in addition to his age but then again he is super-human so it is very hard to bet against him. And you can see how smart the Steeler management is, Troy Polamalu will have only $7.9mm in "SB" remaining after this season. Should we have to cut him (for injury or whatever reason) and if we did it post June 1, 2012 the Cap hit for 2012 would be only 1/3 of the remaining "SB" with 2/3 pushed to 2013 ($2.64mm in 2011 & $5.28mm in 2013).

As I outlined above June 1^st is a critical date because it determines the "Acceleration Date" of remaining "SB"s and other guaranteed funds. Troy's contract is absolutely on target for a 30 year old safety with some history of injury. He may be an icon and a Nation favorite BUT management made sure to limit his "SB" money and hedge their bets.

Quarterbacks will always be your Achilles heel because they have the highest "SB"s and guarantees. Think Peyton Manning. And if Peyton were to go down for good there may be a Cap Noose around Indy’s neck for more than a few years. I am sure they have injury insurance on Peyton so they may be able to get a partial Dead money waiver from the NFL Arbitrator. We also have a ton invested in Ben and for good reason, without Ben we would definitely not be the team we are.

Of course he is an injury risk but would you rather have a marginal QB with no Cap problems or a winning warrior like Ben with the Cap worries? Just think about the time between Bradshaw and Ben, then answer! Can he play long enough to "play through" the guaranteed money hanging over his contract? Who knows?  I would never bet against Ben. However, some may argue that this year we put too many eggs in his basket. In 2009, Ben signed an 8 year contract with $25.2mm in "SB" and $8mm in other guarantees. With this year’s restructure, Ben currently has $26.6mm in "SB" (plus a few remaining guarantees>>> I am guessing here). At the end of the day you have no choice but to go all-in when you have a top level QB, if you don't pay him your competition will be more than happy to!

In a perfect world, you obviously want a player’s "SB" money to go down not up because the older you get the closer you are to the end of your career. In Ben's case the FO had no choice and was forced to clear Cap space with Ben by reducing his $11.6mm Salary in 2011 & 2012 to $6mm & $6.35mm respectively. And you can't blame the FO for not being able to see this coming, in 2009 under the old CBA the Cap was $123mm and with the $3mm transition credit this year's cap is $123.375mm (only $375k above 2009 Cap). No one could have predicted that the NFLPA would be willing to roll it that far back, front offices across the league were planning on a 2011 Cap of roughly $135-140mm. Nothing to do but react to the changed landscape. 

Next year will either be a similar deal as this year with many contract restructures or it will be a house cleaning. Steelers already have approximately $129.9mm committed to next year but consider that 21 of the 56 names on the table below will become free agents. That means that if you exclude Byron Leftwich and Baron Batch (IR) we still need to add 19 Salaries above the $129.9mm. Next year there is an optional $1.5mm Transition Cap Credit (this year $3mm) that can be borrowed from future years and the Cap should go up about 5% without any major league-wide revenue re-negotiations. That puts next year's Cap in the $128mm range inclusive of the $1.5mm 2012 Transition Credit included. 

A lot will depend upon the rest of the season, if we make a deep playoff run or win the Super Bowl then it is harder to "clean house" and get younger. But if the FO wants to keep this team together there is no choice but to restructure contracts by converting Base Salary into signing bonuses. Ben is probably not the best option as about half his Salary thru 2012 was converted to "SB"  [note: for the recent contract signings I had no choice but to divide the annual Salary amounts equally because the information is just not available].

If you got through this overly verbose post without falling asleep I hope you have a better understanding of Salary Cap math and the handicap it places on veteran heavy teams like the Steelers. And I hope this gives you a better feeling for how complex the Steeler’s front office challenge truly is. Any thoughts?