July 5, 2022

Finance & Economy

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How the Vikings Abuse the NFL Salary Cap

As expected, the 2022 NFL salary cap is set at $208.2 million per team. It’s above $200 million for the first time ever. As a new contract between the NFL and TV networks starts to factor into the cap, that number will continue to rise, and fast. Plus, the league-wide gambling embrace will add a whole new stream of revenue that might further accelerate the cap growth. The cap always feels like a myth this time of year as teams fit impossibly huge contracts under the cap year after year after year.

This is especially relevant with today’s news that Aaron Rodgers plans to stay in Green Bay on a massive contract. The Packers will use a ton of these tricks to make the $50 million they need to get under the salary cap, and they’ll need to make even more space to afford Davante Adams‘ likely franchise tag.

Here’s how they’ll do it.

Salary conversions

First off, we have to understand the salary rules as they are constructed. Too often, we think of contracts in terms of their average annual value (AAV). We think of it all as zero-sum — pay a dollar to a player, pay a dollar against the salary cap. In reality, the physical exchange of money (cash flow) is different from the salary cap charge. There’s a good reason for this.

Since signing bonuses are such a common part of signing any contract, it would naturally frontload any and all football contracts. That’s pretty awkward. You’d have a huge payment in the first year and then much smaller ones throughout the life of the deal. It would disincentivize signing bonuses — which players like very much — so the NFLPA and NFL decided to incorporate them differently. Now, any signing bonus will divide itself, or prorate, between each year of the contract, up to five years.

Crucially, the player still receives his signing bonus like he always has — up front. Because of this, the difference between $20 million in salary and $20 million in signing bonus is functionally irrelevant to the player. But it’s everything to the team. So teams bake language into every contract that allows them to convert salary into signing bonus whenever they want. The players have no reason to care.

You might have already known that, but it’s important to recognize that salary-to-signing bonus conversions, which comprise the vast majority of reported “restructures,” are not negotiated. They don’t require the consent of the player, because no player would ever have a problem with more guaranteed cash. Take Danielle Hunter‘s $18 million roster bonus, which becomes salary on March 21. That can become a signing bonus without Hunter’s consent, and Hunter would barely notice a difference.

The same applies to pretty much every contract in the entire league and it’s highly abusable. If you have a contract with three years left on it, you can effectively divide their cap hit in that year by three with the stroke of a pen. The Vikings could save money in 2022 by restructuring Hunter, Kirk Cousins, Dalvin Cook, Eric Kendricks, Adam Thielen, or all of them at the same time if they so chose. It’s all a matter of how much they can defer.

Void Years

You’re going to hear the term “void year” a lot over the coming week or so. Void years can be confusing, so let me explain it a different way. You may be familiar with “dead” cap, or salary cap charges for a player who isn’t on the team anymore. That’s what happens to the rest of a player’s signing bonus if his team cuts him.

Let’s say you have a two-year deal that’s too big for your tastes. The player doesn’t want to take a pay cut, so to get his cap hit down, you want to restructure. Dividing the deal in half isn’t good enough, but dividing it over three or four years might be. If you want to extend that player, like the Packers are about to with Aaron Rodgers, that can work. But what if you don’t want to commit any further to that player?

This is where void years come in. Think of it as signing a player to that extension, with no guarantees, and cutting him halfway through it. The remaining bonus will accelerate when the real years run out, but it relieves cap burden in the meantime. Similarly, it doesn’t change the actual cash flow one bit. It’s the same as the signing bonus conversions that players unilaterally love.

It’s a more aggressive version of the same trick. Teams can take some money from this year and spread it out into future years, easing the burden a bit. Where there’s salary, guaranteed or not, there’s a chance to restructure some money.

This isn’t the worst thing for players, either. It incentivizes teams to be more cavalier with guaranteed money, and it can turn guaranteed money into guaranteed signing bonuses. It’s a much more honest way of business than signing a player to a faux five-year deal and cutting them halfway through it. Financially, it looks the same at the end, but at least they’re not lying through their teeth about it.

Kicking The Can

In theory, a team could do this indefinitely. If they have $9 million in one year, they could divide it over three years. That might mean they need space in the next year, so they could restructure a different contract to make up the $3 million they borrowed before. If they need to make space to pay for the earlier restructures, they can do so with … more restructures. At a certain point, the original debts will run out, offering more flexibility to keep the debts coming.

You may be uncomfortable with deferring debt because you have a lifetime of experience with debts of your own. Be they credit card bills, student loans, mortgages, or whatever else, it’s good financial advice to get your debts paid off as soon as possible. What’s the reason, though? Interest. The fewer payments you make, the less interest you pay. In the NFL, these restructures don’t carry any interest. You’re just deferring money across future years. And unless you know some sort of Mayan prophecy that tells us we’re running out of future years, the chickens will never come home to roost.

Imagine taking out a bank loan. There’s no interest on it, and you know you’re getting a huge raise next year. It would be irresponsible not to take that much of an advance on your money. Sure, you have to pay off every cent of restructured money eventually, but the longer you defer it, the easier it will get to pay off.

This is going to incentivize a very strange economy in the NFL. Teams will promise contracts that are worth way more than what seems logical. Quarterbacks will make over $40 million per year AAV. That will soon become commonplace. Every year, a few teams will have promised more salary to their players than cap space available to them. The Minnesota Vikings might continue to be one of those teams, as well as the New Orleans Saints and Packers — the usual offenders.

With the accelerated growth of the cap and the increasing popularity of void years and restructures, I think we’re going to see more contract structuring and fewer cap casualties. Why get rid of a player when you could simply edit the contracts to fit everyone in? Roster construction isn’t about making the toughest decisions. It’s about finding ways to not have to.

How the Vikings Abuse the NFL Salary Cap