Before delving into the specifics of how the Cleveland Browns are spending money this year, and how they are projected to spend money in the future, we need to have a solid understanding of how the salary cap works. It seems complicated at first, but the salary cap is actually a very straightforward way to make sure every NFL team has the same opportunity to spend money to improve their teams, by extending contracts of in-house veterans, signing free agents on the open market and pay drafted rookies and undrafted free agents.
In 2015, the salary cap for each NFL team is $143.28 million, but that doesn’t mean that every team came into the league year (which began on April 10th, the same day free agency commenced) with the same amount of money to spend. Some teams had contract obligations that exceeded that amount and had to release players or restructure their deals in order to be cap compliant. Others, like the Browns, had carry over cap—or money left over from the previous year or years—that added money to the $143.28 million figure. For the Browns, that amount was just over $18.9 million, giving them over $161 million in cap space they could spend in 2015.
The amount teams can spend each year is determined by a formula established in the NFL’s 2011 Collective Bargaining Agreement. The cash allotted each team has been expanded and includes what is known as “All Revenues,” which means ticket sales, premium and luxury seating revenues, all broadcasting royalties, parking, concession sales, advertising, stadiums being leased for other events and all merchandise sales are now part of the cash divided up to the teams. Television in particular is the biggest source of this “All Revenues.” Thus, the salary cap increased a steep, $10 million from 2014 to 2015 and should only go up exponentially in the years to come.
It should be noted that there are steep penalties for teams that are not cap-compliant come the beginning of the league year, which can include fines of $5 million for each violation, loss of draft picks and the voiding of contracts that caused the non-compliance. It is rare, however, for a team to not be cap compliant. It is also, clearly, not a problem the Browns faced this year or should face in the immediate future. The Browns have been good at taking a large amount of cap space with them year-to-year, a combination of choosing not to spend on expensive free agents and a desire to have a pot of money saved up to give veterans, should they deserve it, high-priced contract extensions.
There is a cap floor, however, that the NFL established in the 2011 CBA which concerns the Browns more than the cap ceiling. Teams must spend 90 percent of the cap on paying their players; however, the floor spans two four-year periods, the first being 2013 to 2016 and the second, 2017 to 2020. Thus, the Browns must spend 90 percent of their total cap room from the years 2013 to 2016, rather than 90 percent every year. Similar penalties as to those imposed on teams who are over the cap will apply to those under the four-year ceiling, so the Browns may get extra spendy next year if they are concerned about being above the cap floor.
Now, let’s talk about the Rule of 51, or Top 51 Rule. Though NFL teams are, in the regular season, made up of 53 players on the active roster, only the top 51 contracts actually count against the salary cap. So while the Browns currently have a cap number of $144,781,652, their Top 51 number is $134,896,652. That gives them $26,309,148 in current salary cap space that they can spend. It’s not likely that they will be spending much more of this on veteran free agents. Their next big outlay of money will be on their draft picks, which is a salary cap of its own. With the Browns possessing 10 picks in the 2015 draft, it is estimated they will have to earmark $7.895 million to pay them, should they use every pick in every round in the order they are presently in. There are also undrafted rookies to pay, though most of those players will make a rookie minimum salary in the $435,000 to $585,000 range.
Another factor that affects the salary cap is dead money—money that counts against the salary cap on the contracts of players who were released with guaranteed cash still due them. These players aren’t paid that money, but it does count against a team’s salary cap. This year, the Browns don’t have a lot of money wrapped up in dead contracts—just $1.514 million, with running back Ben Tate’s $750,000 in dead cap the highest number.
If the Browns were strapped for cap space, they could designate a player’s release as a Post-June 1 roster cut. That way, any money still guaranteed on that player’s contract wouldn’t hit the cap immediately; instead, it is spread out over the remaining years on the contract. For example, if the Browns wanted to release outside linebacker Paul Kruger today, they would save $4.6 million against the cap but also have $3.6 million in dead money. By releasing him on a Post-June 1 designation, they would have $9 million in savings and just $1.2 million in dead money. Of course, the Browns would have $1.2 million in dead money dedicated to Kruger’s contract in both 2016 and 2017, but they wouldn’t take the full $3.6 million hit at one time.
So what goes into a player’s contract, anyway? Generally, a contract is comprised of a salary, with some percentage of that being fully guaranteed and a signing bonus. Sometimes, roster bonuses are added in, as well as performance-based incentives, such as an additional $400,000 if a receiver hits a certain number of catches or yards, or $1 million for a Pro Bowl bid. Of those performance-based incentives, only ones that are considered achievable (cornerback Joe Haden being voted to the Pro Bowl) count against the cap. So, if the Browns wrote in a $5 million performance bonus if he leads the team to a Super Bowl this year, that’s not considered an achievable incentive, and thus it has no cap ramifications if he does not reach it.
Some teams, mostly those with salary cap issues but not always, will pay players relatively low guaranteed salaries, or load the bulk of the money into later years without full guarantees and instead give them large signing bonuses. Signing bonuses are fully guaranteed, but can be spread out over the course of a contract. Thus, a $1 million signing bonus on a four-year contract is actually worth $250,000 per year, not $1 million at the moment the player signs the contract.
No NFL contract is fully guaranteed for its face value. Teams protect themselves this way—whether from a veteran’s skills declining with age, from the risk of serious injury, or as a means to pay a high-profile player well for a brief time without having to shoulder $20 million in yearly costs three seasons down the line, when it may be less feasible to do so. Take for example Browns wide receiver Dwayne Bowe. Bowe signed with the Browns in late March, accepting a deal worth $12.5 million over two years. Though this gives him an “average salary” of $6.25 million, he is actually guaranteed only $9 million of that, with $3.5 million counting as a signing bonus paid out at $1.75 million per year. Therefore, Bowe’s guaranteed salary is $5.5 million spanning two years. While he could see the full, $12.5 million, the Browns are banking on not investing more than $9 million on Bowe in 2015 and 2016.
The actual structure of a player’s contract must be examined before passing judgement—no $100 million contract is ever really a $100 million contract in the NFL. The only thing that matters is the guaranteed money and when that guaranteed cash is paid out. The best example of this can be found elsewhere in the AFC North—the contract of Cincinnati Bengals quarterback Andy Dalton. Last summer, the Bengals signed Dalton—a quarterback of talent, but not one of the league’s best—to a six-year, $96 million contract extension. It seems a bit excessive, given what he has accomplished and his very obvious ceiling as a player. But looking closer and it’s an incredibly fair and very team-friendly deal.
Only $17 million of that $96 million is guaranteed. That’s it. And of that $17 million, $12 million is a signing bonus, one that is tapped out after the 2018 season. Thus, only $5 million of Dalton’s salary is guaranteed. He does have $9 million wrapped up in roster bonuses, but those have already been paid—$4 million upon signing the deal and $5 million given him in April of this year. His base salary for 2015 is just $3 million. There are a number of performance-based escalators attached to playing time and playoff wins, but essentially it breaks down to a two-year, $25 million deal with the Bengals deciding, starting in 2016, whether to opt in on a year-by-year basis. Thus if Dalton plays well, he gets financial and job security and the Bengals feel good about spending money on him. If he falters, or they are not pleased with his progress as a player, they can move on with very little damage done to their bottom line.
The salary cap can be a complicated thing, but it doesn’t have to be. Just understanding the basics—the amount of cap space given to each team, the amount of carry-over cap a team may have, the Top 51 number and how contracts and roster cuts are structured—makes it a much less esoteric subject. And by knowing these basics, it’s easier to understand the intricacies, which we’ll be diving into on a weekly basis. And to the Browns’ credit, they have one of the least complicated cap situations in the NFL, given they have a ton of space and don’t have to do the salary cap jiu jitsu required of other teams with financial struggles, most notably the rival Pittsburgh Steelers.
The NFL is a sport. To truly appreciate it, one must understand the rules, the roles each player is responsible for and basics about plays, formations and down-and-distance strategies. But the NFL is also a business. Following the money is as crucial as following the on-field action in order to have a well-rounded understanding of how the league works.
All salary cap and contract data via OverTheCap.com and Spotrac.com