Salary Cap basics: Indexing contracts across seasons

The conference championship games are in the books, and the final meaningful game of the 2017 NFL season is less than two weeks away meaning we are just days from the start of the true NFL offseasons. While many fans will pack their football gear up and store it away until training camp, Field Gulls will be here the entire time, providing information and updates on the roster, the draft, free agency and the salary cap.

I have a long, long list of offseason projects, which is great since there are more than six months until training camp starts, and part of what I will will be covering throughout the offseason is the salary cap, its machinations and the basics of understanding the cap.

In particular, one of the things we will be spending a lot of time on this offseason in discussing the salary cap is the fact that the Seattle Seahawks, at first glance, have relatively little cap space available to make massive changes to the team they put on the field. Now, because of how Pete Carroll and John Schneider have constructed the roster and structured contracts, they have plenty of room to make the necessary moves they need prior to the season, it’s simply a matter of maneuvering through the offseason in the meantime. In order to fully understand the moves the team is likely to make, a good understanding of the salary cap is essential.

Thus, as fans will be clamoring for free agent additions, while critiquing and analyzing past free agent signings, one of the key foundations that will be utilized repeatedly throughout the offseason will be the benchmarking of contracts across different seasons. Because of the constantly changing cap, a $10M contract from 2014 is far different from a $10M contract in 2018, so understanding the difference between contracts across different seasons is key. This week I will be covering multiple different methods of benchmarking contracts, and today we will start with the absolute most basic method of cap inflation, simple indexing of contracts to the salary cap.

This appears to be the most common methodology when fans discuss the salary cap and contracts relative to cap growth, as it represents one of the most basic ways to compare contracts. In short, it is a method to say, “since 201X the salary cap has risen Y%, so Player Z’s contract should be Y% larger than it was in 201X.”

For those who want fewer variables, here’s a couple of real examples. In 2013 the Seahawks signed Michael Bennett to a one year, $5M contract and Cliff Avril to a two-year, $13M contract. Since 2013 the salary cap has increased roughly 44.7% (assuming a $178M salary cap for 2018), so doing the proportional math on that, it equates to roughly the same as a player signing a one year $7.235M contract for 2018.

For Cliff Avril’s contract, the computations are slightly more complicated only because it involves adjusting the cap hits for two seasons. Avril’s two year contract had cap hits of $3.75M in 2013 and $9.25M in 2014. Adjusting those numbers forward to the present using this methodology it is roughly the equivalent of a player signing a two year contract worth $18.6M, with cap hits in the ballpark of $5.4M and $13.2M in 2018 and 2019, respectively.

In any case, for reference, here is a table of the salary cap under the current collective bargaining agreement showing how much the cap has grown in recent years and is expected to grow in coming years.

For those who prefer to use an inflation index rather than the raw cap numbers, the third column in the table is the salary capflation index, with the first year of the new CBA used as the base for the index. For those readers who are unaware how the inflation index works but would like to learn, this article explains how to do so.

This method is simple and effective in creating a ballpark estimate, yet has significant drawbacks in certain situations. In particular, exclusively using this methodology leads to cap slippage and failing to account for cap space over time, as it fails to take into account the dynamics of the roster and minimum salaries relative to the overall cap. We’ll take a look at why exactly that is the case and some of the alternative methods for translating contracts across seasons in the coming days as we dig deeper into the cap.

In addition, any readers who have specific questions about the salary cap, its usage or its machinations, please feel free to ask those questions in the comments section or hit me up on Twitter under the handle @SeahawksMachine. Anyone who may be afraid of posting a question in public for fear of embarrassing themselves in front of others may feel free to send me a direct message privately on Twitter and I can address the question without readers ever knowing who asked it.