This season, the NBA salary cap was set at $109.14 million, and that was initially projected to jump to $115 million next season. Then the NBA’s controversy with China came up and hit the bottom line, which led to a projection of a $114 million cap.
Then the NBA had to shut down due to the coronavirus. That threw salary cap planning into chaos.
There have been expectations of a drop in the salary cap number for next season, but former Memphis Grizzlies executive John Hollinger predicted at The Athletic that the cap would likely remain flat.
The expectation is that the NBA will set the cap at roughly the same level as this year – $109 million, with a tax line of $123 million – and separate it from Basketball Related Income [BRI], the mechanism by which the split of money between players and teams is achieved, like the league did coming out of the 2011 lockout, and make up any potential difference that arises by increasing the escrow withholding from players. Such “smoothing” of the cap would eliminate a shock-to-the-system cap spike in 2021 and beyond, eliminating a potential severe one- or two-year drop in the cap and tax lines because of lost revenues from fans not being in arenas, followed by a burst of income whenever they are allowed to return.
In short, there would be no repeat of 2016, when the first money from the new national TV deals came into the system, and the cap jumped from $70 million in 2015 to $94 million the following summer.
The National Basketball Players Association opposed cap smoothing back in 2016, but in this case will likely support it. The reason is if they don’t — if the league just followed the BRI formula laid out in the CBA — the salary cap would fall dramatically next season, potentially below $100 million even if all the Orlando restart games are played (which has its challenges). This would hit teams hard, putting teams into the luxury tax that thought they would be nowhere near it. It’s an outcome nobody wants.
It’s going to take a few seasons to completely smooth things out because next season revenues for teams could be down as well if they have to play some — or, as the union projects, all — games without fans in the stands. Commissioner Adam Silver said 40% of league revenue was tied to fans at games.
This could lead to the owners using the force majeure to tear up the CBA and renegotiate it, which would throw open the doors to countless more financial questions around the league.