Reports: NBA salary cap would be $90M with normal formula, instead expected to remain flat

NBA salary cap
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NBA owners and players split league revenue approximately 50-50. The league’s salary-cap system is built on that central fact.

Each season, the NBA sets a salary cap based on projected revenue. The formula is designed to reach a salary-cap number that induces the total of player salaries to be worth… approximately 50% of league revenue.*

*Of course, it’s impossible to hit that target exactly. So, a portion of players’ salaries are held in escrow. At the end of the season, the amount necessary to reach the approximate 50-50 split is returned to the players.

The salary cap is currently 109.14 million.

But revenue cratered this season and is expected to do so again next season amid the coronavirus pandemic.

Adrian Wojnarowski and Zach Lowe of ESPN:

Had the league and players’ union followed the normal formula to determine this season’s salary cap — linking it to overall league revenue — sources told ESPN that it would have fallen to around $90 million

That $90 million figure provides useful perspective on the league’s finances.

The salary cap has decreased just twice in NBA history:

  • From $58,680,000 in 2008-09 to $57,700,000 in 2009-10 (-$980,000)
  • From $42,500,000 in 2001-02 to $40,271,000 in 2002-03 (-$2,229,000)

A drop of $19 million would be a major shock to the system.

Which is why it almost certainly won’t happen.

Owners and players are negotiating where to set the salary cap and luxury-tax line rather than just relying on the formula. That way, certain classes of players – 2020 free agents, 2020 first-round picks – won’t be disproportionately harmed by the economic downturn. Nor will there be a huge salary-cap spike if revenue suddenly returns to normal in a future season.

In either direction, cap smoothing looks far more appealing this time around.

The belief is the salary cap ($109,140,000) and luxury-tax line ($132,627,000) remain near their current marks. More evidence of that is emerging.

Shams Charania of The Athletic:

Multiple sources say the cap and tax are expected to be $109 million and $132 million, respectively.

There are multiple ways of looking at this:

  • Players and owners are so far apart on a restart plan. There can be no faith in how the salary cap and luxury tax will look by the time both sides reach a deal.
  • Players and owners are so far apart on a restart plan. If both sides – amid the disconnect – have found common ground on the salary cap and luxury tax, that must be ironclad.

Back to the 50-50 split…

If the salary cap is set at $109 million when projected revenue calls for a $90 million cap, that means players would get paid more than their fair share. Obviously, owners won’t go for that.

The simplest solution is players putting a larger share of their salaries in escrow. But players currently under contract might not like that just so 2020 free agents and 2020 first-round picks get better deals.

Which is one reason the player-vs.-player dynamics of this situation loom so large.

(Of course, there’s also team-vs.-team.)