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SBJ/May 16-22, 2011/Leagues and Governing Bodies
Memo: NBA proposing $45M hard cap
Published May 16, 2011, Page 4
The details, spelled out in an April 26 memo issued by National Basketball Players Association Executive Director Billy Hunter, marks the league’s push for a major overhaul of the NBA’s economic model and emphasizes to players an aggressive bid to significantly slash costs and shorten contracts.
The memo was sent to all NBA players and was dated just days prior to the league delivering to the union a new labor proposal, which a source said still included the $45 million hard cap but added a phase-in of the cap over a few years. Union president Derek Fisher publicly dismissed the latest proposal as too similar to the original proposal.
The memo’s most eye-popping element is the league’s proposed $45 million hard cap, which cuts the current $58 million soft cap by nearly 25 percent.
Hunter said in the memo that the NBA projects the $45 million hard cap number with a team’s total salary not to exceed the cap for any reason. The proposed hard cap as outlined by Hunter also would eliminate the current luxury tax provision, which penalizes teams with a dollar-for-dollar tax for the amount spent on player payroll exceeding the salary cap.
The proposed hard cap is something the NBA has never had under collective bargaining, but it has become a critical element to owners. This initial proposal, and its steep cut in player cap space, demonstrates a strong commitment by the owners to dramatically curtail player payrolls while also supporting NBA Commissioner David Stern’s mantra of making the league more profitable.
The inclusion of non-guaranteed player contracts, while a negotiating point, also represents a radical shift for players who have long benefited from guaranteed deals. Taken together, Hunter felt compelled to send out the missive.
“The nature of the owners’ demands is so onerous that I feel it is imperative to reinforce the message of our recent team meetings with this letter,” Hunter wrote in the memo.
The union confirmed the letter but refused to comment.
Hunter also alerts players to the league’s effort to alter the structure of current contracts while detailing the owners’ proposal that no player contract be guaranteed for more than 50 percent for the first $8 million in salary and 25 percent for any amount above $8 million.
“A system-wide change in the nature of guaranteed contracts … not only would harm players’ economic interests individually, but it would also significantly change the culture of the league collectively,” Hunter wrote.
The league also strikes directly at a team’s cap room to re-sign players at a maximum salary, known as the “Bird” exception, after hall of famer Larry Bird. Annual contract increases would be no greater than 3 percent for players meeting the Bird rule, down significantly from the current 10.5 percent increase, according to the memo. Owners also proposed that the Bird rule contract length be cut to four years from the current six-year length.
Non-Bird players, or free agent players signing with new teams, would see their annual increases cut to 2 percent from the current 8 percent increase, with contract lengths cut to three years from the current five-year length.
The memo also explains that players would be put into one of four categories under a hard cap system, namely, Category A: a minimum salary player; Category B: a rookie wage scale player; Category C: a maximum salary player; and Category D: a player “fighting for whatever room remains under the new hard salary cap after the three above categories are accounted for.”
The union clearly is most concerned about the last category of players seeing major salary cuts. It uses, in the memo, as an example a player placed in the “D” category with his salary to be dictated by the team’s available salary cap. The player is signed through 2013 for a total salary exceeding $9 million. The memo shows that under the initial league proposal, the player’s salary would drop to a total just over $8 million, demonstrating how teams would be forced to cut salaries to remain under the hard cap.
“Under the hard cap proposal, a team’s total salary may not exceed the proposed hard salary cap for any reason,” Hunter said in the memo. “The important part to keep in mind is that without exceptions provided in our current soft cap system, all players would have to squeeze tightly under a hard (and much lower) cap number.”
Hunter and Stern have met in the past few weeks as the June 30 deadline of the current collective-bargaining agreement approaches. But as talks intensify, Hunter used the memo to stress to the players the growing threat of a lockout and the league’s firm hope to roll back salaries.
“Only by making it a point to prepare and educate yourself about the CBA negotiations and the pending lockout will you be able to best protect your own interests and the interests of the players that will follow,” Hunter wrote to the players.