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Explaining the NFL’s Rookie Salary Cap
Posted on March 26, 2015 by Jason Fitzgerald
http://overthecap.com/explaining-the-nfls-rookie-salary-cap/
Troy asked me the other day a good question on NFL rookie contract’s impact on the salary cap so I thought this would be a good time to give another primer on the NFL rookie pool. It can be a confusing topic and often I see many people get the impact of the rookie pool incorrect when making salary cap projections for the summer. I’ll do this as Q&A style to hit on the main questions I usually receive on the topic. In case you don’t know it we also have a draft resource page which lists all our contract projections for the 2015 rookie class.
What is the “Rookie Pool”?
In the old CBA the NFL had a cap on how many cap dollars could be spent on rookies. This was called the “Entering Player Pool” and was generally considered the “Rookie Pool” or “Rookie Salary Cap”. The league allowed a player’s cap hit to rise by 25% of his first years cap charge which in theory would keep rookie salaries in check. However, in practice it was not the case as teams and agents used all types of neat little cap mechanisms to render the 25% rule invalid, especially for highly drafted players. This was a major renegotiating point in the 2011 CBA.
Per the current CBA, each NFL team is allotted a maximum amount of dollars to spend on their draft picks not only in year 1 cap charges, but also in total value. Those loopholes that existed in the prior CBA were all eliminated and thus rookies are limited to increases that equal 25% of their first years cap charge. The new CBA refers to these allocations as the “Total Rookie Allocation” and “Year One Rookie Allocation”. The values for each team are determined by the round and position in which the player is drafted. I just call them “Rookie Pools” because I’m used to using that term.
While the formula itself is a secret for calculating the charges those of us who track the numbers are able to get a good idea of how the process works. In general it’s an exponential decay where there are rapid drops at the top of the draft in terms of value and minimal drops as you get into the 3rd and 4thround of the draft. This gives us a good idea at forecasting the charges, though the NFL and NFLPA made it a bit easier due to the way that they grow the rookie pool.
The various rookie pools are supposed to grow (or fall) by about the same percentage as the salary cap. However the sides quickly realized that the formula failed to account for the normal growth of minimum salaries by $15,000 a year in the event the cap rose at a slow rate (approximately less than 3.7%), which it did in 2012 and 2013. Since it would not make sense to lessen bonus money in a year where the cap is growing the NFL and NFLPA agreed to freeze bonus money to allow for the natural growth of the year 1 salary.
Despite the fact that the 2014 salary cap rose significantly the freeze still remained in place and because of that we are assuming it will remain frozen in 2015, though we do have estimates for an unfrozen pool if someone has information pointing in that direction. So keeping all of this in mind we should get a pretty decent idea, barring some big changes by the League, as to what each team will spend on their rookies.
How does the “Rookie Pool” Impact the Salary Cap
This is probably the most confusing aspect for most people. Some people think that this is additional money added on top of the salary cap which is not the case at all. The “Rookie Pool” is a cap within the salary cap. It is essentially money that your team needs to place aside for your rookies. It is not added to your salary cap at all and it has to fit in the $143.28 million cap limit that is set for each team. If signing a rookie puts a team over the cap they will not be permitted to sign the player until they have the cap room to do so.
The second thing that confuses people is the amount of cap space required to fit in a rookie class. This is probably the biggest mistake made regarding rookie salaries and their role in cap management. Usually someone will see that rookie salaries are expected to total $6 million and then make the assumption that the team needs $6 million in cap space to sign their rookies. That’s not really correct.
During the offseason NFL roster expand to 90 players and only the top 51 players count against the salary cap. Every rookie that is signed will either replace a player currently in the top 51 or not count enough against the cap to be in the top 51, in which case only their prorated bonus money will count against the cap. This is why it is important to understand the concept of effective cap space.
To illustrate let’s look at the Jets. I project that the Jets will have a rookie pool number of $6,046,013 to spend on 6 draft picks. That is a lot of required cap space for a team that just spent like the Jets did in free agency. But when we look at effective cap space it will paint an entirely different picture.
The number 6 pick is projected to count $3,002,182 against the cap. But once he is signed he will bump out the number 51 player on the roster. I currently estimate that player to be IK Enemkpali whose base salary of $510,000 will fall off the cap books once number 6 is signed. That makes the effective cost of pick 6 to be just $2,492,182. When we do that for every pick in the Jets draft we get the following:
Pick 6 37 70 104 224 225 Totals
Year 1 Cap Charge $3,002,182 $985,153 $602,813 $554,250 $450,933 $450,682 $6,046,013
Replacement Cost $510,000 $435,000 $585,000 $435,000 $435,000 $435,000 $2,835,000
Effective Cap Cost $2,492,182 $550,153 $17,813 $119,250 $15,933 $15,682 $3,211,013
So really what the Jets will need is around $3.2 million in cap space to sign their rookies despite the total cap charge being over $6 million. You simply due this for your team to determine the charge. The quickest way to do it is to simply take the rookie pool we have listed and subtract from it $435,000 multiplied by the number of draft picks you have. This will represent the maximum possible amount the rookies will take up and is much faster than what I did above.
Do Rookies Immediately Count Against the Cap
No 99.9% of the time a drafted rookie will not count against the salary cap. The only time a drafted rookie will count against the cap is if a team has less than 51 players. Technically when a rookie is drafted they are tendered a minimum contract so if a team has less than 51 players the rookie would count for $435,000 against the salary cap, but not for the full cap charge. A team does not need to account for the full cap charge until the player is actually signed to a contract, which for most players will not happen until the summer, giving the team ample time to make any moves they need to be able to sign their rookie class.
So What Teams Need To Create Space for Rookies?
I’ll do the quick and dirty calculation here to get an idea of how much effective cap space is required for a rookie class. Please note that these numbers may be slightly off due to the changes tonight in draft order, which I attempted to account for but I may have made a possible mistake.
Team No. Picks Rookie Pool Effective Cap Cost
Buccaneers 8 $8,112,982 $4,632,982
Browns 10 $7,895,357 $3,545,357
Titans 7 $7,490,535 $4,445,535
Jaguars 7 $7,331,746 $4,286,746
Raiders 7 $7,216,784 $4,171,784
Saints 9 $7,087,249 $3,172,249
Redskins 7 $6,942,849 $3,897,849
Chiefs 10 $6,365,237 $2,015,237
Texans 10 $6,309,174 $1,959,174
Giants 8 $6,267,517 $2,787,517
Falcons 8 $6,257,380 $2,777,380
Ravens 10 $6,150,913 $1,800,913
49ers 9 $6,067,953 $2,152,953
Panthers 10 $6,048,967 $1,698,967
Jets 6 $6,046,013 $3,436,013
Broncos 10 $5,915,045 $1,565,045
Bengals 9 $5,840,929 $1,925,929
Bears 6 $5,733,850 $3,123,850
Seahawks 11 $5,570,814 $785,814
Vikings 7 $5,502,921 $2,457,921
Patriots 9 $5,482,042 $1,567,042
Colts 9 $5,386,895 $1,471,895
Eagles 8 $5,286,611 $1,806,611
Rams 6 $5,218,925 $2,608,925
Steelers 8 $5,160,845 $1,680,845
Cardinals 8 $5,112,281 $1,632,281
Packers 8 $4,872,000 $1,392,000
Dolphins 6 $4,579,499 $1,969,499
Cowboys 7 $4,559,006 $1,514,006
Chargers 6 $4,492,053 $1,882,053
Lions 6 $4,141,082 $1,531,082
Bills 6 $3,216,255 $606,255
Based on the above I would say three teams will likely need to think about tweaking their rosters over the next few months. Based on our current cap estimates the Cowboys and the Chiefs would both have under $250,000 in remaining cap room after signing rookies, which is a pretty tight number to work with. New Orleans would be about $2.8 million over the salary cap once rookies are signed so clearly there is work that needs to be done before July when they will begin to sign their top draft choices.
For those curious about teams that could absorb Adrian Peterson’s $12.75 million salary the list would include the Chargers, Falcons, Raiders, Bengals, Buccaneers, Packers, Titans, Browns, and Jaguars.
Any questions feel free to ask and make sure to check out our draft page which we will update soon for the new draft order. We’ll have some draft articles up over the course of the next few weeks as well and for fun head over to Fanspeak and use their really cool draft sims to run your own draft.
Posted on March 26, 2015 by Jason Fitzgerald
http://overthecap.com/explaining-the-nfls-rookie-salary-cap/
Troy asked me the other day a good question on NFL rookie contract’s impact on the salary cap so I thought this would be a good time to give another primer on the NFL rookie pool. It can be a confusing topic and often I see many people get the impact of the rookie pool incorrect when making salary cap projections for the summer. I’ll do this as Q&A style to hit on the main questions I usually receive on the topic. In case you don’t know it we also have a draft resource page which lists all our contract projections for the 2015 rookie class.
What is the “Rookie Pool”?
In the old CBA the NFL had a cap on how many cap dollars could be spent on rookies. This was called the “Entering Player Pool” and was generally considered the “Rookie Pool” or “Rookie Salary Cap”. The league allowed a player’s cap hit to rise by 25% of his first years cap charge which in theory would keep rookie salaries in check. However, in practice it was not the case as teams and agents used all types of neat little cap mechanisms to render the 25% rule invalid, especially for highly drafted players. This was a major renegotiating point in the 2011 CBA.
Per the current CBA, each NFL team is allotted a maximum amount of dollars to spend on their draft picks not only in year 1 cap charges, but also in total value. Those loopholes that existed in the prior CBA were all eliminated and thus rookies are limited to increases that equal 25% of their first years cap charge. The new CBA refers to these allocations as the “Total Rookie Allocation” and “Year One Rookie Allocation”. The values for each team are determined by the round and position in which the player is drafted. I just call them “Rookie Pools” because I’m used to using that term.
While the formula itself is a secret for calculating the charges those of us who track the numbers are able to get a good idea of how the process works. In general it’s an exponential decay where there are rapid drops at the top of the draft in terms of value and minimal drops as you get into the 3rd and 4thround of the draft. This gives us a good idea at forecasting the charges, though the NFL and NFLPA made it a bit easier due to the way that they grow the rookie pool.
The various rookie pools are supposed to grow (or fall) by about the same percentage as the salary cap. However the sides quickly realized that the formula failed to account for the normal growth of minimum salaries by $15,000 a year in the event the cap rose at a slow rate (approximately less than 3.7%), which it did in 2012 and 2013. Since it would not make sense to lessen bonus money in a year where the cap is growing the NFL and NFLPA agreed to freeze bonus money to allow for the natural growth of the year 1 salary.
Despite the fact that the 2014 salary cap rose significantly the freeze still remained in place and because of that we are assuming it will remain frozen in 2015, though we do have estimates for an unfrozen pool if someone has information pointing in that direction. So keeping all of this in mind we should get a pretty decent idea, barring some big changes by the League, as to what each team will spend on their rookies.
How does the “Rookie Pool” Impact the Salary Cap
This is probably the most confusing aspect for most people. Some people think that this is additional money added on top of the salary cap which is not the case at all. The “Rookie Pool” is a cap within the salary cap. It is essentially money that your team needs to place aside for your rookies. It is not added to your salary cap at all and it has to fit in the $143.28 million cap limit that is set for each team. If signing a rookie puts a team over the cap they will not be permitted to sign the player until they have the cap room to do so.
The second thing that confuses people is the amount of cap space required to fit in a rookie class. This is probably the biggest mistake made regarding rookie salaries and their role in cap management. Usually someone will see that rookie salaries are expected to total $6 million and then make the assumption that the team needs $6 million in cap space to sign their rookies. That’s not really correct.
During the offseason NFL roster expand to 90 players and only the top 51 players count against the salary cap. Every rookie that is signed will either replace a player currently in the top 51 or not count enough against the cap to be in the top 51, in which case only their prorated bonus money will count against the cap. This is why it is important to understand the concept of effective cap space.
To illustrate let’s look at the Jets. I project that the Jets will have a rookie pool number of $6,046,013 to spend on 6 draft picks. That is a lot of required cap space for a team that just spent like the Jets did in free agency. But when we look at effective cap space it will paint an entirely different picture.
The number 6 pick is projected to count $3,002,182 against the cap. But once he is signed he will bump out the number 51 player on the roster. I currently estimate that player to be IK Enemkpali whose base salary of $510,000 will fall off the cap books once number 6 is signed. That makes the effective cost of pick 6 to be just $2,492,182. When we do that for every pick in the Jets draft we get the following:
Pick 6 37 70 104 224 225 Totals
Year 1 Cap Charge $3,002,182 $985,153 $602,813 $554,250 $450,933 $450,682 $6,046,013
Replacement Cost $510,000 $435,000 $585,000 $435,000 $435,000 $435,000 $2,835,000
Effective Cap Cost $2,492,182 $550,153 $17,813 $119,250 $15,933 $15,682 $3,211,013
So really what the Jets will need is around $3.2 million in cap space to sign their rookies despite the total cap charge being over $6 million. You simply due this for your team to determine the charge. The quickest way to do it is to simply take the rookie pool we have listed and subtract from it $435,000 multiplied by the number of draft picks you have. This will represent the maximum possible amount the rookies will take up and is much faster than what I did above.
Do Rookies Immediately Count Against the Cap
No 99.9% of the time a drafted rookie will not count against the salary cap. The only time a drafted rookie will count against the cap is if a team has less than 51 players. Technically when a rookie is drafted they are tendered a minimum contract so if a team has less than 51 players the rookie would count for $435,000 against the salary cap, but not for the full cap charge. A team does not need to account for the full cap charge until the player is actually signed to a contract, which for most players will not happen until the summer, giving the team ample time to make any moves they need to be able to sign their rookie class.
So What Teams Need To Create Space for Rookies?
I’ll do the quick and dirty calculation here to get an idea of how much effective cap space is required for a rookie class. Please note that these numbers may be slightly off due to the changes tonight in draft order, which I attempted to account for but I may have made a possible mistake.
Team No. Picks Rookie Pool Effective Cap Cost
Buccaneers 8 $8,112,982 $4,632,982
Browns 10 $7,895,357 $3,545,357
Titans 7 $7,490,535 $4,445,535
Jaguars 7 $7,331,746 $4,286,746
Raiders 7 $7,216,784 $4,171,784
Saints 9 $7,087,249 $3,172,249
Redskins 7 $6,942,849 $3,897,849
Chiefs 10 $6,365,237 $2,015,237
Texans 10 $6,309,174 $1,959,174
Giants 8 $6,267,517 $2,787,517
Falcons 8 $6,257,380 $2,777,380
Ravens 10 $6,150,913 $1,800,913
49ers 9 $6,067,953 $2,152,953
Panthers 10 $6,048,967 $1,698,967
Jets 6 $6,046,013 $3,436,013
Broncos 10 $5,915,045 $1,565,045
Bengals 9 $5,840,929 $1,925,929
Bears 6 $5,733,850 $3,123,850
Seahawks 11 $5,570,814 $785,814
Vikings 7 $5,502,921 $2,457,921
Patriots 9 $5,482,042 $1,567,042
Colts 9 $5,386,895 $1,471,895
Eagles 8 $5,286,611 $1,806,611
Rams 6 $5,218,925 $2,608,925
Steelers 8 $5,160,845 $1,680,845
Cardinals 8 $5,112,281 $1,632,281
Packers 8 $4,872,000 $1,392,000
Dolphins 6 $4,579,499 $1,969,499
Cowboys 7 $4,559,006 $1,514,006
Chargers 6 $4,492,053 $1,882,053
Lions 6 $4,141,082 $1,531,082
Bills 6 $3,216,255 $606,255
Based on the above I would say three teams will likely need to think about tweaking their rosters over the next few months. Based on our current cap estimates the Cowboys and the Chiefs would both have under $250,000 in remaining cap room after signing rookies, which is a pretty tight number to work with. New Orleans would be about $2.8 million over the salary cap once rookies are signed so clearly there is work that needs to be done before July when they will begin to sign their top draft choices.
For those curious about teams that could absorb Adrian Peterson’s $12.75 million salary the list would include the Chargers, Falcons, Raiders, Bengals, Buccaneers, Packers, Titans, Browns, and Jaguars.
Any questions feel free to ask and make sure to check out our draft page which we will update soon for the new draft order. We’ll have some draft articles up over the course of the next few weeks as well and for fun head over to Fanspeak and use their really cool draft sims to run your own draft.