Would A Higher, Harder NBA Salary Cap Fix The League?

The Hook digs into the NBA lockout's salary cap issue: is a higher, harder salary cap the right fix to balance the league and bail out the poorer teams? Plus, just how much has your team paid in salary since 2006?

One of the flashpoints in the NBA's labor battle is over the firmness of the league's salary cap. It's current firmness can be described as "meringue" (the pie topping, not the dance); the owners would like to get it somewhere toward "brick wall". This is one of those fuzzy issues where the NBA has already pulled back from its demands a bit, which likely means that owners care less about a hard cap than they do the all-important revenue split. Reports suggest that even players would consent to a hard cap, given other concessions from the league and given that the cap was set high enough, say $70 million to start. (It was $58 million last season. Despite this, the average team payroll was $67 million. Remember what I said about meringue?)

The two outcomes from a hard or harder salary cap are depressed salaries and competitive balance. Salaries would be depressed because fewer teams would theoretically be able to bid on mid-rung players, having soaked up much of the cap space in stars. Competitive balance would be stronger because all teams would be spending roughly the same amount on payroll, theoretically eliminating the advantage of large-market teams or deep-pocketed owners. (As NFL and NHL fans know, this is stronger in theory than in practice.) 

There's one thing that is absolutely certain: the current NBA salary cap has done nothing to ensure team payrolls remain in the same range. I looked at all annual team payrolls and luxury tax payments over the six-year life of the most recent NBA collective bargaining agreement, pulling data from the invaluable Patricia Bender and Larry Coon. The range on total payroll over the course of the CBA, as illustrated below, is simply astounding.


The New York Knicks and Dallas Mavericks will rightly draw your immediate attention -- the Knicks exist in a truly Holy S--t zone over there -- but beyond that this graphic shows some wild differences. Twenty-six of the league's 30 teams fall between $350 million and $480 million, with one team (the Charlotte Bobcats, at $324 million) below and three teams (the Knicks, Mavericks and L.A. Lakers) above. But within that pack is a whole lot of difference. Consider that the team at the top of that range, the Orlando Magic at $480 million, had an average payroll (including tax payments) of $80 million over the last CBA. The team at the bottom -- the Seattle Sonics/Oklahoma City Thunder, at $350 million -- had an annual payroll of $58 million. Everyone but the aforementioned four teams is somewhere in the middle.

Consider that the Indiana Pacers aren't profitable at the most recent cap of $58 million, and consider that if they paid $58 million in payroll every season they would be among the two or three cheapest teams in the league, and consider that to achieve a hard cap the NBA would have to raise that level significantly. That's my concern with a higher, harder cap: in and of itself, it does nothing to help teams that already can't afford to hit the cap. It relies on the good graces of Jerry Buss, Jerry Reinsdorf and Jimmy Dolan to approve a helpful revenue sharing program ... in the months after the lockout ends.

This is what the NHL faces, as illustrated by SB Nation's Travis Hughes: after the 2004-05 lockout, the league pushed through a hard cap with increases tied to league revenue. The league's revenue has been booming, and will continue to boom thanks to a lucrative new deal with Kabletown Comcast/NBC. Already, just a few years in, the cap (and associated salary floor) are high enough to make a number of teams unprofitable, and perhaps untenable. 

Without strong revenue sharing -- something David Stern has never been able to draw from his high-revenue owners -- the same situation would apply to the least fortunate NBA teams from Day 1. A higher, harder cap isn't a fix. If the NBA is looking to achieve competitive balance through a hard cap, it needs to crush its size lest a two-tier NBA be re-created, with the challenge of making every team profitable kicked down the road.



We touch on the Knicks-Mavericks situation in today's This Is Why We Can't Have Nice Things, but there are some other necessary observations to make from the payroll study, and the Chicago Bulls are No. 1 with a bullet. (Literally!)

  • The Bulls have had the sixth-lowest payroll over the past six seasons, which is especially considering everyone considers the Bulls to be among the top three or so most lucrative franchises in the NBA. High revenues thanks to a loyal fanbase and high prices, and low payroll? It's quite a one-two punch to line Reinsdorf's pocket. With gold.
  • The Bulls are one of eight teams that did not pay a dime of luxury tax over the last CBA. The others are: the Golden State Warriors, Detroit Pistons, New Orleans Hornets, L.A. Clippers, Atlanta Hawks, Sonics/Thunder and, of course, the Bobcats.
  • OK, I can't resist one Knicks note here: New York's salary plus tax over the six seasons investigated -- three seasons of Isiah Thomas, two seasons of Donnie Walsh cleaning up Isiah's mess, one season of Donnie Walsh trying to win games -- it is more than double that of 13 other teams. The Washington Wizards rank 18th in salary plus tax. The Knicks' salary plus tax is twice that of the Wizards. Washington has a rough .394 winning percentage over that span. The Knicks are at .370. Oof.
  • The Bobcats' league-low average payroll comes out to $54 million. In fairness, the salary floor didn't apply to the Bobcats in the early years of the team's existence, and Bob Johnson was not shy about cutting under it.
  • Those broke Pacers, who have been rebuilding for roughly the entire CBA? They finished No. 12 in total payroll and tax, just under $1 million behind the San Antonio Spurs (who had the league's best winning percentage and one title) and ahead of the Miami Heat, Phoenix Suns and Utah Jazz, all three of whom had strong total winning percentages. The Pacers spent more than Suns over the past six years, and a total of $94 million over the annual salary caps (an average of $15 million over per season). The Pacers claim to be broke. This things are not unrelated.
  • Last year's Sacramento Kings had the third lowest payroll of any non-Bobcats team in the last CBA at $44 million. The 2006 Hornets and Hawks undercut them by a couple million each. The big difference: the salary cap in 2006 was $49.5 million. In 2011, it was $58 million. Adjusted for the cap level, the Kings' were much cheaper last season than any team but the Bobcats have been within the past six years, coming in at 22 percent under the cap.
  • If you add the salary cap from each season, you get $332 million. Only the Bobcats came under the number for the life of the CBA. The 29 other teams all went over the aggregate cap over the six seasons. Which begs the question: is it really a cap at all?

The Hook runs Monday through Friday. See the archives.
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