Despite the falling Canadian dollar, the NHL's newest salary cap projections won't fall under this year's numbers. Either the NHL will stick it out at the rate they went with this year -- $71.4 million -- or they will exercise a five percent escalator option.
This is good news, as many feared the salary cap would take a hit due to the Candian dollar, which had been trending downwards over the last year, but has gone up ever so slightly over the month of February. The flat rate could still cause pain for teams with deep rosters in their attempts to re-sign key pieces, but it's a far better option than what would have happened should the salary cap have gone down.
The other option the NHL has is to use what's called an escalator, which raises the salary cap ceiling by five percent, up to $74 million. This, however, is dependent on the players and a fun little term called escrow.
It's a complicated process that requires a bit of math and legal knowledge, something which I have but not in complete abundance, so I'll let an expert from NHLNumbers.com take it away on a good definition of escrow:
The CBA provides that exactly 50 percent of hockey related revenue must be paid to players. If the total amount of salary slated to be paid to players in any season ends up being more than 50 percent of revenue earned that year, then players are required to forfeit an appropriate portion of their salary so that the 50 percent mark is hit.
This forfeiture is standard practice when the salary cap is set "too high" such that, when the numbers are crunched at the end of the season, the accountants conclude that teams had "overspent." And this is what has happened almost every season since the salary cap started a decade ago.
To avoid the possibility of sending full-salary cheques to players only to then require players to return some of that money after the season, the CBA includes an escrow concept, whereby a portion of all player salary is retained in an escrow fund. After the season, the accountants determine how much of the escrow fund should be paid to the players and how much should be returned to the owners.
You might remember that term "escrow" being thrown around when the NHL had their partial lockout in the 2012-13 season. It's the sports equivalent of what happens when you do your taxes every year, in a sense. In order to balance the revenue equally between the owners and players, the players deduct part of their salary into a fund that gets divvied out at the end of the season.
Escrow is a key factor in the escalator option. With the players already losing 16 percent of their salaries -- in comparison, last year they lost 12 percent and earlier this season, it was 14 before it got bumped up -- they may say they've had enough when the time comes to vote on the five percent escalator. The Hockey Writers does a good job of breaking down just what this process is and why it matters.
Even so, many can breathe a sigh of relief that the NHL salary cap isn't slated to go down once the final numbers are made public in June.