A More Ideal NBA CBA, Part IV - Maximum Salary Amounts

This section is very long due to details on maximum contracts. It's also the number one issue that is a point of contention between the union and the owners. I know some of you guys want to see the players get their dough but sometimes you just don't know how much dough they could make if they make a max deal.


Maximum annual contracts
Currently in the NBA, the maximum contract amount is determined by two factors. The first factor is how many years he has played in the league. The second factor is if he his signing a contract with a new team, or if he is signing a contract with his current team and exercising his Larry Bird rights.

If the player is signing a new contract with his current team and has been with them for less than three years (does not have Larry Bird Rights), or is signing a new contract with a new team, annual increases can be no more than the amount of 8% of the first year's salary per year, and the maximum contract can be no more than five years. If a player has been with a team for three years or more (without being waived), he may get a contract for up to six years, and annual increases can go up to 10.5% of the first year's salary per year. This is an exercise of the benefits of Larry Bird Rights.

CURRENT MAXIMUM CONTRACT FOR A PLAYER with 0-6 YEARS IN THE NBA
For players with 0-6 years in the NBA, the maximum salary of the first year of his contract is set at 25% of the soft salary cap or 105% of his previous year's salary, whichever is more (the latter rarely happens given that players haven't been in the league long enough). Annual increases or decreases are determined by the contract agreement.

The soft cap is currently at $58,044,000.00. Assuming I add the maximum increases, this is the amount of a max contract for such a player in the chart below.

	0-6 yrs of NBA Experience
	No Bird Rts	Bird Rts
2010-2011	$14,511,000.00	$14,511,000.00
2011-2012	$15,671,880.00	$16,034,655.00
2012-2013	$16,832,760.00	$17,558,310.00
2013-2014	$17,993,640.00	$19,081,965.00
2014-2015	$19,154,520.00	$20,605,620.00
2015-2016		$22,129,275.00
	$84,163,800.00	$109,920,825.00

Annual increases of non bird max deals are $1,160,880.00 per season which is 8% of $14,511,000.00
Annual increases of bird max deals are $1,523,655.00 per season which is 10.5% of $14,511,000.00

As you can see, max contracts are particularly advantageous if a player has bird rights and signs with his current team, rather than if he goes to a new team. He could earn over $25 million total and get an extra year on the deal.

CURRENT MAXIMUM CONTRACT FOR A PLAYER with 7-9 YEARS IN THE NBA
For players with 7-9 years in the NBA, the maximum salary of the first year of his contract is set at 30% of the soft salary cap or 105% of his previous year's salary, whichever is more. To keep things simpler, I'll use the 30% figure as the first year of the salary since you may have a player using the 105% of last year's salary as the max figure.

	7-9 yrs of NBA Experience
	No Bird	Bird
2010-2011	$17,413,200.00	$17,413,200.00
2011-2012	$18,806,256.00	$19,241,586.00
2012-2013	$20,199,312.00	$21,069,972.00
2013-2014	$21,592,368.00	$22,898,358.00
2014-2015	$22,985,424.00	$24,726,744.00
2015-2016		$26,555,130.00
	$100,996,560.00	$131,904,990.00

Again, with Bird rights and the extra year, a max deal with bird rights can be worth considerably more. The maximum annual increase for a non-Bird max deal here was $1,393,056.00 per season, and for a bird max deal, it is $1,828,386.00. The year one salary as you might have guessed is 30% of the salary cap.

CURRENT MAXIMUM CONTRACT FOR A PLAYER with 10 OR MORE YEARS IN THE NBA
For players with 10 or more years in the NBA, the maximum salary of the first year of his contract is set at 35% of the soft salary cap or 105% of his previous year's salary, whichever is more. Again to keep things simpler, because some max players could get a first year salary more than 35% of the cap, the first year salary for our purposes is set at 35% of the cap. Here is how these amounts stack up.

	10+ yrs of NBA Experience
	No Bird	Bird
2010-2011	$20,315,400.00	$20,315,400.00
2011-2012	$21,940,632.00	$22,448,517.00
2012-2013	$23,565,864.00	$24,581,634.00
2013-2014	$25,191,096.00	$26,714,751.00
2014-2015	$26,816,328.00	$28,847,868.00
2015-2016		$30,980,985.00
	$117,829,320.00	$153,889,155.00

Annual increase for a non-bird max deal here was at $1,625,232.00 (8% of year one salary). For a bird max deal it is $2,133,117.00 (10.5% of year one salary). Note that maximum salary amounts could theoretically be higher if a player's salary last year was more than 35% of the salary cap.

PROBLEM WITH MAX SALARIES IN THE NBA RIGHT NOW.
There are two problems with the current situation of max salaries in the NBA:

1. As you can see with salaries right now, max salaries can easily make one player eat up 40% or even close to 50% of the salary cap if not more limiting financial flexibility of the team to get more players and if could force teams to accept free agents by only using the minimum salary exception and that turns off potential free agents. The minimum salary exception allows teams to sign free agents when they're above the cap but only to a minimum deal. Teams like the Celtics and Heat have been forced to take in new players by only giving minimum contracts.

• Kobe Bryant is an example of a player who is hurting the Lakers' financial flexibility. He currently makes about $24.8 million this season and his new contract for next season gives him over $25 million due to the 105% rule (he took less actually). His current salary is over 40% of the soft cap.
  

2. If the player who is making such a large contract has many years left in his deal and he is "underperforming" or injured, this also hurts the team from getting quality replacement players. There is an injury exception in the NBA that allows a team to get a player at a salary worth 50% of the injured player, OR at the mid level exception (average NBA salary), whatever is less.

• Yao Ming sat out the entire 2009-2010 season due to a foot injury. The Rockets were able to get an exception for his injury, but the total salary they could give for a replacement player was at the mid level exception because Yao was making over $!7 million that season, and half of that is more than the mid level exception. At least for Yao, he only had a couple seasons left in his deal at the time, but it still hurts the team
  

MY REMEDIES

1. LOWER MAXIMUM SALARY AMOUNTS CONSIDERABLY

Again in an era with a hard cap, it is inevitable that maximum salaries must be cut considerably so teams could be flexible enough to sign 15 players and remain under a threshold. I'm not too concerned about most players earning up to the current mid level exception amounts, but it's the maximum players that are hurting flexibility with even a soft cap. I make these proposals based on experience:

0-3 YEARS EXPERIENCE
1st year max salary capped at 10% of salary cap, annual increases for Bird deals are capped to 8% of the 1st year salary, and annual increases for non Bird deals capped at 5% of the first year salary. That is a drop from 10.5% and 8% respectively. Assuming the hard cap is $60 million as I said in Part I, here are the numbers.

	No Bird	Bird*
Year 1	$6,000,000.00	$6,000,000.00
Year 2	$6,300,000.00	$6,480,000.00
Year 3	$6,600,000.00	$6,960,000.00
Year 4	$6,900,000.00	$7,440,000.00
Year 5	$7,200,000.00	$7,920,000.00
Year 6		$8,400,000.00
	$33,000,000.00	$43,200,000.00

*This can only be given to a player with 3 years of NBA experience, and if he has retained his Larry Bird Rights.

Non bird contracts have a max increase of $300,000/yr which is 5% of the 1st year salary which is $6 million; bird contracts have an increase of $480,000/yr which is 8% of $6 million.

• With rookie scale contracts which won't be at the maximum, it is unlikely that these contracts are ever handed out, unless we have a Gilbert Arenas-like situation where he earned close to league minimum his 1st couple years in the NBA and received close to a max deal in his third season since he was a 2nd round pick. They're still here anyway if a team decided that such a contract was warranted.
  

4-6 YEARS
1st year max salary capped at 12.5% of salary cap, increases for bird
deals are capped to 8%, increases for non Bird deals capped at 5%. There is no exception/loophole that allows the 1st year salary to be 105% of the player's salary the previous year if it is higher than 12.5% of the salary cap. Therefore, the player must plan accordingly to time his contracts if he wants to make his salary increase each year he is in the NBA. Again numbers are based of a hard cap of $60 million.

	No Bird	Bird
Year 1	$7,500,000.00	$7,500,000.00
Year 2	$7,875,000.00	$8,100,000.00
Year 3	$8,250,000.00	$8,700,000.00
Year 4	$8,625,000.00	$9,300,000.00
Year 5	$9,000,000.00	$9,900,000.00
Year 6		$10,500,000.00
	$41,250,000.00	$54,000,000.00

The maximum annual increase of a non Bird deal is $375,000.00 and the maximum increase for a Bird deal is $600,000.00.

7-9 YEARS EXPERIENCE
1st year max salary capped at 15% of salary cap, increases for Bird deals are capped to 8%, increases for non Bird deals capped at 5%. There is no exception/loophole that allows the 1st year salary to be 105% of the player's salary the previous year if it is higher than 15% of the salary cap.

	No Bird	Bird
Year 1	$9,000,000.00	$9,000,000.00
Year 2	$9,450,000.00	$9,720,000.00
Year 3	$9,900,000.00	$10,440,000.00
Year 4	$10,350,000.00	$11,160,000.00
Year 5	$10,800,000.00	$11,880,000.00
Year 6		$12,600,000.00
	$49,500,000.00	$64,800,000.00

The maximum annual increase of a non Bird deal is $450,000.00 and the maximum increase for a Bird deal is $720,000.00.

10+ YEARS EXPERIENCE
1st year max salary capped at 20% of salary cap, increases for Bird deals are capped to 8%, increases for non Bird deals capped at 5%. There is no exception/loophole that allows the 1st year salary to be 105% of the player's salary the previous year if it is higher than 20% of the salary cap.

	No Bird	Bird
Year 1	$12,000,000.00	$12,000,000.00
Year 2	$12,600,000.00	$12,960,000.00
Year 3	$13,200,000.00	$13,920,000.00
Year 4	$13,800,000.00	$14,880,000.00
Year 5	$14,400,000.00	$15,840,000.00
Year 6		$16,800,000.00
	$66,000,000.00	$86,400,000.00

Increase for a non Bird deal is $600,000/yr; increase for a Bird deal is $960,000/yr.

2. GET RID OF THE 105% OF LAST YEAR'S SALARY RULE WHEN DETERMINING MAXIMUM SALARY AMOUNTS
With the new tier of salaries, this allows max contract players to continually make a higher salary year after year if they sign deals for the maximum amount of years up until they have well over 10 years in the NBA when their skills tend to decline at this point. Most players who sign max deals also sign for the maximum amount of years. For example a 4th year player that signs a contract for five years will be in his 9th season when it's time for him to sign a new contract.

3. SET A MAXIMUM PLAYER CAP
Currently there is no maximum player cap in the NBA which further compounds the problem with guys like Kobe Bryant.

The NHL has this in their CBA. In the NHL, no one player can earn more than 20% of the hard cap. Keep in mind that in hockey there are about 22-28 players on the roster. In the NBA, we have a maximum of 15. The maximum player cap will be set at 30% of the hard cap. I got this number from dividing the year 6 salary of a max contract with bird rights when the player has 10+ years of experience which is $16.8 million. This amount is 28% of $60 million. I increased this to 30% in case the salary cap drops any particular year. We can't blindly assume that the cap would go up every year.

Should at any time a salary increase make a player's salary go above 30% of the salary cap, that player will only be paid 30% of the salary cap. This is what happens in the NHL where a player can never earn more than 20% of the hard cap period.

THE GOOD FOR THE LEAGUE:

• Considerable cost savings with the star players. Annual increases are dropped in a manner which keeps maximum salaries at a reasonable proportion against the salary cap.
  

• Very few players will be starting a max contract after 10 years of NBA experience and such players would be superstars if they were.
  
• Teams can give max level contracts or near max level contracts to more than just one player without crippling the rest of the financial flexibility.
  

THE GOOD FOR THE PLAYERS

• Contract lengths remain the same. Increases are still considerably better should a player elect Larry Bird rights.
  

You cut player salaries in half...

Yo Adrien! wrote:

You cut player salaries in half...

You're right only when it applies to max level salaries and I guess you're a bit shocked that the NBA could really be like this, right? Maximum contract amounts were cut by more than half across the board, annual increase amounts dropped too, and I did it this way to create long term salary savings, as well as to make it feasible for a team to hold two max contract salaries (first year amounts) for players, one with over six years experience, and one for a a player with less than six years experience while still allowing the other players on the team to make a living.... If players' salaries are gonna be cut, it has to hit someone. either way, the players in the upper echelons among salaries will be subject to making a considerably smaller NBA salary than those closer to the bottom.

Generally speaking with minimum contracts, I propose that they stay......the same. It's the maximum deals and the near maximum deals plus inflated mid level exceptions that are crippling some NBA teams.

There will be a proposal later about what to do with players who currently have or are scheduled to receive salaries above the player maximum cap.

Boo @ cutting salaries...teams just need to stop giving out bad contracts

I see nothing particularly wrong with cutting their salaries.

NBA players don't actually need that much money anyway.

Yo Adrien! wrote:

Boo @ cutting salaries...teams just need to stop giving out bad contracts

C/S. Honestly I don't like salary caps. Pay these players what they deserve! But I don't want the yankee-factor in basketball. That would suck.

I rep 301 wrote:

Yo Adrien! wrote:

Boo @ cutting salaries...teams just need to stop giving out bad contracts

C/S. Honestly I don't like salary caps. Pay these players what they deserve! But I don't want the yankee-factor in basketball. That would suck.

I love your libertarian philosophy Visa.