The bad news about the salary cap made quite a splash. But not all of it was justified, especially when it comes to the future of Cleveland Cavaliers star LeBron James.
In case you missed it, the 2009-2010 salary cap figure is $57.7 million, down from $58.68 million last year. The luxury tax level dropped even more, from $71.2 to $69.92 million.
But the big news (and subsequent panic) was in the warning that it will go down even more for the 2010 season, with its free agent market featuring James, Dwyane Wade, and Chris Bosh.
Speculation began immediately that this news hurts a team like the New York Knicks, which has been shedding long-term salaries to make room to possibly sign two big stars in that free-for-all summer of ’10.
It was also decided that this was the final straw that would keep LeBron James in a Cleveland Cavalier uniform.
The assumption is that the Knicks (or any other suitor) now won’t have enough salary room to sign both James and some quality help—which might make him rather stay close to home.
But that overlooks a few things.
First is the NBA’s maximum salary rule. LeBron will be in his seventh year and as such will be eligible to receive a maximum of 30 percent of the salary cap figure ($17.31 million) or a five percent increase over his previous year’s salary (which comes out to $16.59 million) in the first year of his contract.
Since the maximum salary is a percentage of the cap and James’ contract wasn’t already over the maximum, his 2010 starting salary actually ends up being less than expected.
Thus, if the Knickerbockers are hoping to sign both LBJ and either Wade or Bosh—as many have speculated that they are—the adjustment of the salary cap actually makes little difference for such a plan. Two maximum salary players would take up 60 percent of the cap space, or $34.62 million, leaving $23.08 million for the rest of the team.
If the cap had stayed the same, the rest of the team would have been allotted $23.48 million.
The difference of $400,000 isn’t going to hugely affect any team—it’s the contract size of a rookie drafted late in the second round, and that amount shouldn’t be a deal-breaker in larger contracts.
Where the salary cap decline makes a difference is for free agents not earning the maximum salary—which, admittedly, is most of them. Unless market value pushes down salaries of other players, then the feared effect will occur, and there will in fact be less money available for them.
That all said, there are a few incentives in place for LeBron and Wade to stay with their current teams.
They come thanks to something called the “Larry Bird exception,” more officially called the Veteran Free Agent exception.
Its most important characteristic is that it allows teams to re-sign their star free agents at the maximum salary even if it will push them over the cap. Teams signing a free agent away from their former team don’t have that luxury.
That means that the Cleveland Cavaliers will be able to keep some of their better pieces on the roster—consider Anderson Varejao, who just signed a big contract, or even a Shaquille O’Neal re-signing—and still give LeBron his paycheck on top of all that. That’s got to look very enticing to a superstar deciding if he wants to come back.
The Bird exception also allows a team to re-sign its free agents to six-year contracts, whereas the standard maximum length is five years.
This isn’t a huge deal, except that the last year of a contract is always the most lucrative. If money is an issue, then contract length is an issue.
Finally, the exception means bigger salary increases each year. If someone like LeBron re-signs, his salary can go up by 10.5 percent each year—if he heads somewhere else, it can only go up by eight percent each year.
Other than the ability to re-sign over the cap, the exception is only compelling if free agent is swayed by money. But the fact that it allows more supporting talent to remain on the roster just might be enough to keep The King in Cleveland.
We’ll just have to see.
If LeBron goes to New York none of this salary stuff will matter because he will make about 3X his salary on other things like royalties, and whatever big business wants to throw money at him to do whatever… commercials, movies, clothing, anything.