The latest on the potential NFL salary cap in 2021

Pro Football Network Insider Tony Pauline revealed Thursday what the NFL may do to protect teams from a significant drop in the salary cap in 2021

Back at the beginning of May, Adam Schefter went on the record on the My Sports Update podcast with some startling news coming out of the NFL. Schefter stated that the NFL and the team owners were preparing for a salary cap drop in 2021 by as much as $30-$80 million from the 2020 base salary cap of $198.2 million. A drop of that magnitude would have seen the cap drop to levels not seen for over a decade. The effect on the teams of that drop would have been devastating, especially for teams already struggling for cap space in 2021, such as the Philadephia Eagles and New Orleans Saints.

The potential of a salary cap decrease was then later confirmed in a conference call with the NFLPA. In that call, the NFLPA stated that a season without fans would cost the NFL more than $3 billion in lost revenue. A $3 billion loss would equate to approximately a $93.75 million loss of revenue on a per-team basis.

However, in the latest episode of Pro Football Network’s NFL Draft Insiders podcast, Chief Draft Analyst and Insider Tony Pauline shed some more light on the situation. Pauline stated that currently, it is thought that the NFL would use a system of borrowing against future caps to protect the 2021 salary cap from a sharp drop. In fact, Pauline even stated that the NFL’s salary cap could potentially rise a small amount to $200 million in 2021.

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2021 NFL Salary Cap

Financing the 2021 salary cap

The method that the NFL will use to finance the salary cap in 2021 is not an unusual concept in the current world. In essence, they will use a similar method to the way in which people get a mortgage to buy a house. However, in this situation, the NFL will be the bank, with the players acting as the party taking out the mortgage.

The system of setting the salary cap is reasonably simple using the previous season’s revenue as a starting point:

  • Revenue calculations x CBA percentage = Players revenue share
  • Player revenue share – projected benefits = The amount available for salaries
  • The amount available for salaries/number of teams = Base salary cap per team

However, with that revenue expected to drop significantly due to either a limited number of fans or a complete absence of fans, as well as a loss of other revenue streams such as International Series games, that calculation is going to lead to the cap problems for teams that we outlined previously. Therefore, in 2021 the NFL will use the salary cap calculation above to merely forecast how much of a shortfall the league and the owners are going to have to account for.

What could this mean for the future of the salary cap?

The example used by Pauline in the NFL Draft Insider’s podcast was what we might expect if the 2020 revenue dictated a base salary cap of $175 million in 2021. In that situation, the owners would fund the $25 million shortfall in 2021. In a scenario where the NFL could get “back to normal” in 2021, and the revenue dictated a salary cap of $250 million, then the league can then set the cap at $225 to cover that shortfall.

Where this situation could be problematic is if there are further issues causing a loss of revenue in 2021. In that situation, then the NFL will have tough choices to make entering both 2021 and 2022 regarding how long they are willing to cover the shortfall and wait on the return of their investment.

What does this mean for the teams and players?

The situation for the teams

The good news for the teams is that this prevents the need for immediate panic about the cap. They do not need to consider creating as much cap space in 2020 in an attempt to roll over that space into 2021 to correct against the shortfall. However, teams may still decide to move on from expensive middle-of-the-roster players in 2020 if they have an adequate replacement step up in their limited contact time prior to the season.

The reason teams still need to plan wisely is because they will need to address the issues of inflating player contracts. When teams add big-money players in free agency, they often push money further back into the contract in order to create short-term space in their salary cap. However, it is rare those contracts stay cheap for much more than a year or two, meaning that teams who were active in the last two free agency periods will now be looking at potentially big salary cap hits on their marquee players.

Some examples that Pauline provided from the most recent free agency period are Byron Jones for the Miami Dolphins, Robert Quinn for the Chicago Bears, and Teddy Bridgewater for the Carolina Panthers. While Byron Jones’ contract appeared smartly constructed for Miami in a “normal” situation, they are now left facing his base salary jumping $3 million in 2021. The situation is worse for the Bears and Panthers, with Quinn’s base salary increasing $8.5 million from $3 million to $11 million, and Bridgewater’s base salary increasing $9 million from $8 million to $17 million.

What is the effect on the players?

With contracts rising as outlined above, while the salary cap in 2021 stays static compared to 2020, NFL teams are left facing tough decisions. In order to keep improving their team and prevent the need to cut marquee players, they will need to create cap space. That cap space can only be created by moving on from players, and there is one particular group of players that may bear the brunt.

The effect of the salary cap squeeze in 2021 will be felt hardest by the second and third-tier veteran players in the NFL. Those players are often on middle-of-the-road contracts that are a notch below the marquee players but paid higher than the veteran minimum or the young players that can provide depth. Therefore, with marquee players likely to be protected from being released and not necessarily financially viable to cut players on their rookie deals, the second and third-tier veterans could be cleared out to create the cap space required.

Those players will then have a tough decision to make — ask for a salary they feel they deserve and risk being left on the free-agent market, or sign with a team for close to the veteran minimum. Therefore, we should expect to either see a lot of veterans earning close to the veteran minimum in 2021 or see teams leaning more on players that are on their rookie contracts.

Listen to the NFL Draft Insiders Podcast

You can listen to PFN’s NFL Draft Insiders Podcast with Pauline and host Andy Herman by clicking the embedded player below.

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