The Philadelphia Eagles project to be over the 2021 NFL Salary cap by $63 million. I’ll pause and let that sink in for a moment.
I know what you are thinking: How in the world did we get here? Are those numbers right? Is that even possible? How can the Eagles even field a team next year?
Today we are going to take a deep dive into the situation the Eagles find themselves in, talk about how they got here, and look for the path out.
What is Dead Cap?
The first thing we need to understand when looking at the salary cap is dead cap. Dead cap is money that you have already paid to a player (usually through a signing bonus) that has not counted against your salary cap yet. The reason that it is important to be aware of the amount of dead cap hanging over a player is that when said player ceases to be on your roster, all of the remaining dead cap hanging over that player accelerates onto the next year’s salary cap.
For example, take the Eagles WR Alshon Jeffrey. Jeffery counts against the Eagles salary cap for $15.4 million this season. Let’s assume that the Eagles decide that he isn’t worth that money and decide to cut him to free up space. Unfortunately, that move would not result in an additional $15.4 million in cap space. That is because Alshon carries a large amount of dead cap. If the Eagles were to cut Alshon today, it would cost them $15.5 million against the cap in 2020 and an additional $10.7 million in 2021. So the Eagles would actually have less cap space this year if they cut Alshon Jeffrey than if they retain him on the roster.
How does that happen? It happens through the restructuring of contracts that Eagles GM Howie Roseman routinely utilizes.
An Example of a Restructured Contract
Real-life contracts are very complicated and always include elements of bonuses, option years, and front or back loading. But, for the sake of simplicity, let’s assume that a player signs a 5-year contract worth $50 million dollars that contains no signing bonus or guaranteed money and has the same salary each year. This is a representation of how the deal would be structured when it was signed.
At the conclusion of the 2017 season, let’s assume the organization approached the player about restructuring his contract. The normal way that a contract is restructured is by converting some of the salary for a season into a guaranteed bonus and paying it to the player immediately. This is a win for the player because money now is always more valuable than money later. It is also a win for the team because it allows them to pro-rate the bonus money over the duration of the contract.
In the below example, the team converts $4 million dollars of 2018 salary into a bonus and then is able to place $1 million of that bonus on each of the 4 years remaining on the contact. In essence, this lowers the cap hit for the player in 2018 by $3 million while raising the cap hit by $1 million per season for each of the next 3 years.
There is no limit to the number of times a team can restructure a deal, so in 2019 the team approaches the player about restructuring again, this time converting $6 million in 2019 base salary into bonuses. The player accepts and it changes the cap hits for the next 3 years to look like this:
With time running out on the contract, further restructuring doesn’t allow you to spread the bonus money over enough years, so the team does something sneaky: they add “dummy years” onto the contract. These are years where there is no base salary paid to a player, but it allows the team to spread the bonus money out even further. No player would ever play a season on one of these dummy years, and no team would ever ask them to, but it does allow the team to kick the can down the road so to speak.
The team restructures the deal adding 2 dummy years in 2022 and 2023 while converting $8 million of salary to bonus money. Now the contract looks like this:
As it currently stands at the conclusion of this restructuring, this is what the player counts against the salary cap for in each of the contracted years:
What is the Point of All of This?
The reason that the Eagles continually do this with players is that it allows them to “kick the can down the road” into years where the salary cap will be higher. In 2018, the team saved $3 million just by adding $1 million to each of the next 3 years’ worth of salary cap. This allows the team to pay the player the same amount of money while making it count for less against the cap now while increasing the amount it counts against the cap in future years. That sounds like a bad idea save one key point: the salary cap always goes up. Because the salary cap always goes up, the money you are kicking down the road into future years is worth less then than it is now.
Here is a representation of the NFL salary cap since 2011:
As you can see, starting in 2013 the salary cap has climbed by an average of $10 million per year. It has climbed with such regularity and predictability that all teams have begun to make long term plans based around the idea of the salary cap continuing to rise.
Why Doesn’t Every Team Do This With Every Player?
While restructuring contracts is a handy tool in the cap management tool kit, it must be used cautiously. Only players who you plan to re-sign to another contract should have their deal restructured in this way because of the way dead cap accelerates when a player is no longer on a roster. Let’s look back at our previous example for this:
If this player is cut or traded at the conclusion of the 2020 season, only the salary for 2021 is gone. All of the money that has been restructured stays on the 2021 salary cap and the restructured money from every year after 2021 accelerates onto the 2022 cap. In this example, the player could be cut to save $10 million, but he would still count for $5 million against the 2021 cap and $4 million against the 2022 cap.
If the player was cut or traded during the 2020 season the outcome is even worse, as all of the 2021-2023 restructuring money would accelerate onto the 2021 cap resulting in the player still counting for $9 million against the 2021 cap despite no longer being on the football team.
Where it All Went Wrong
You may have heard that the Eagles are in a bit of a jam with the salary cap in 2021. In fact, they are a projected $63 million OVER the cap for next season. What gross negligence on the part of Howie Roseman allowed this to happen?
If you remember from before, we talked about restructuring contracts being a good tool since the salary cap always goes up. The problem is that the salary cap doesn’t always go up. Historically speaking, the salary cap has only dropped 1 time in its history: 2011. In 2011 a new collective bargaining agreement was signed and the salary cap dropped $3 million, before surging upward on the graph I showed earlier. Now the salary cap is tied to league revenue, and, like most companies in the world right now, the NFL has seen revenue dramatically drop as a result of the COVID-19 pandemic. Without fans in attendance (or with a small percentage of fans in attendance) revenue is dropping and the salary cap is projected to drop almost $25 million for the 2021 season.
It turns out that you can count on the salary cap to go up every year unless there is a global pandemic.
What Would Have Happened Without COVID-19?
If COVID-19 hadn’t happened and the salary cap went up the average of $10 million for 2021 rather than dropping a projected $25 million, the Eagles would be in much better shape. That swing of $35 million would take care of a lot of the Eagles issues relating to the 2021 salary cap. Instead of being $63 million over the cap, the Eagles would only find themselves $28 million over the cap.
That is still a lot of money, but the team would have an easy path to getting back into the positive. As of the writing of this article, the team is $22 million under the cap for the 2020 season. The NFL allows teams to roll over their unused cap space up to 10% of the total cap. This would allow the Eagles to roll over $19.8 million into the 2021 season, which I’m going to round to $20 million for simplicity’s sake. Now the Eagles are only $6 million over the cap.
Where do we find the $6 million? It could be found any number of places, but here are the most likely cap casualties:
- Alshon Jeffrey – $8 million savings
- Derek Barnett – $10 million savings
- Marquise Goodwin – $4.5 million savings
- DeSean Jackson – $5 million savings
As you can see, if the salary cap had behaved as expected, the Eagles would have had no trouble finding the $6 million dollars needed to get under the cap. Unfortunately, the cap didn’t behave as expected and now the Eagles are in a mess.
What Happens Now?
Now, suddenly, the Eagles find themselves $43 million over the cap after the rollover takes effect, while only having 46 players on the roster. By moving on from the 4 players I previously mentioned, the team can drop that number to $15.5 million over the cap with 42 players on the roster. Unfortunately (yes, I know I’m saying that a lot in this article), there aren’t really any other players that the Eagles can cut or trade for significant savings. The only other sizable contract that the Eagles can shed is the Zach Ertz contract.
Coincidentally, our imaginary player from before has had his contract restructured similarly to Zach Ertz. Indeed, this is almost the exact scenario the Eagles find themselves in with Ertz. Ertz has had his deal restructured each of the last several years and he is currently under contract through the end of the 2021 season with dummy years in 2022 and 2023. Trading Ertz at the trade deadline becomes problematic because of the dead cap on the contract. Ertz knows this, which is why he feels comfortable airing his grievances with the contract situation and insinuating that he will not play 2021 under his current contract. He knows that the Eagles are in a very difficult spot with the salary cap next year and he also knows that moving on from him will contribute even more to the problem.
What is the Solution?
The ultimate solution to the Eagles salary cap problems will be restructuring even more deals to continue to kick the can further down the road until the salary cap rebounds again. As much as many fans would like to go into full out rebuild mode, it simply isn’t economically feasible to move on from many of the veteran players on the Eagles roster. Furthermore, the losses in revenue from COVID are slated to be spread out over the 2021-2023 seasons meaning that this won’t be a one-season fix. It is going to take several seasons of careful cap management to dig the Eagles out of this hole.
Eagles fans can take solace in the fact that their general manager, Howie Roseman, is considered one of the better cap managers in the league. Roseman has been under fire lately by Eagles fans over his drafting, but given the cap situation that the team finds itself in Howie isn’t going anywhere.
For now, all Eagles fans can do is hope that league revenue doesn’t drop as much as projected while praying that Howie Roseman has a few more salary cap tricks up his sleeve.