Mastery of salary cap is a necessity

Wielding newly acquired power in Philadelphia, third-year head coach and personnel savant Chip Kelly has shredded the Eagles roster. It has been a gruesome week. Kelly cut Philadelphia's two longest-tenured players, guard Todd Herremans and outside linebacker Trent Cole, jettisoned cornerback Cary Williams and agreed to trade LeSean McCoy, who rushed for nearly 3,000 yards over the past two seasons.

And Kelly might not be done yet.

With the moves, Kelly the general manager has accumulated about $50 million in salary-cap space to provide Kelly the coach with players he covets. Unlike some cash-strapped teams, Philadelphia is poised to be active in free agency, which begins Tuesday at 4 p.m. ET, because it has shrewdly managed its cap.

This much is certain: There are teams that must spend lavishly. One victory the NFL Players Association achieved in the latest collective bargaining agreement was the creation of a minimum spending floor. Over the span of two four-year periods -- 2013-16 and 2017-20 -- each team must spend at least 89 percent of the salary cap in cash. Any team that falls short will have to pay the difference to the union, which will distribute the money as it sees fit.

At the midpoint of the first four-year window, nine teams are under the minimum spending threshold, according to figures the NFLPA released this week: Carolina, Dallas, Jacksonville, New England, New Orleans, the New York Giants, the New York Jets and Oakland.

The Raiders have spent only 80.16 percent of the $256 million they were allotted in the first two years. The Panthers have spent 80.78 percent. The Jets have spent 81.16 percent, and the Jaguars have spent 82.2 percent.

With the salary cap increasing to $143.28 million this year, Oakland must spend $40 million more in payroll each of the next two years than it did in 2014 to reach the minimum spending requirement. Carolina has to increase its average payroll by $39 million each of the next two years, and the Jets must bump theirs up by $38 million. For players looking to cash in, the teams below the minimum spending requirement could become prime destinations.

No more loopholes

Cheating the salary cap used to exist. Most famously, the NFL fined San Francisco and Denver for circumventing the cap with side deals for star players in the 1990s.

In 2012, the NFL docked Washington and Dallas salary-cap space for taking immediate cap hits in 2010, when the league operated without a salary cap. With a labor dispute looming, the league had warned teams against frontloading contracts in the uncapped year, in an effort to preserve competitive balance and avoid a spending free-for-all.

Dallas signed wide receiver Miles Austin to an extension that included a $17 million base salary in 2010. Washington restructured the contracts of defensive tackle Albert Haynesworth and cornerback DeAngelo Hall to allocate $36 million in bonus money to 2010. The NFL responded by taking away a total of $36 million in cap space from the Redskins and $10 million from the Cowboys over the 2012 and 2013 seasons.

The NFLPA subsequently accused the NFL of collusion in a lawsuit that remains tied up in federal court.

"The commissioner looked at the competitiveness of the NFL after the labor deal was done and basically said that, 'If I see something, some type of competitive advantage inordinately, then I'm going to, under my power, even it up,' " Cowboys owner Jerry Jones said. "We basically complained very much, but I recognized the explanation. I agree [Roger Goodell] has the power to make those kinds of decisions."

Over time, the collective bargaining agreement was amended with side letters that make circumventing the cap nearly impossible today.

"Each CBA that's gone on, they've closed more and more loopholes because, really, in the end, it's in the union's best interest to make sure that everything is level for all of its members," longtime general manager and ESPN analyst Bill Polian said. "Now, with the floor being cash and not cap, it's a huge concession, a huge win for the union. Bottom line is that's an absolutely perfect safeguard because what it says is every club has to spend to a specific cash floor."

In the current CBA, other issues were eradicated. The biggest was the implementation of a rookie wage scale that streamlined contracts and made negotiating deals for draft picks so easy, as one former general manager said, "a 10-year-old could do it."

The money that used to go to unproven players entering the league now goes to experienced players when they hit free agency.

Another issue that was removed was the ability for teams to write what's known as a poison pill into a contract to poach another team's tendered player. While the practice was rare, Seattle lost coveted guard Steve Hutchinson to Minnesota in 2006 because of a poison pill.

The Seahawks had tendered Hutchinson with the transition tag, which gave Seattle the ability to match any offers. The Vikings then offered Hutchinson a seven-year, $49 million contract that included language guaranteeing the entire deal if Hutchinson was not the team's highest-paid offensive lineman.

At the time, left tackle Walter Jones was Seattle's highest-paid lineman, so if the Seahawks had matched Minnesota's offer to keep Hutchinson, they would have had to guarantee the entire $49 million. That wasn't feasible, so they let Hutchinson go.

"That was one way people quote-unquote cheated the cap or manipulated the cap in their favor," the former general manager said. "The league found a way to get rid of that going forward to try to clean up the scrutiny that was going on with the cap."

Said Polian: "Over time, the incentive to cheat and the mechanisms to cheat have gone away. You never want to say never, but you really have to be very creative to find a way to get around it.

"We've got a lot of problems in the league, but I don't think the salary cap is one of them. Over time, it has worked better for our sport than any economic system in sports, and part of the reason is because [players] have short careers, and free agency at four years is exactly the right time. There's a lot of things in this new agreement that don't work in the players' benefit, but that salary cap has stood the test of time, and it's made the game what it is because everybody has a chance. You can only be a have-not if you choose to be or you mismanage."

Where will this year's big money go?

It's uncertain how teams will approach free agency this year. Clubs are still trying to navigate the minimum spend. How will the teams that haven't spent the 89 percent cash minimum make up the difference?

Elite players will cash in. So might second-tier talent, the way former Broncos wide receiver Eric Decker did last year when the Jets signed him to a five-year, $36.25 million contract that included $15 million guaranteed.

"What's interesting is those teams can go out and they've got to spend," one general manager said. "So for the players hitting the market, B-plus players are going to get paid like A-plus players because certain teams need to spend. It's going to be interesting to see how it works, because we're all new at this where, hey, it's less money for the rookies and more money for the veterans. I think you're going to start seeing that."

Given where they sit, does that mean the Jaguars will be willing to sign Denver tight end Julius Thomas to $9 million a year and Seattle cornerback Byron Maxwell for $8 million a year and potentially pick up another starter? Does that mean the Raiders will sign Broncos defensive tackle Terrance Knighton for $7.5 million a year and Kansas City center Rodney Hudson for $8 million a year and give Buffalo defensive end Jerry Hughes big money, too?

One thing is for sure, given the mandatory minimum expenditures -- big contracts for A-list players could look a lot different. Many teams are shying away from large signing bonuses that prorate over the life of the deal. Instead, they're offering contracts that include sizable base salaries that are guaranteed for at least two years. The player gets the same amount of guaranteed money he would have with a signing bonus, it just comes in the form of base salary.

"It allows you to better budget for the future in terms of what you're committed for, what dollars are for cap to cash and to create flexibility," said Kevin Demoff, executive vice president of football operations and chief operating officer of the St. Louis Rams. "You can always turn money into signing bonus if you need cap room."

Such a deal gets rid of dead money in the event the team decides to cut the player after the guaranteed salary is paid. It also serves as incentive for players, because they know they could be cut with little financial repercussion for the team if they underperform.

"It's been a complete change in philosophy," agent Jerrod Colton said. "In the old days, we'd be looking for signing bonus. Now, there's more of a trend for guaranteed money -- for the right players. Not everybody is included in the people they want to guarantee. It's still the upper-echelon players they want to guarantee."

Another trend is the rise of the one-year veteran minimum contract. But Colton said minimum salaries often price marginal veterans out of a team's budget. For 2015, the veteran minimum for a player with seven to nine credited seasons is $870,000; for players with at least 10 years, it's $970,000.

Many observers expect most teams to pay a handful of players exorbitantly, plug holes with one-year veteran minimum deals and rely on younger, less expensive draft picks to contribute.

The $200 million cap is coming

The NFL implemented the salary cap in 1994. It was $34.6 million per team. In 2009, the last capped year under the previous collective bargaining agreement, the salary cap was nearly $128 million. The 2015 cap of $143.28 million is $20 million more than the 2013 cap.

So a $200 million cap isn't just conceivable -- it's coming.

"The salary cap, in its own way, has contributed to growth in revenues," Jerry Jones said. "I don't think you'd have these stadiums like you've got without it. I don't think you'd have the type of revenues like we have. There are incentives to build stadiums by ownerships. There are all kinds of competitive aspects that [have] created an enormous gain that has appeal and that produces a lot of revenues, which the players are the chief benefactor of."

No one benefits more than the owners, though.

What will the NFL look like with a $200 million cap? No one knows for sure, but one general manager speculated that the landscape might include "NBA-type" trades, by which a team that needed to reach the minimum spend would trade with a cash-strapped team for the hefty expiring contract of a star player.

Last year, one team had internal discussions about doing just that when it became apparent that Dallas was going to release veteran pass-rusher DeMarcus Ware, who was due $12.25 million.

As for the present, there is this certainty: Teams must spend.

"Top players are still getting paid like top players," Demoff said of the current CBA. "The cost of rookies at the top of the draft has been lowered so that draft picks are more valued because they're more affordable than they used to be. That disparity has probably made it so the middle class probably gets squeezed on both ends. The top guys are making more. To afford that, we may take a chance on a rookie versus a veteran.

"I think as the quarterback deals grow and the top player deals grow, that trend will be the one you'll have to keep a pulse on to see if you can still build an effective team with four or five players taking up 40 to 50 percent of your salary cap. Now, if you draft well and coach well, that method will work. And if you don't draft well and you don't coach well and you have the top four players take up 10 percent, it won't matter."