Note: Much of this explanation is a re-post from last year, except that the figures have been updated to reflect the Browns' situation one year later.
As we have been breaking down the excessive amount of available cap room that the Cleveland Browns have, fans have been wondering, "How can we have so much room? I thought there was a requirement that we had to spend 89% of the salary cap." Here is a digest of how the 89% cash spending rule works, and where the Browns fall.
Requirements: 89% in Cash Spending from 2013-2016
First off, the 89% rule does not apply to a single season, but rather a span of four years. Therefore, it doesn't matter that the Browns spent less than 89% in 2013, or if they spent less than 89% in 2014. By the end of the 2016 season, though, the cumulative spending from 2013-2016 must be at least 89%. Therefore, if the Browns spend very little in 2013 and 2014, in order to meet the requirement in 2016, they will be forced to spend a lot of money in 2015 and 2016.
Second, everyone needs to understand the difference between a cap hit and a cash spend. The 89% rule applies to cash spends, not cap hits. For a full, in-depth understanding between the two, read this article over at Cincy Jungle from last year. I will present a simple example below that should convey the difference well enough, using OLB Paul Kruger as an example.
Difference Between Cap Hit vs. Cash Spend
Two years ago, former Browns CEO Joe Banner signed OLB Paul Kruger to a 5-year, $40.5 million deal. Most of you should be familiar with cap hits, because they are the numbers we typically talk about.
|Paul Kruger's Contract, Cap Hits Per Year|
|Year||Base Salary||Signing Bonus||Roster Bonus||Cap Hit|
The table above represents Kruger's cap hits per year. Kruger's contract included $12.285 million in bonuses, with $6 million allocated to a signing bonus and $6.285 million allocated to a roster bonus. What is the difference between a signing bonus and a roster bonus when talking about cap hits? Roster bonuses are paid in the full amount for a specific year if a player is on the roster by a certain date. Signing bonuses are fully guaranteed, but divided by the number of years of the contract to create an equal signing bonus allocation per year against the cap.
|Contract, Cash Spends Per Year|
|Year||Base Salary||Signing Bonus||Roster Bonus||Cash Spend|
The table above represents the cash spends per year on Kruger. While the Browns are able to divide Kruger's signing bonus over five years for salary cap purposes, the fact is that they physically paid Kruger $6 million, straight up, in 2013. The total cap hit and cash spend numbers are always going to be the same, but the per year numbers are different.
Why is it important to understand this? Let's say the Browns are currently under the 89% spending requirement by a good amount, but still want to be in decent cap shape for the future. Signing a player to a $12 million signing bonus on a 3-year deal (through 2016, for example) would be pro-rated to $4 million per year for cap hits, but the immediate cash spend in 2014 would be at a much higher clip -- the full $12 million -- which can help a team "catch up quicker" to the spending requirement if they need to.
What is the Projection for the 89% Rule?
The minimum spending requirement says that teams must spend, in cash, at least 89% of the total salary cap from 2013-2016. This is impossible to figure out to precision, because the salary cap is not known until around March each year. We know the official salary cap numbers for 2013-2015, but 2016 is still yet to be determined. We have estimated the 2016 cap to be $150 million, per OverTheCap. To determine the 89% minimum cash spending requirement, the sums of the salary caps are multiplied by 89%.
|Total Salary Cap||$549.20 million|
|89% Floor (Minimum Spending)||$488.79 million|
If the total salary cap from 2013-2016 is $549.20 million, then every NFL team, including the Browns, must have a cash spend of at least 89% of that by the end of the 2016 season, which is $488.79 million.
Do the Browns Need to Start Spending More?
The short answer is "No." I consulted with Tom Pelissero of the USA Today, who was kind enough to provide me with the Browns' cash spending figures as of March 5, 2015. He made an important note that I was not aware of -- any cash spends that the Browns do up until 4:00 PM ET on March 10, 2015 still count toward the 2014 league year. After that, they count toward the 2015 league year.
The table below outlines the Browns' cash spending for the years 2013-2016. 2013-2014 data comes from Pelissero, while 2015-2016 data comes from OverTheCap. Note that the 2014 data might actually need to be a little bit higher to account for Josh McCown's contract -- I'm not certain as to when that contract kicked in to the NFLPA database. Nonetheless, the picture is accurate enough to be close to reality. If you are confused by what the table means, I explain it below.
|Year||Cash Spend||% of Cap Spent
|2013||$107.096 million||87.07%||On pace for 78.0% (1-year avg)
|2014||$148.730 million||111.83%||On pace for 93.1% (2-year avg)
|2015||$97.526 million||68.10%||Spend $29.922M to get to 89%|
|2016||$75.095 million||50.06%||Spend $58.405M to get to 89%|
|Total Cash Spent||$428.447 million|
|Amount Below 89% Requirement||$60.343 million|
The % of Cap Spent is calculated by taking the Cash Spend / That Year's Salary Cap. In 2013, the Browns only spent 87.07% of the cap, which is below the 89% requirement. That is fine, though, because they still had three more years to go.
For the 2014 league year (which is still in effect through Tuesday at 4 PM ET), the Browns have spent 111.83% of the cap. By spending so much, the have now spent 99.93% of the cap from 2014-2015, which is well beyond the 89% requirement. The "on pace for 93.1%" statistic means that if the Browns had spent an average of $127.913 million in 2015 and 2016, they would still be above 89%.
If the Browns' goal was to reach $89 million each season between 2015-2016, then they would need to spend at least $29.922 million more after this Tuesday (for the 2015 league year), and then $58.405 million more for the 2016 league year. Because they are currently at 99.93%, though, they have room to spare, and over the next two league years, they only need to spend $60.343 million more to be compliant with the 89% rule. That will happen without them even trying, accounting for things like free agents, the draft, extensions, etc.
How Does This Effect the Team's Cap Space?
The Browns can be conservative if they so choose to in free agency and they will still be cap compliant.
Amidst my research into this topic last year, Sander Philipse of Bucs Nation reminded me of the repercussions of not meeting the 89% requirement:
It's also important to note that the penalty for not reaching the 89% spend over 2013-2016 is you have to give the money you're short by to your own players (via NFLPA-determined distribution). Which means there's no real penalty to not spending to the floor. Obviously you'd prefer to spend the money where you saw fit instead of being forced to adopt the NFLPA's distribution key, but there's no point to handing out idiotic contracts just to hit the floor.
If you don't reach the amount, is it better to basically distribute slight bonuses to your current players, with the backlash of knowing you could have used that money instead toward a better-fitting player? Teams should be motivated to spend on players they feel can improve their team, rather than spending a certain amount on someone just for the sake of meeting the requirement. It's all about the general managers of the league planning in advance, and Cleveland is in good shape right now to do so.
Another hat tip to 603brown.com, who also did a similar breakdown for the Browns' 89% cash spending a few weeks ago.