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It’s time for our annual explanation on how the 89% cash spending rule works, and where the Cleveland Browns fall. First, if you’ve been following this feature for several years, note that the Browns and all 32 teams in the NFL were compliant for the first four-year period of the rule, which was from 2013-2016. We are presently in the second four-year period of the rule, which runs from 2017-2020.
The NFLPA has provided a nice infographic of each team’s cash spending in the past, but they did not do the same for the 2018 season. Bummer. Instead, we will rely on the data provided by Over the Cap.
The minimum spending requirement from 2017-2020 will be based on the cumulative amount of whatever the salary cap is set at each year, an amount that one can only estimate at this point in time. For just 2018 alone, the salary cap was $177.2 million, and the Browns had a cash spend of $208.8 million (117.8%).
Requirements: 89% in Cash Spending from 2017-2020
The 89% rule does not apply to a single season, but rather a span of four years. Therefore, it doesn't matter if the Browns spend less than 89% in 2017, or if they spend less than 89% in 2018. By the end of the 2020 season, though, the cumulative spending from 2017-2020 must be at least 89%. Therefore, if the Browns spend very little in 2017 through 2019, in order to meet the requirement in 2020, they would basically be forced to spend a lot of money in 2020.
It's important 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 several years ago. I will present a simple example below that should convey the difference well enough, using CB Terrance Mitchell as an example.
CB Terrance Mitchell’s Contract, Cap Hits Per Year
| Year | Base Salary | Signing Bonus | Roster Bonus | Workout Bonus | Total Cap Hit |
|---|---|---|---|---|---|
| Year | Base Salary | Signing Bonus | Roster Bonus | Workout Bonus | Total Cap Hit |
| 2018 | $1,500,000 | $666,666 | $200,000 | $100,000 | $2,466,666 |
| 2019 | $2,500,000 | $666,666 | $200,000 | $100,000 | $3,466,666 |
| 2020 | $2,500,000 | $666,668 | $400,000 | $100,000 | $3,666,668 |
| Total | $6,500,000 | $2,000,000 | $800,000 | $300,000 | $9,600,000 |
The table above represents Mitchell’s cap hits per year. Mitchell’s contract was very simple: base salaries, his $2 million signing bonus, and some roster/workout bonuses. What is the difference between a signing bonus and a roster bonus when talking about cap hits?
- Roster and workout bonuses are paid in the full amount for a specific year if a player is on the roster by a certain date, or have accomplished certain feats.
- 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 ($2 million divided by 3 year-contract = $666,666 per year against the cap).
CB Terrance Mitchell’s Contract, Cash Spends Per Year
| Year | Base Salary | Signing Bonus | Roster Bonus | Workout Bonus | Total Cap Hit |
|---|---|---|---|---|---|
| Year | Base Salary | Signing Bonus | Roster Bonus | Workout Bonus | Total Cap Hit |
| 2018 | $1,500,000 | $2,000,000 | $200,000 | $100,000 | $3,800,000 |
| 2019 | $2,500,000 | $0 | $200,000 | $100,000 | $2,800,000 |
| 2020 | $2,500,000 | $0 | $400,000 | $100,000 | $3,000,000 |
| Total | $6,500,000 | $2,000,000 | $800,000 | $300,000 | $9,600,000 |
The table above represents the cash spends per year on Mitchell. While the Browns are able to divide Mitchell’s signing bonus over three years for salary cap purposes, the fact is that they physically paid Mitchell that $2 million signing bonus, straight up, in 2018. 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 with a $12 million signing bonus on a 3-year deal (through 2019, for example) would be pro-rated to $4 million per year for cap hits, but the immediate cash spend in 2018 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 2017-2020. To determine the 89% minimum cash spending requirement, the sums of the salary caps are multiplied by 89%. The only years we know for certain are 2017 and 2018, so we will estimate 2019 and 2020.
Figuring Out the 89% Floor
| Year | Salary Cap | Notes |
|---|---|---|
| Year | Salary Cap | Notes |
| 2017 | $167.00 million | Confirmed |
| 2018 | $177.20 million | Confirmed |
| 2019 | $188.20 million | Confirmed |
| 2020 | $200.00 million | Estimated |
| Total Cap | $732.40 million | |
| 89% Floor | $651.84 million | (Minimum Spending Requirement) |
Since the total salary cap from 2017-2020 is $732.4 million, then every NFL team, including the Browns, must have a cash spend of at least 89% of that by the end of the 2020 league year, which is $651.84 million.
Do the Browns Need to Start Spending More?
The short answer is "Not Really," as they are already above average in terms of the spending requirements.
The table below outlines the Browns' cash spending for the years 2017-2020, with the data coming from Over the Cap. If you are confused by what the table means, I explain it below.
Projecting the Browns’ Compliance
| Year | Cash Spend | % of Cap Spent | Additional Notes |
|---|---|---|---|
| Year | Cash Spend | % of Cap Spent | Additional Notes |
| 2017 | $177.107 million | 106.05% | (Already in compliance) |
| 2018 | $105.374 million | 82.07% | Spend $23.857M to get to 89% |
| 2019 | $78.947 million | 67.66% | ------- |
| 2020 | $59.009 million | 57.26% | ------- |
| Total Cash Spent | $420.437 million | ||
| Amount Below 89% Requirement | $233.003 million |
The % of Cap Spent is calculated by taking the Running Total Cash Spend / Running Total of the Salary Cap. In 2019, the Browns have already spent 97.81% of the cumulative cap, which is above the 89% requirement. They are well on pace to exceed the cumulative 89% cash spending.
For those still confused on how the numbers above were obtained:
- Add the 2017-2019 cash spends: $177.107M + $208.821M + $136.576M = $522.504M
- Add the 2017-2019 salary caps: $167.0M + $177.2M + $188.2M = $532.7M
- Divide the first amount by the second amount: $522.504M / $532.7M = 98.09% already spent
We are already three years into the process. Looking forward to 2020, the Browns are already almost at the 89% cumulative amount for all four years; they will likely reach it within the next week, in fact. Also remember that all 32 teams were compliant the last time around, so every NFL team has demonstrated the financial acumen to meet the requirements.
Appendix
The repercussions of not meeting the 89% requirement aren’t even all that severe:
The penalty for not reaching the 89% spend over 2017-2020 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.