As DeMarcus Ware disappears from the list of free agents, the question presents itself: how can teams like the Denver Broncos continue to sign high priced veteran free agent after free agent while the Bears are already bumping their heads up against the cap? Brad Biggs at the Chicago Tribune provides the answer – in part:
“The Bears have a snug salary-cap situation but have mechanisms to create more room. At this point, it’s probably more about the cash budget and the team has spent big when you go back to the signing spree that began in the final week of December.”
It does, indeed, go back to the signing spree in December. But the “cash budget” part of this excerpt is probably more to the point.
A Salary Cap Primer
Knowledgable, long-time readers of this blog can safely skip this section.
Nearly all teams “work” the salary cap by putting a certain amount of guaranteed money into a signing bonus. This bonus is paid to the player entirely up front but the cap hit is spread over the length of the contract or 5 years, which ever is shorter.
If I give player A a five year contract with a $30 million signing bonus, the cap hit for that $30 million dollars will be $6 million dollars every year for five years. If you release player A after 3 years, the cap hit from years 4 and 5 “accelerate” into the current year resulting in $6 million dollars of cap space occupied by a player who isn’t on the roster (known as “dead money”).
When the Bears released Julius Peppers it was said that they “saved” $9.8 million in cap space. But this is misleading. Before he was released, Peppers cap number was $18.2 million. Because they now aren’t paying him his salary, that money will not count against the cap. But the $8.4 million dollars in guaranteed money that has already been paid and spread out over the length of the contract still counts and Peppers still occupies this much cap space even though he’s no longer with the team.
The Bears and the Cap
Peppers aside, as someone who hates to rob Peter to pay Paul, I’m happy to say that the current Bears front office generally avoids situations where a great deal of dead money is generated when players are released. However, it may surprise many fans when they understand how far the Bears go in this matter and what the consequences are.
The Jay Cutler contract from last December is an excellent case in point. Cutler signed a seven year contract but because its structured in a very special and clever way, the $54 million in guaranteed money is spread across the first three years only. This makes it effectively a three year contract with what amounts to a Bears team option to keep Cutler with no cap hit if he’s released after that. This is outstanding cap management.
But here’s what will surprise many – when the details are examined, one finds that the split of $18 million per year over the first three years isn’t even. In fact, the Bears have front loaded the cap hit so that it is $22.5 million in the first year and only $15.5 million and $16 million in the second and third years, respectively. This actually means that their cap hit in the first year is $4.5 million higher than normal from this contract. Though they have contractually retained the option of converting some of Cutler’s salary into signing bonus to create room, its fairly evident that this is only for emergencies and they have no plans to do so.
Similarly, the sharp fan will note that Peppers was likely released without a post June 1 designation. Releasing him with the post June 1 designation would have allowed the Bears to absorb some of the dead money in 2015 rather than 2014. Instead, they chose to absorb the entire $8.4 million this year, thus increasing their cap number significantly.
So, while other teams spread their guaranteed money out to avoid hitting the cap, the Bears have actually fixed their contracts such that they will hit the salary cap sooner. Why would they do this?
Cash is King
The answer comes in the first part of Biggs’s statement above. Its about the “cash budget”. And its evident that the franchise has limited cash on hand to spend.
The key is understanding that though you can spread the cap hit from a signing bonus across several years, the money has to be paid up front. In order to avoid paying cash that you don’t have, you have to limit the number of big signings that you make. Therefore, its not just a matter of spending the cap (which all teams must effectively do). It’s a matter of spending the cap while limiting the cash spent – i.e. front loading the cap hit on a few contracts to limit the number signings that you make before hitting the ceiling.
Some might assume from this that my conclusion is that the Bears organization is “cheap”. It’s not. The Bears aren’t the Packers, who almost never spend anything in free agency and almost never improve their team except through the draft (which fortunately for them they are very good at doing).
However, it is important to note that though the Bears exist in a big market, they’re a family run organization. It’s highly likely that the major portion of the family income still derives itself from the team with limited diversification. The result is a large market franchise that essentially has to be run like a small market team. And when you are a fan of a small market team, you have to accept the fact that they aren’t going to spend like the rich boys who run their franchises as much for hobby as profit.
Like the Packers a few other franchises around the league, the Bears have to make less money work smarter. More than many teams, they have to spend carefully, draft effectively and they have to develop that young talent. Former GM Jerry Angelo and head coach Lovie Smith weren’t up to that task and it resulted in their downfall where, more than usual, repeated mistakes can’t be made. Preliminary indications are that current GM Phil Emery and head coach Marc Trestman are up to the challenge.
One thing is certain. However they manage to beat the competition, it won’t be by out spending them.