Salary Cap 101: Explaining the NFL's financial system John F. Rhodes / DMN Club vice-president Stephen Jones (left) is the Cowboys' salary cap expert. 10:47 PM CDT on Saturday, July 17, 2004 By TODD ARCHER / The Dallas Morning News The salary cap rules the NFL. Sometimes, teams use it as a crutch for not doing much in terms of free agency. Other teams push the limits of the cap, taking a win-at-all-cost approach without thinking about the future. The Cowboys are in the middle. If they think there is a player worth having, they will get him. They vow not to get caught in salary-cap jail the way they were after their Super Bowl run. "I don't see any mentality around here from Jerry [Jones] or Bill [Parcells] of, 'Let's load up now for next year and hope it works out,'" director of player personnel Stephen Jones said. "There are too many variables." Stephen Jones is the Cowboys' salary-cap expert, but even he concedes that sometimes it's difficult to know what works and what doesn't. Here's a primer on the cap. How the NFL comes up with the cap: The salary cap is a percentage of the NFL's defined gross revenues (DGR), which include all revenues from TV and radio and ticket sales, and portions from concessions, parking, advertising and promotion, signage, sponsorship agreements, stadium clubs, luxury boxes, programs and novelties, NFL Films and NFL properties. 2004: Roughly 64 percent of the NFL's defined gross revenues (DGR) or $80.582 million. How to compute a player's "cap figure": The salary-cap figure is the combination of the player's base salary and the yearly slice, or proration, of his signing bonus. A (Signing bonus/contract years) + B (season's base salary) = Cap figure. Player A signs a five-year deal with an $8 million signing bonus. His first-year base salary is $750,000. A ($8 million/5) + B ($750,000) or $1.6 million + $750,000 = $2.35 million. What happens when a team releases a player? The only money that gets counted against the salary cap is the remaining proration of the signing bonus. Player A signs a five-year deal with an $8 million signing bonus. He is cut in the second year of his contract. The team would be charged $6.4 million ($8 million - $1.6 million) against the cap for a player no longer on the roster. Why do teams wait until June 1 to cut players? Teams generally wait until June 1 to release players who have high salary-cap figures. For players cut after that date, NFL rules allow clubs to spread the hit over two years. Player A signs a five-year deal with an $8 million signing bonus. He is cut in the second year of the deal on June 1. The team is charged $1.6 million (signing bonus proration) that season and $4.8 million (the remaining signing bonus) next season. How does a team restructure a contract? There are two primary ways, with a pay cut being simpler. If the Cowboys had not been able to trade WR Joey Galloway, they would have tried a pay cut. Reworked contracts have incentives that allow the player to make back some lost money. Teams can also turn base salary into a signing bonus, then prorate that bonus over the rest of the contract. It lowers a player’s cap figure for a year but adds money down the road. What's the most important part of a contract? The signing bonus, because it generally is the only guaranteed money. Agents like to look at what the player will receive in total money over the first three years, because most contracts are backloaded to make the average per year look better. Player B signs a seven-year, $42 million deal with an $8 million signing bonus. He is cut in the fourth year of the contract. Player B probably ends up being paid around $12 million over three years. What are incentives and escalators in contracts? An incentive is easy to understand. A defensive end, say, would earn $500,000 (charged to the next year's cap) if he recorded 10 sacks during the season. With an escalator, the player would not only receive the $500,000, but his salary would increase by that amount for the remainder of the contract. How many contracts count against the cap? Even though teams are allowed to carry 53 players and eight practice-squad players during the season, only the top 51 contracts count against the cap. All guaranteed money also counts against the cap. If a player who was given a $100,000 signing bonus is cut, then that money counts. What is a split contract? This protects a team in case of an injury. Let's say a rookie signs a contract with a base salary of $230,000, but he suffers an injury during training camp that will end his season. Instead of paying the full $230,000, the player would receive $135,000, saving the team $95,000. INSIDE MARCELLUS WILEY'S FREE-AGENT CONTRACT One of the Cowboys' bigger needs during the off-season was finding a pass rusher to play alongside Greg Ellis and La'Roi Glover. Their initial target was Bert Berry, who ended up in Arizona with a five-year, $25 million contract that included a $5 million signing bonus. The Cowboys believed that was too high a price to pay for a player who started a full season only once. After ending their dalliance with Berry, the Cowboys turned their attention to Marcellus Wiley once he was cut by San Diego. They were able to sign Wiley to a four-year, $16 million contract that included a $4.5 million signing bonus. Only a year older than Berry, Wiley came in $9 million cheaper and has a better resume (2001 Pro Bowl, 41 career sacks). Details of the contract: Four years, $16 million ($4.5 million signing bonus) • 2004: $4.5 million bonus, $660,000 base salary ($1.78 million cap figure) • 2005: $500,000 roster bonus, $2 million base salary ($3.62 million cap figure) • 2006: $4.34 million base salary ($5.46 million cap figure) • 2007: $4 million base salary ($5.12 million cap figure) Wiley can void the final year of the contract if he makes the Pro Bowl or gets 11 sacks in any of the first three seasons. It's a gamble worth taking for the Cowboys because in 2007, Wiley will be 33. TOP CAP FIGURES (IN MILLIONS) 2004: Larry Allen ($5.5), La’Roi Glover ($4.7), Dexter Coakley ($3.96), Darren Woodson ($3.55), Keyshawn Johnson ($3.0) 2005: Larry Allen ($6.55), Flozell Adams ($5.9), La’Roi Glover ($5.2), Dexter Coakley ($4.71), Darren Woodson ($4.3) 2006: Larry Allen ($7.55), Flozell Adams ($7.5), La’Roi Glover ($7.2), Darren Woodson ($6.8), Dexter Coakley ($5.46) FUTURE FREE AGENTS 2005 Unrestricted: Willie Blade, Leonardo Carson, Aveion Cason, Javiar Collins, Tony Dixon, DeMingo Graham, Matt Lehr, Lynn Scott, Markus Steele, Vinny Testaverde, Dedric Ward, James Whalen. Restricted (3+ year veterans): Darian Barnes, Jamal Brooks, Billy Cundiff, Andrew Davison, Pete Hunter, Chad Hutchinson, Cedric James, Daleroy Stewart, Kurt Vollers, Tyson Walter. Exclusive rights (2 years or less): Jermaine Brooks, Ryan Flinn, Mat McBriar, Keith O’Neil, Tony Romo, Dave Volk. 2006 Unrestricted: Richie Anderson, Antonio Bryant, Quincy Carter, Gennaro DiNapoli, Andre Gurode, Donald Mitchell, Eric Ogbogu, Jeff Robinson, Randal Williams. Restricted: Keith Davis, Jemeel Powell, Scott Shanle, Zuriel Smith, Torrin Tucker, Ryan Wingrove. Exclusive rights: ReShard Lee. 2007 Unrestricted: Dexter Coakley, Kenyon Coleman, La’Roi Glover, Al Johnson, Al Singleton, Darren Woodson. Restricted: Shaun Smith. 2008 Unrestricted: Flozell Adams, Larry Allen, Terry Glenn, Bradie James, Keyshawn Johnson, Dat Nguyen, *Marcellus Wiley, Jason Witten. 2009 Unrestricted: *Jamar Martin, Tango McCauley, *Roy Williams. 2010 Unrestricted: Greg Ellis, Terence Newman. 2012 Unrestricted: *QB Drew Henson. *Contract length can be shortened based on playing time ROOKIE POOL Using a formula based on the number of picks a team has and where those picks are slotted in the seven-round draft, each team is given a figure. The Cowboys have $2,895,414 to spend on their eight draft picks and undrafted free agents. A rookie’s signing bonus is prorated and is added to the base salary to produce the rookie’s pool figure.