What does the suspension of the 2019-20 NBA season amid the coronavirus outbreak mean for player salaries and the salary cap?
As ESPN's Adrian Wojnarowski reported on Sunday, owners and league executives are bracing for a mid-to-late-June return as a best-case scenario. That's important because the 2019-20 salary-cap calendar ends on June 30. Multiple players such as the Los Angeles Lakers' Anthony Davis (who has a June 29 player option to become a free agent this summer) and his teammate Dwight Howard (who has a contract that expires June 30) would be affected by a late lifting of the current moratorium on transactions.
To rectify players' pending free-agent status, sources said the NBA and the players' association are expected to bargain and establish a set of transition rules once games are scheduled to return. These rules will amend all future salary-cap dates.
Here's a breakdown of everything in flux and under discussion.
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The impact on the salary cap and luxury tax
Despite a significant projected decline in basketball-related income (BRI), it is premature to project what the salary cap and luxury tax will be in 2020-21 and future years.
According to the collective bargaining agreement, if BRI for any salary-cap year substantially decreases from the prior year, and as a result, the players receive more than their designated share, the NBA and the union shall negotiate in good faith to find an adjustment that satisfies both parties.
In the 2011-12 lockout-shortened season (66 games) and the following year, when 82 games were played, the salary cap remained steady at $58 million, with a $70.3 million luxury-tax line.
If, hypothetically, the NBA and players' union take a similar approach and leave the salary cap at the current number of $109.1 million, with a $132.7 million luxury-tax line for 2020-21 and 2021-22 -- rather than raising the cap to $115 million and then $125 million -- there will be huge financial ramifications across the league, starting with ...
Rookie max extensions
The rookie extensions that Ben Simmons (five years, $170 million), Jamal Murray (same as Simmons) and Pascal Siakam (four years, $130 million) signed heading into this season included placeholders to be finalized when the 2020-21 salary-cap numbers were set. Each of their contracts noted the final figure was for 25% of the cap and not an exact salary amount.
If the cap remains at $109 million, Simmons and Murray would lose $8.5 million and Siakam would lose $6.1 million over the length of their contracts.
The 2021 supermax
Despite the projected decrease in revenue, the Milwaukee Bucks likely still will be able to offer Giannis Antetokounmpo a supermax extension for one of the largest contracts in NBA history. But a stagnant cap -- rather than one hitting $125 million in 2021-22 as initially projected -- could cost Antetokounmpo $32 million over the life of the deal, with the potential for more of a dip if the cap drops.
Here is the breakdown:
If Antetokounmpo bypassed signing an extension and signed a max contract in the summer of 2021 with a team other than Milwaukee, his total salary with a flat cap would be $140.8 million -- $80 million less than what the Bucks could offer.
Portland Trail Blazers star Damian Lillard would also be affected if the 2021-22 salary cap is adjusted.
Lillard signed a four-year, $196 million supermax extension last July based on a $125 million salary cap. The salary cap remaining at $109 million would cause his total salary to drop to $171.1 million.
The luxury tax and teams with cap space
This is where teams would be affected the most.
ESPN is projecting the Boston Celtics, Brooklyn Nets, Golden State Warriors and Philadelphia 76ers to be in the luxury tax in 2020-21. If the tax drops from the current projection of $139 million, teams including the Houston Rockets, LA Clippers and Bucks could quickly join that group.
A decline in the tax line could cost the Nets an additional $25 million if they bring back free agent Joe Harris. The Nets' projected tax bill with a $132.7 million luxury tax would be $73.5 million -- significantly more than the $48.8 million tax payment if the cap rises as projected.
Plus, 2020 free agency could quickly be at a standstill if the salary cap doesn't increase.
After the trade deadline, ESPN projected that only six teams -- the Atlanta Hawks ($45 million), Charlotte Hornets ($27 million), Detroit Pistons ($35 million), Miami Heat ($27 million), New York Knicks (up to $50 million) and Phoenix Suns ($20 million) -- would have real money to spend. Removing $6 million of room decreases leaguewide spending power ever further.
Why the NBA regular season still matters
In what is already a difficult situation, jumping directly to the playoffs and eliminating the rest of the regular season if and when play resumes would further complicate cap issues without some relief via temporary rule changes.
Teams would not be allowed to waive or sign a player to a rest-of-season contract. Under normal circumstances, the last day to cut a player and have him clear waivers is April 12, and the last day to sign or convert a two-way contract is April 15 (the last day of the regular season).
One example: The Thunder would miss out on a chance to convert the two-way contract of Luguentz Dort if the regular season is wiped out completely. In the 21 games that the undrafted guard started, Oklahoma City was 16-5.
And in the case of the Timberwolves, ending the season prematurely would leave them as a luxury-tax team at $454,726 over the line. Except for trade and incentive bonuses, team salaries and tax figures are frozen on the last day of the season. Unlike last season, when the Heat waived Rodney McGruder late in the season to skirt the tax, Minnesota would not have that option with Omari Spellman or Jacob Evans.
Salary-cap issues to bargain
While there aren't expected to be any permanent changes to the CBA, sources said there will be transition rules for transactions, similar to the ones that were instituted following the 2011 lockout. For example, teams with traded player exceptions that expired during the lockout period saw those expiration dates bumped back.
Assuming the season isn't canceled, the latest possible concluding date of the NBA Finals will dictate how salary-cap items and contract dates are adjusted. If the Finals end in mid-August, the most logical solution would be to start the new cap year on Sept. 1.
Here are the set of dates that will have to be amended:
Player and team options
There are 41 players with some kind of option date in their contracts for 2020-21 that likely will need to be adjusted.
One thing to keep in mind for former All-Stars with player options such as Andre Drummond and DeMar DeRozan: A projected drop in the salary cap will leave even fewer teams with spending power whenever free agency begins, potentially making their player options even more appealing.
Contracts with guarantee dates
An altered league calendar also would affect the guarantee date for more than 40 player contracts.
Players such as T.J. McConnell, Ersan Ilyasova and Monte Morris currently have end-of-June guarantee dates, but all three are projected to be in the playoffs at the same time if the league resumes. And the Knicks have four players with June 28 guarantee dates who could become possible waiver claims for teams holding trade exceptions such as the Warriors or Thunder. However, without a tweak to the guarantee dates or new temporary rules, the Thunder would not be allowed to make a waiver claim because they would still be in the playoffs.
Each of these players is likely to see his guarantee date amended to better align with the conclusion of the playoffs and the start of the new salary-cap year.
Trade exceptions
There are 13 trade exceptions that expire by July 10.
Teams such as Golden State and Oklahoma City with these valuable trade assets are not expected to lose their exceptions once those deadlines pass.
The revised salary-cap calendar will determine the new dates here. For example, if the league year begins on Sept. 1 and the moratorium is lifted on Sept. 6, the $17.2 million Golden State trade exception could expire on Sept. 7.
Incentive bonuses
There are millions of dollars at stake for players with incentives in their contracts. With the potential for an abbreviated season or a full cancellation, the league and the union will negotiate what incentive bonuses would have been reachable if the full season were played.
For example, Solomon Hill of the Heat had a $531,614 bonus if he played 1,000 minutes in the regular season. If the season resumes with the postseason beginning immediately, Hill would fall eight minutes short, and he'd have a strong claim to that bonus money, since there was supposed to be 17 games remaining.
Not all cases are that clear, though. The Knicks' Maurice Harkless had a $500,000 bonus if he attempted more than 100 3-point shots while shooting better than 35%. Harkless was two attempts short with a 34.7 3-point percentage when the season was suspended.
In the 66-game lockout season, the NBA adjusted performance bonuses down to 80% (using a 66/82 formula) if they were based on a specified number of games or minutes played, team wins or total points scored. The formula was not used for per-game averages or ratios. If the same type of formula is used in this case, then the New Orleans Pelicans' Jrue Holiday likely would reach his games-played bonus of 66 contests, even though the point guard has played only 55 so far.
Other dates to be collectively bargained
Salary cap and luxury tax set: June 29
Last day to tender a qualifying offer: June 29
NBA moratorium begins: 6 p.m. ET June 30
Extensions can be negotiated: June 30
Salary-cap calendar year begins: July 1
Restricted free agents can sign offer sheets: July 1
Minimum and first-round picks can be signed: July 1
Third- and fourth-year rookie options can be exercised: July 1
Moratorium ends: 12:01 p.m. ET July 6
Teams can sign unrestricted free agents and officially make trades: July 6
Contracts can be renegotiated: July 6
Matching period for offer sheets signed during the moratorium begins: July 6
Veteran and rookie extensions can be signed: July 6
Last day to withdraw a qualifying offer without the player's consent: July 13
Last day to use the waive-and-stretch provision: Aug. 31