NBA Releases New Projections For Future Salary Caps

The NBA has released new salary cap projections to their teams, The Athletic’s Shams Charania reported Monday night. The latest projections don’t move the cap for the 2019-20 season, but both the cap and luxury tax threshold were raised by $2 million for the 2020-21 season over the last projections, which were reportedly released to teams at the end of June, when the 2018-19 numbers were finalized. Every change in the projected salary cap updates maximum contracts, the various over-the-cap exceptions, and a host of other details teams have to know inside and out to navigate the unpredictable world of free agency.

It has to be noted at the beginning of any conversation about the 2020 salary cap that the league office has been notoriously inaccurate in their financial projections more than one year in advance. As one can imagine, predicting how all thirty teams will spend their available money over the next two years is nearly impossible, to say nothing of projecting Basketball Related Income between now and July 2020. This specific increase in the projection could be any number of things, but one particular revenue stream stands out: sports gambling.

When the owners and players came together to negotiate the current Collective Bargaining Agreement, they were well aware of the potential sports gambling represented as a strong source of revenue for their league, so much so that they negotiated it into the agreement ahead of the activity being legalized. Now that we’re well on our way to being able to gamble on sports from phones, tablets, and even restaurants, the league’s leadership is actively working with oddsmakers to establish a financial connection between the two organizations. Any “integrity fee” or other revenue generated for the league through these agreements would influence the salary cap, though by how much remains to be seen.

Any shortfall in spending between now and 2020 could also drastically change the salary cap, though there are massive issues with projecting spending shortfalls across the league. A shortfall occurs when many of the thirty teams don’t spend up to or exceed the cap, but historically that’s never been an issue for the league. A study done in 2015, before the massive cap spike in 2016, found that the league as a whole never spends less than the aggregated cap in modern history. In general, the thirty teams’ total salary adds up to about 120% of the total cap, with no reason to think that will stop between now and 2020.

2018 free agency did show a marked change from previous years, as players and teams opted to sign one-year deals in order to take advantage of 2019 cap space. With so many teams having significant money to spend next summer, it would make logical sense that there won’t be enough players worthy of that cap space, but like we saw in 2016, that doesn’t mean teams won’t spend the money they have. While the league gets smarter and smarter with each passing year with respect to giving big-money contracts to players who are overvalued, cap space tends to burn a hole in general managers’ pockets and it’s a very rare sighting to see a team not spend at least up to that year’s salary cap, not to mention the multitude of teams who will spend well over the cap to retain their current rosters.

A quick, back-of-the-napkin calculation already shows that the league as a whole will almost certainly spend through the cap next summer. Guaranteed salary for 2019-20 currently stands at $2.78 billion, a number that includes all player and team options as well as the first-round draft picks this coming June. That number is just $494.73 million below the projected total salary cap of $3.27 billion. While nearly $500 million might seem like quite a bit of money to make up, keep in mind that free agents and second-round draft picks signed for a grand total of $701.15 million in guaranteed money this past offseason, in a year that’s almost certainly going to go down as one of the stingiest in modern NBA history. With upwards of 20 teams having significant cap space next summer, making up the current gap to hit the $3.27 billion in total spend necessary to not have a shortfall in 2019-20 will be a walk in the park.

There’s no way to know from the outside whether the league is projecting an increase in revenue, what the source of that increased revenue is, or a shortfall in team spending. The uncertainty surrounding the nationwide legalization of sports gambling and whether or not the NBA will get a cut of the overall pie leads to some skepticism as to where the league’s accountants found evidence to increase these projections, but there’s also a significant chance that the league and various companies are closing in on a deal that would provide the revenue bump these numbers indicate is coming.