Cash is King in the Land of the NFL Salary Cap
Cash is King in the Land of the NFL Salary Cap
An unspoken aspect of roster building is cash spending and team budgets.
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The salary cap is all the rave of the NFL offseason. An unspoken part of the offseason is cash spending and how the teams budget their planned cash spending for the upcoming league year. How does cash spending affect what a team can do in the offseason?
Cash Is King
If you have been following me for some time, you may have heard this statement. The salary cap can be manipulated to fit what a team wants to do with building their roster. I’ve always defined the salary cap system as an accounting system with rules that will determine the allocation of your cash spending.
The real barrier for NFL teams is cash spending.
We know these organizations are worth billions and billions of dollars. I am not speaking of the idea that teams are cash-deficient and can’t afford to pay their players.
The barrier is the budget and how much a team wants to spend in terms of cash for a league year. At the end of the day, this is a business. Organizations have revenue and profit goals to reach just like any other business in the real world.
Note all the dollar figures used below are cash spending, not cap spending dollars.
Budget
Unfortunately, I am not in the budget meetings with teams to get a full understanding of what the team cash spending budget would be, but I can look at the history of spending efforts to guesstimate future spending.
For today’s exercise, I will examine the Houston Texans’ cash spending history and potential cash budget for 2024.
The Houston Texans organization experienced a change in principal ownership with the unfortunate passing of Bob McNair. His son, Cal McNair, took over the CEO role of the organization in November 2018.
First, I reviewed the team’s recent cash spending history, specifically the percentage spent on the adjusted and unadjusted salary cap. from 2019 through 2023.
Unadjusted Cash Spending Average = 112.65%
Adjusted Cash Spending Average = 105.30%
The two largest spending years were 2020 and 2023. The 2020 league year was the year of Laremy Tunsil and Deshaun Watson extensions, both were a major contributor to the high cash spend. The 2023 league year experienced a large free agent class plus the cost of signing the second and third overall draft selections of C.J. Stroud and Will Anderson.
For the 2024 league year, referencing the above averages, I will use 113% and 105% to hone in on a potential cash budget for the Houston Texans to be used on roster spending.
113% of $255,400,000 = $280,602,000
105% of $258,136,100 = $271,042,905
For simplicity's sake let’s use a nice even number of $280,000,000 for the cash spending budget for the 2024 league year.
What Does This Mean?
The team will need to account for multiple areas of spending towards building their 90-man roster for training camp, and budgeting for the regular season. This includes free agency, in-house player extensions, draft class, undrafted class, reserve player costs, dead money spending, and in-season roster moves including potential player trades.
This specific budget does not include front office and coaching salaries, facility costs, equipment, or travel costs.
Cost buckets we know or can estimate:
Current cash spend on 54 rostered players: $126,528,365
Current draft class total cost: $20,050,652
Practice Squad cost: $4,550,400 (assuming 6 veterans)
Offseason workout cost: $650,000
Replacement cost for replacement players: $11,250,000 (assuming ~10 players)
In-season roster moves: $6,500,000
Undrafted class signing bonus cost: $100,000 (maximum amount not yet set)
Total: $169,629,417…call it an even $170,000,000. It is worth noting that the above figures capture players who will not make the final roster, and their specific cash costs will be minimal.
54 Active players signed + draft class + undrafted class should put the team with approximately 75 players.
Now I can project the team could be heading into free agency with a $110.0 - $120.0 million cash budget to cover approximately ~15 players and any potential current player contract extensions.
Sounds like a good bit of cash doesn’t it? Maybe not.
Free Agency Signings and Extensions
The Texans will have the ability to structure free agency contracts in a way that sets the year-one player cap charge much lower than the contract paper value APY (average per year).
Example: Player X signs a three-year contract worth $30 million, a $10 million APY. The contract will likely be structured in a way that would produce a year-one cap charge of $4.5 million. However, the player did receive a $9.0 million signing bonus and has a $1.5 million first-year base salary.
Under this scenario, the player’s cash cost would be $11.5 million…much different than the $4.5 million cap charge.
The team could make a splash in free agency signing a player to a contract that includes $25.0 million in year one cash spending. This would eliminate close to ~22% of the free agency cash budget.
Another major cash expenditure could be a big contract extension for wide receiver Nico Collins. Such an extension could cost upwards of $20.0 million in cash for the 2024 league year once you factor in salary and a new signing bonus.
Final Thoughts
The team-specific cash budget is a privately held number. Nick Caserio’s spending history is still short on evidence, especially if you consider the 2021 and 2022 seasons as incomplete evidence.
The McNairs could amp up the cash budget, closer to $300.0 million, forecasting a stronger cash flow year from the new league media contracts. Ownership may also factor in a likely increased game attendance and increased merchandise sales with the new uniforms slated to be released the week before the draft.
Unless that number becomes public (it won’t) the best we can do is work from historical information to try to predict the future.
March 13th cannot get here quickly enough!
-TC