Green Bay Packers salary-cap primer: What you need to know about restructuring, voidable years and 'dead money'
GREEN BAY – When it comes to the NFL, there is in-season vernacular and there is offseason vernacular.
It can be equally confusing.
Contract extensions, voidable years, salary converted to signing bonus and pro-rated bonuses have become terms as common as read options, yards after catch, jet motion and double moves.
Some of the offseason terms have become more common around these parts because over the past two seasons the Green Bay Packers have been dealing with salary-cap issues they never had to deal with in the past.
Blame it on the pandemic or the “all-in” approach general manager Brian Gutekunst has made at the tail end of quarterback Aaron Rodgers’ career, but the Packers are using every tool available to them to keep their team together.
More:Packers general manager Brian Gutekunst dismisses 'hypotheticals' about futures of Aaron Rodgers, Davante Adams during news conference
More:The Packers have many salary cap decisions to make for their roster (and that's not even counting Aaron Rodgers). Here are 18.
Packers chat:How a Rodgers deal could work within the salary cap
By March 16, the Packers will have restructured more contracts for salary-cap purposes in a two-year period then they had in the previous 26 years combined of salary-cap football.
So, it seems the right time to explain how the salary cap works and what the Packers are doing to manipulate it. The following Q&A should provide some clarity on what exactly the team is doing.
Q: What is the 2022 salary-cap limit?
A: It is projected to be $208.2 million.
Q: How much of an increase is that from 2021?
A: It is an increase of $25.7 million. (In 2019, the year before the NFL played most of its games without fans in the stands, the cap was at $198.2 million. It dropped to $182.5 million last year, causing problems for many teams who had not budgeted for a big drop in league revenue.)
Q: When do teams have to be under the $208.2 million limit?
A: March 16. That is the start of the new NFL calendar year and the first day of free agency.
Q: How much are the Packers over the $208.2 million limit?
A: They started the offseason at about $52 million over the cap but have shaved off $14 million by restructuring the contracts of nose tackle Kenny Clark and running back Aaron Jones. They will restructure many more deals before March 16.
Q: What does restructuring mean?
A: In basic terms, it is taking salary-cap money that is due this year and spreading it out over future years to lower its toll on the 2022 cap.
Q: How is that done?
A: The Packers have used a procedure in which they convert base salaries and roster bonuses into signing bonuses and add voidable years to help lessen the ’22 cap charge.
Q: What is the difference between a base salary and a roster bonus?
A: A base salary is what the player earns over the course of the regular season. The player receives a weekly check worth 1/18th of that total (17 games plus a bye week). A roster bonus is paid either for being on the roster at the start of free agency or at the start of the regular season. A per-game roster bonus is also common and pays the player a certain amount for every game in which he is active.
Q: How does a signing bonus differ from a base salary and roster bonus for salary-cap purposes?
A: A signing bonus can be spread out evenly over the length of a contract but for no more than five years. So, even if a player signs a seven-year deal, the bonus can only be spread out over five. For example, if a player signs a five-year deal and receives a $1 million signing bonus, that bonus only counts $200,000 against the cap in the first year and every year after that. A base salary or roster bonus counts in full against the cap the year in which it is paid.
Q: How does this conversion work?
A: Say a player has a $6.035 million base salary and cap number in ’22. The player must maintain the league minimum, which in this case we’ll say is $1.035 million, so the rest — $5 million — is converted into a signing bonus. Assuming the player has five years left on his deal, the signing bonus is broken up into five equal parts for the remainder of the contract. So, the player’s cap number now consists of the $1.035 million base salary and the $1 million in pro-rated signing bonus. The club has knocked the player's salary-cap number down from $6.035 million to $2.035 million.
Q: What if the player doesn’t have five years remaining on his contract?
A: This is where voidable years come in. The team tacks on phony years to lengthen the contract to five years, so they can spread the signing bonus out as much as possible. The more years they add, the lesser the charge in ’22. They do this by adding years and inserting language that simply voids the entire contract right before those phony years go into effect.
Q: So, what happens to the part of the signing bonus that is attached to the voidable years?
A: That money goes onto the current year’s salary cap once the deal is voided or the player is cut or traded. (It goes on the next year’s cap if the player is cut or traded after June 1.) So, for the player who had $5 million converted to signing bonus, if he is released after two years, there are $3 million of salary-cap charges that must be applied immediately.
Q: What is dead money?
A: Those $3 million of charges that are applied are considered “dead money,” because the charges are being carried for a player who is no longer on the roster.
Q: Wouldn’t a lot of dead money on the cap take up room you need to spend on players you want on the roster?
A: Absolutely. They refer to these cap-saving measures we’ve discussed, as “pushing money into the future,” because that’s exactly what teams are doing. They can delay salary-cap charges for a while, but they eventually come due.
Q: Why do the Packers think they can sign Rodgers to an extension, re-sign free-agent receiver Davante Adams, restructure so many deals and remain competitive in the future?
A: The salary cap is expected to explode starting next season because the league’s new broadcasting rights contracts — worth $110 billion over 11 years — start to kick in. Some have estimated the cap will increase by 15% every year, which means the cap would be around $240 million next year and $276 million in ’24. That’s almost a $70 million jump in two years. The Packers are hoping those increases will help them cover the cap charges they have pushed into the future.
Q. What are the risks in doing it this way?
A. The biggest risk is injury. If some of these players who have cap charges pushed into the future suffer injuries that end their careers or result in a dramatic drop in performance, their strategy could backfire. They could wind up carrying so much “dead money” that they would need to cut valuable players or let them go in free agency just to comply with the salary cap.