Yesterday, the NFL announced each team’s Rookie Salary Cap for their 2009 draft class. The Ravens’ Rookie Cap number for this year has reportedly been set at $3.372M.
The Rookie Salary Cap is often referred to as “a cap within a cap” because it limits the amount that teams can allocate to their rookies in the year they were drafted. But, beyond that, there is a lot of confusion about the Rookie Salary Cap and exactly how it works. Even some in the media do not fully understand the mechanics of it. Some have been heard to say that it’s a totally separate pool of money that is not included in the team’s overall Cap. Others think the entire amount of the rookie Cap is included in the team’s overall Cap, meaning that the Ravens would need $3.372M in overall Cap space to sign their rookies.
Both of those characterizations are incorrect.
The rookie Cap is not a separate, distinct pool, but rather, a separate calculation and there is not a dollar-for-dollar correlation between the rookie Cap and the overall Cap. So, while all of the Salary Cap numbers of the Ravens’ draft picks must fit under their Rookie Salary Cap, not all of that amount will impact the team’s overall Cap.
The reason for these misconceptions revolves around the Rule of 51, which dictates that, from late February until the beginning of the season, only the top 51 Cap numbers and all pro-rata shares of bonus money of players outside of the top 51 Cap numbers count toward the team’s overall Cap at this time of the year. Any dead money, i.e. amounts that count against the Salary Cap for players who are no longer on the roster, counts as well.
This rule is necessary because, during the offseason, team rosters can number up to 80 players. As such, it would be impossible for teams to fit all of those players under the Cap. So, to counter this problem, the NFL has mandated that only the highest 51 Cap numbers and all bonus money applies during the offseason.
So, then, how does the Rookie Cap actually work?
First, as way of explanation, most rookies receive a 3- or 4-year contract, with a signing bonus and minimum base salaries over the length of the contract. For 2009, the minimum base salary for a rookie is $310K. For Salary Cap purposes, the bonus received by the player is prorated over the years of the deal (usually 3 years for players drafted in the 3rd round or later, 4 years for 2nd round picks and 5 years for 1st round picks) and that prorated amount is added to the base salary to create the player’s Cap number. Contracts for 1st and 2nd round picks can be more complicated because they may also receive roster bonuses (which count entirely in the year they are paid) and option bonuses in future years (but those don’t count in the rookie year anyway). Ultimately, the 2009 Cap numbers of all 6 of the players drafted by the Ravens must equal $3.372M or less. That is the Rookie Salary Cap.
But, this is where the Rookie Cap and the Rule of 51 become intertwined – and where most of the misunderstanding comes from. Presently, the 51st highest Salary Cap number on the team is $460K. Of the Ravens 6 draft picks, it is likely that only the picks in rounds 1 through 3 will have 2009 Cap numbers of at least $460K. As such, for the 3 drafts pick chosen in the later rounds, only their 2009 prorata share of their bonus would count against the overall Cap. Their base salaries of $310K would not.
By way of example, if a 5th round pick signs a 3-year deal with a bonus of $150K and a base salary of the rookie minimum of $310K, then his Cap number would be $360K. All of that amount would count against the team’s Rookie Cap, but because of the Rule of 51, only the $50K bonus proration (1/3 of the $150K bonus) would count against the team’s overall Cap.
As such, of the team’s Rookie Cap of $3.372M, $930K (3 x $310K) would not count against the team’s overall Cap because the Cap numbers of those players is not among the top 51 on the team, leaving only the 2009 bonus shares to remain on the team’s overall Cap.
Further, once the 3 rookies drafted in rounds 1 through 3 are signed, their Cap numbers would count entirely among the top 51 Cap numbers, but those would replace the 3 lowest Cap numbers that had previous counted as the 49th, 50th and 51st Cap numbers. For the Ravens, each of those players has a Cap number of $460K, which is the veteran minimum salary for 3rd year players. In the case of each of those players, none of that number includes any bonus money. As such, to figure how much of the Rookie Cap actually applies to the overall Cap, another 1.38M ($460K x 3) is deducted from the Rookie Cap amount.
So, to calculate just how much of the Rookie Cap actually applies to the team’s overall Cap, the Rookie Cap of $3.372M is reduced by $930K and $1.38M, leaving an amount of only $1.062M in overall Cap space needed to accommodate the signing of rookies within the Rule of 51.
Once the season starts, however, the entire Cap Numbers of the rookies who make the team will count against the overall Cap. The impact of that, though, actually operates to save the team a little bit of Salary Cap space, since the rookies are likely only making base salaries of $310K and they are replacing players on the roster who were making more in base salary.