Belichick Clarifies Cap vs. Cash Spending Comments

[Vindicate]

Saw this article from CBS: Bill Belichick believes salary cap spending is more important than cash spending

Interesting comments include:

"Cash spending isn't really that relevant. It's cap spending," Belichick said on WEEI's Greg Hill Show. "So teams that spend a lot of cash one year probably don't spend a lot of cash in the next year, because you just can't sustain that."

Personally, I'm a bit lost on cap stuff. I get the basics, but could someone do a ELI5 (explain like I'm 5) summary of cash vs. cap spending?

Personally, my question really comes down to: what constitutes as cash vs. cap? What are the benefits of either? Is cash more reward up front and risky?

 

[TheRainMaker]

Watch YouTube video's from Andrew Brandt who managed Green Bay's salary cap during the Favre era while he was the highest paid QB in the league.

He basically says the cap is not what the media and fans think it is. If teams have cap, you pay guys upfront cash while they are good in the event they crap out a few years later. He has made the Saints an example of what not to do - pays guys money down the road when they had declined.

49ers are a good example of how contracts are well structured. A lot of contracts look large on paper, but the finer details say they are only on the hook for a few years.

 

[Wozzy]

People who think they understand football finances more than BB, an economics major from Wesleyan College and most successful football mind on the planet, they’re a special kind of dumb.

 

[RobertWeathers]

People who think they understand football finances more than BB, an economics major from Wesleyan College and most successful football mind on the planet, they’re a special kind of dumb.

 

[Wozzy]

View attachment 52345

Listening to Greg Hill try to explain to Bill why cash spending was more important than cap spending was hilarious.

The funniest part is people here have explained the same exact thing BB did to Greg numerous times and it sounded exactly the same.

 

[Hammer of Thor]

Saw this article from CBS: Bill Belichick believes salary cap spending is more important than cash spending

Interesting comments include:

"Cash spending isn't really that relevant. It's cap spending," Belichick said on WEEI's Greg Hill Show. "So teams that spend a lot of cash one year probably don't spend a lot of cash in the next year, because you just can't sustain that."

Personally, I'm a bit lost on cap stuff. I get the basics, but could someone do a ELI5 (explain like I'm 5) summary of cash vs. cap spending?

Personally, my question really comes down to: what constitutes as cash vs. cap? What are the benefits of either? Is cash more reward up front and risky?

In very, very, very, very simplistic terms: cash signing bonus payments hit the cap evenly over a 5 year period or the length of the contract, whichever is shorter. All other payments hit the cap when they’re paid.

All cash actually paid to the player eventually needs to hit the salary cap.

When a player has a dead cap hit, it’s either because of the portion of the signing bonus that hasn’t hit yet, or guaranteed future salary that the team needs to pay regardless of whether or not the player is on the team. Most NFL contracts are only Partially guaranteed, so typically the majority of a dead cap hit is the signing bonus. Players want large signing bonuses precisely because NFL contracts aren’t fully guaranteed.

Most teams that have high cash spending have just gone on a free agency spending spree with a lot of signing bonuses. The Patriots had very high cash spending in 2021 because of that. We’re low in 2022 and 2023 because we didn’t. But our cap in 2022 and 2023 is being used up by those signing bonuses.

As I said, this is very, very simplified, but it‘s 90% accurate and gets at the key high level mechanics and rationales.

 

[Sciz]

Frankly, if you’re clueless on all of this then the easiest option is to stay that way and ignore the noise. Arguments based on cash and cap spending are intentionally misleading about 9 times out of 10. If they’re using a single year snapshot, then that increases to about 999 in 1000. It’s not worth understanding.

 

[rkarp1]

Bill also told us that MattP and Joe Judge could coach offense.

 

[One-If-By-Sea]

Personally, I'm a bit lost on cap stuff. I get the basics, but could someone do a ELI5 (explain like I'm 5) summary of cash vs. cap spending?

Personally, my question really comes down to: what constitutes as cash vs. cap? What are the benefits of either? Is cash more reward up front and risky?

I will try. The Cap records how much cash is "committed" every year so the player's union can track the spending to confirm compliance to the collective bargaining agreement. Cash "committed" does not equal cash "spent". The cash "spent" is reflected in Kraft's checking account statement (the same as your checking account but with a lot more zeros ). The difference between "committed" and "spent" is that players like to get their cash upfront, so there are signing bonuses, guaranteed payments, etc., usually paid in Y1 of a contract (can be guaranteed and paid in later years). So with a new 3 year contract a player might get a $21M check from Kraft's checking account upfront and that is cash "spent". The Cap "committed" amount for that $21M cash "spent" is $7M for three years ($7M * 3 = $21M) because the player is playing for three years. So the cash "committed" is $7M in Y1, Y2 and Y3, but the cash "spent" in $21M in Y1.

The wrinkle is that all cash is not "guaranteed" so the contract value can be a lot less if a player is cut such that they do not receive the "non-guaranteed" money.

 

[Ross12]

In very, very, very, very simplistic terms: cash signing bonus payments hit the cap evenly over a 5 year period or the length of the contract, whichever is shorter. All other payments hit the cap when they’re paid.

All cash actually paid to the player eventually needs to hit the salary cap.

When a player has a dead cap hit, it’s either because of the portion of the signing bonus that hasn’t hit yet, or guaranteed future salary that the team needs to pay regardless of whether or not the player is on the team. Most NFL contracts are only Partially guaranteed, so typically the majority of a dead cap hit is the signing bonus. Players want large signing bonuses precisely because NFL contracts aren’t fully guaranteed.

Most teams that have high cash spending have just gone on a free agency spending spree with a lot of signing bonuses. The Patriots had very high cash spending in 2021 because of that. We’re low in 2022 and 2023 because we didn’t. But our cap in 2022 and 2023 is being used up by those signing bonuses.

As I said, this is very, very simplified, but it‘s 90% accurate and gets at the key high level mechanics and rationales.

A good example of this is to compare this year's total cap ($224 million in 2023) to the contract that Justin Herbert just signed ($262 million). Obviously that contract can't all be in 2023, it wouldn't fit. It must be spread out, and it is - across 5 years. So you're really talking about $50 million or so per year, but exactly what proportion of that amount is allotted to each of those 5 years will vary depending on how the team structures it. Additionally, not all of the deal is guaranteed, which would come into play if the player is traded, gets cut etc.

 

[moosekill]

I am sorry, but this isn't really very hard. That is why we are always told wait to see what the contract actually says before you complain about it. Non-guaranteed money often is not realized.

 

[Vindicate]

I am sorry, but this isn't really very hard. That is why we are always told wait to see what the contract actually says before you complain about it. Non-guaranteed money often is not realized.

Very insightful, thanks.

 

[Vindicate]

Frankly, if you’re clueless on all of this then the easiest option is to stay that way and ignore the noise. Arguments based on cash and cap spending are intentionally misleading about 9 times out of 10. If they’re using a single year snapshot, then that increases to about 999 in 1000. It’s not worth understanding.

You see, I understand what you're implying, however that's the kinda stuff that makes me wanna torture myself trying to understand hahaha.

 

[Vindicate]

In very, very, very, very simplistic terms: cash signing bonus payments hit the cap evenly over a 5 year period or the length of the contract, whichever is shorter. All other payments hit the cap when they’re paid.

All cash actually paid to the player eventually needs to hit the salary cap.

When a player has a dead cap hit, it’s either because of the portion of the signing bonus that hasn’t hit yet, or guaranteed future salary that the team needs to pay regardless of whether or not the player is on the team. Most NFL contracts are only Partially guaranteed, so typically the majority of a dead cap hit is the signing bonus. Players want large signing bonuses precisely because NFL contracts aren’t fully guaranteed.

Most teams that have high cash spending have just gone on a free agency spending spree with a lot of signing bonuses. The Patriots had very high cash spending in 2021 because of that. We’re low in 2022 and 2023 because we didn’t. But our cap in 2022 and 2023 is being used up by those signing bonuses.

As I said, this is very, very simplified, but it‘s 90% accurate and gets at the key high level mechanics and rationales.

Thank you, this is helping a lot. So when it comes to the "cap is crap" theory, are people referring to the obfuscation that can be done via cash spending?

 

[XLIX]

"Our spending in 2020, our spending in 2021, and our spending in 2022 -- the aggregate of that -- was we were 27th in the league in cash spending," - Bill Belichick, 6/30

"Cash spending isn't really that relevant. It's cap spending," - Bill Belichick, 8/28

 

[PatsFan2]

Bill also told us that MattP and Joe Judge could coach offense.

Ouch! Homers got a kick in the gut.

 

[borg]

People who think they understand football finances more than BB, an economics major from Wesleyan College and most successful football mind on the planet, they’re a special kind of dumb.

Believing a NESCAC undergrad economics degree gives Bill special capology credentials is a special kind of dumb.
Most liberal arts NESCAC economics departments, including Wesleyan back in the day and currently, refuse to offer even basic accounting courses because they are not theory based and would provide actual practical knowledge which is a major no-no at these $85k/year woke incubators.
Sincerely,
An economics major from a NESCAC woke incubator

 

[moosekill]

Cash is basically irrelevant to the owners. Let's just pretend they have unlimited amounts of cash, which for our sake is true. However they have a set amount of cap $$'s they can spend each year. They can't go over that amount. They are allowed to spread it out over the length of the contract. Then they can entend the contract or change the contract to make the players pay this year spread out over multiple years, even though the player got the cash this year. That is how they can make the cap less relevant, however, over time, that piper still needs to be paid.

 

[h0c2000]

Cash is basically irrelevant to the owners. Let's just pretend they have unlimited amounts of cash, which for our sake is true.

Except salary guarantees are important to most of the owners, since future ones need to be held in escrow. I'd believe most owners hate having large amounts of idle cash.

 

[40yrpatsfan]

The main reason there's a difference between cap and cash is because of upfront bonuses. If a guy is worth $10m a year for 3 years, he might negotiate getting $15m up front as a bonus, with salaries of say $1m, $7m, and $7m. The bonus for cap purposes is spread over the 3 year term ($5m per year). So in that example:
- Cash spending is $16m in year 1 ($15m + $1m), and it's $7m in each of years 2 and 3.
- Cap spending is $6m in year 1 ($1m + $5m), and $12m in each of years 2 and 3 ($7m + $5m)

So you spend $16m cash in year 1, but the cap is only charged $10m. Conversely in each of years 2 and 3 you're spending $7m in cash but the cap is being charged $12m.