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Signed Caps

The NBA Salary Cap is the limit to the total amount of money that NBA teams are allowed to pay their players. While this seems simple enough in concept, the salary cap is in actuality extremely complex, and contains many obscure rules and loopholes. more...

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The amount that is actually the \"cap\" varies on a year-to-year basis, and is calculated as a percentage of the League's revenue from the previous season; for instance, in 2004-05, the NBA's salary cap was approximately $44 million (U.S.) per team, while in 2005-06 it was $49.5 million. The NBA has a salary cap to keep teams in larger markets (with more revenue) from buying all of the top players and extending their advantage over smaller-market franchises.

History

The NBA had a salary cap in the mid-1940s, but abolished it after only one season. The League continued to play without such a cap until 1984-85, when the current incarnation of the salary cap was instituted in an attempt to level the playing field among all of the NBA's teams and ensure competitive balance for the League in the future. Before the cap was reinstated, teams could spend whatever amount of money they wanted on players, but in the first season under the new cap, teams were limited to $3.6 million in total payroll.

\"Soft\" vs. \"Hard\" Caps

Unlike the NFL and NHL, the NBA features a so-called \"soft\" cap, meaning that there are several significant exceptions that allow teams to exceed the salary cap to sign players. This is done to allow teams to keep their own players, which, in theory, fosters fan support in each individual city. By contrast, the NFL and NHL caps are considered \"hard,\" meaning that it offers relatively few circumstances in which teams can exceed the salary cap (though the NFL has a notable exemption in that signing bonuses are prorated over the life of the deal, thus reducing a player's salary-cap number).

The Collective Bargaining Agreement

The Collective Bargaining Agreement, or \"CBA,\" is the contract between the NBA (the commissioner and the 30 team owners) and the NBA Players' Association that dictates the rules of player contracts, trades, revenue distribution, the NBA Draft, and the salary cap, among other things. In June 2005, the NBA's 1999 CBA expired, meaning the League and the players' union had to negotiate a new agreement; in light of the fiasco that was the 2004-05 NHL lockout, the two sides quickly came to an agreement, and ratified a new CBA in July 2005. The new agreement will expire following the 2010-11 season, but the League has the option to extend it through the 2011-12 season if they wish. If so, the League must exercise its option to extend the agreement by December 15, 2010.

Little changed in terms of the salary cap between the 1999 and 2005 versions of the CBA. In exchange for agreeing to the controversial player age minimum, the players will receive a slightly higher percentage of the League's revenues over the course of the new agreement. Additionally, the League's maximum salary decreased slightly in comparison to the 1999 CBA.