2024 NFL salary cap spike: Free agency, team spending impact

This year, the NFL salary cap increased by an unprecedented 13.6%, from $224.8 million to $255.4 million per team. Given that teams will have more salary flexibility to spend, athletes who hit free agency in the upcoming week may find great benefits from the jump. However, the news was also well-received in front offices, as clubs had to make some adjustments to their budgets after learning about the cap, which was estimated to be between $240 and $245 million, at the end of February.

“We were hoping it would get to $250 [million], but we didn’t really expect it to,” Buffalo Bills general manager Brandon Beane stated at the combine last week. The team is short for cash.

Advantageous for both the teams and the players. Everyone in the NFL is making money, and the league is financially well. However, what information is essential for fans to understand regarding this season’s and future seasons’ implications of the historic $30.6 million salary cap jump? Big topics and key insights, such as which players and teams may be most impacted, are covered by us.

Why did the cap go up so much this year?

The wage cap in the NFL is determined by taking a percentage of the anticipated league income for the upcoming season. The NFL ventures/postseason revenue (money from postseason games and NFL-operated entities like the NFL Network) and local revenue (money made by teams in their local markets, such as selling local broadcast rights to preseason games) are the three categories into which the collective bargaining agreement (CBA) divides revenues. League media revenue is essentially the money made from television rights deals. The total of 55% of league media money, 45% of NFL venture/postseason earnings, and 40% of local revenue makes up the annual player cost.

If the player cost estimate does not drop below 48% of the overall revenue forecasts, the league may use stadium credits, which are funds used for stadium development and repair. A “media kicker” may also be used to raise the cost of a player due to newly negotiated TV rights agreements since the 2020 CBA signing.

To determine the per-team wage cap amount for the year, the player cost is basically calculated and divided by 32. The estimated player cost for this season is $10.54 billion; dividing that amount by 32 yields $329.4 million for each team. After deducting an additional $74 million from each franchise for player perks (which include performance-based compensation and benefits for retiring players), the amount left over for player wages per team is $255.4 million.

League and NFL Players Association sources state that there were at least three reasons why the 2024 number was substantially higher than the 2023 figure:

• Revenues were impacted by the massive new TV rights deals signed by the league with its broadcast partners in 2021.
• All of the player benefits deferred via the 2020 “COVID-19 CBA” have now been paid back. The league and the union paid those benefits back gradually over the previous few years, deducting the amount from the final cap calculation, and they no longer have to do so.
• Several teams outperformed their revenue projections for 2023, leading to improved revenue projections for 2024. Two teams cited as examples here were the Detroit Lions (who had two home playoff games after not having one since 1993) and the New York Jets (whose local revenues were significantly impacted by the offseason acquisition of Aaron Rodgers, even if Rodgers’ season lasted four snaps).

 

So is this a one-time thing, or will the cap start going up $30 million every year now?

I have spoken with sources that do not anticipate a comparable increase in 2025. In fact, an agreement was struck to “float” around $8–10 million of this year’s raise into next year during the league’s negotiations with the NFLPA to finalize this year’s cap. Yes, this implies that if the cap had been set exclusively on the basis of revenue-production figures, it might have reached $265 million this year.

Why, therefore, postpone some of the increase until 2025? The league’s agreement to this is understandable given that, in general, the cap serves the interests of the clubs rather than the players.

It’s possible that revenue estimates for 2025 could exceed expectations, in which case the cap will rise once more. However, as of right now, it is anticipated that the increase in 2025 would more closely resemble the $10–12 million yearly increments that we have been accustomed to seeing.

What effect did this have on franchise tag usage this offseason?

It’s challenging to identify a player on the tagged list who would not have been tagged if the cap had been lower. One explanation for this is that the tag numbers and cap numbers are linked; as the cap reached a certain height, the tags did too. For instance, if they wind up playing on the tag, Josh Allen of Jacksonville and Brian Burns of Carolina will each receive $24.007 million. The linebackers’ franchise tag pay would have been about $22.5 million if the ceiling had been set at $242 million.

The increased cap may allow teams to tag and move players more easily, though we’ll see if this actually occurs.

Consider the Kansas City Chiefs, who will have to pay cornerback L’Jarius Sneed a cap charge of $19.802 million as soon as the league season begins on March 13. The larger cap number makes it simpler for the Chiefs to carry Sneed into the upcoming league year before eventually dealing him, according to several in the league who believe the Chiefs intend to trade Sneed to a team prepared to grant him the contract extension he seeks. To squeeze Sneed under the figure, they need to free up roughly $13 million less in cap space than they had anticipated. For Burns, Cincinnati receiver Tee Higgins, or any other player who might be a tag-and-trade prospect, the same might apply.

How does this help teams dealing with massive cap charges for their stars?

This brings us to the Dallas Cowboys. Dak Prescott, a quarterback, presently has a $59.455 million cap charge for 2024. His contract has one year remaining, and there are two vacant years in 2025 and 2026. With a contract extension, the Cowboys might reduce Prescott’s cap figure, but they haven’t always been able to work out an extension with him. Furthermore, the quarterback has leverage because a $59.455 million cap figure is extremely expensive. (Patrick Mahomes’ $37 million in 2023 was the highest in the NFL.)

But once more, a few weeks ago, every team in the league essentially discovered $13 million in cap space that was just laying around.

Prescott’s 2024 salary of $29 million may be converted by the Cowboys into a signing bonus of up to $27.79 million. If they do it before March 17, they can use his roster bonus for March 17 in the same way. They would save $21.86 million in cap space in 2024 if they only made those two swift changes, without adding any additional vacant years to the agreement. They wouldn’t even need Prescott’s approval to do it. The issue now is that, should they choose not to re-sign Prescott, the Cowboys will be required to bear a dead money charge of $58.32 million for his services in 2025. However, they can buy themselves an extra year by using the straightforward automatic conversion that doesn’t need Prescott’s consent to fix that issue.

Some more team-specific examples:

• The Los Angeles Chargers have four star players — wide receivers Keenan Allen and Mike Williams, and edge rushers Joey Bosa and Khalil Mack — with cap numbers over $32 million for 2024. If the cap had come in at $242 million, they might have had to cut two or even three of those guys to get under it. At $255 million, they might have to release only one, maybe two of them.
• The San Francisco 49ers have a better chance of being able to keep their Super Bowl team together. San Francisco is still going to need to restructure a contract or two — maybe offensive tackle Trent Williams or edge rusher Arik Armstead — to get under the cap, but carrying receiver Brandon Aiyuk on his $14.124 million fifth-year option seems more palatable now than it did a couple of weeks ago. A lower cap might have forced the Niners to consider trading Aiyuk if they couldn’t get him extended, but the higher number buys some time to figure it out.
• The Cincinnati Bengals might be able to keep their offensive core together longer than expected. Cincinnati has cap space but a lot of needs on defense, so it will need to spend some there. Carrying Higgins on a $21.816 million franchise tag and running back Joe Mixon on his $8.85 million cap number would have been trickier at the lower cap number. But if the Bengals now want to squeeze another season out of this Super Bowl-caliber group they’ve built around Joe Burrow, it’s going to be a little bit easier.
• The Cleveland Browns don’t want to cut running back Nick Chubb, who is coming off a knee injury. They love the guy. But they also can’t carry him on a $15.825 million cap number. They will have to either extend him or negotiate some sort of pay cut if he is going to be on the 2024 team. If it’s the latter, the expanded cap means the Browns might not have to offer as deep a cut to a valued player as they might have otherwise.

Who else does this higher cap number benefit?

Big-name free agents: This month, there should be more bidding for the best free players since more teams, including the ones that were previously loaded with salary space, will have even more to spend. You can position yourself as the top edge rusher available to free agents if, like Minnesota Vikings edge rusher Danielle Hunter, you just witnessed Allen and Burns be tagged. Demand rises when a position becomes scarce, giving the clubs more spending power. Xavier McKinney of the New York Giants and Antoine Winfield Jr. of the Tampa Bay Buccaneers are two examples of safety players who did not get franchised (although Kyle Dugger of the New England Patriots received the transition tag).

The wide receivers looking for new deals: After taking off in 2022, the top end of the receiver market stagnated during the previous offseason. Stars like CeeDee Lamb and Justin Jefferson requested extensions, but they were denied. They are joined in being eligible for extensions by players like as Ja’Marr Chase and Amon-Ra St. Brown this year. The top of the market for the position is probably going to be above $30 million annually, and teams may find it simpler to move on from the extensions they decided not to offer a year ago due to the loosened cap.

How will the cap number impact cut designations?

Teams can spread out the expense of their cap over a number of years by using the post-June 1 cut. In most cases, a team that releases a player before the end of his contract has to charge dead money to cover the remaining portion of his prorated signing bonus. However, teams are permitted to split the cap charge by designating two players annually as post-June 1 cuts. Example: The Denver Broncos will lose $85 million in dead money if they decide to release Russell Wilson. This is due to the fact that he signed a 2022 contract with Denver that contained a $50 million signing bonus, a $20 million option bonus for 2023, and a $22 million option bonus for 2024.

Wilson’s signing bonus was allocated to the Broncos’ cap in $10 million increments for the years 2022, 2023, 2024, 2025, and 2026. CBA regulations permit teams to prorate the cap impact of signing and option incentives for up to five years. This indicates that he still owes $30 million in prorated signing bonuses, all of which will be added to the team’s 2024 cap when he is released. The Broncos will receive $4 million in increments from the 2023 option bonus in 2023, 2024, 2025, 2026, and 2027. Hence, the remaining $16 million will accelerate onto the 2024 cap.

The Broncos would only need to carry $35.4 million on this year’s cap (the $17 million salary plus one year’s worth of proration from the signing bonus and each of the two option bonuses) if they choose to designate Wilson as a post-June 1 cut. The remaining $49.6 million would be a dead money charge on their 2025 cap. The Broncos had the option to absorb the entire loss this season and deduct it from their 2025 cap. This is blatantly an extreme scenario, since no limit increase will let a team to absorb dead money costs for one player totaling $85 million.

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