What is a “pegged” cap and why should you care?

DeMaurice Smith, NFL Players Association Executive Director, makes a statement after negotiations collapsed between the National Football League (NFL) and National Football League Players’ Association (NFLPA) in Washington on March 11, 2011. The last real hope for a quick end to the dispute ended when the union representing the players (NFLPA) filed a court application to dissolve itself after failing to reach an agreement with league and owners over a range of issues. REUTERS/Joshua Roberts (UNITED STATES – Tags: SPORT FOOTBALL EMPLOYMENT BUSINESS)

The latest scuttlebutt out of the NFL labor non-negotiation negotiations is the idea of a “pegged” cap, which was reportedly brought up by the players. A pegged cap is a stable salary cap that is based on revenue projections and goes up at a set amount each season. The last CBA had a salary cap based on actual annual revenue that could go up or down each year depending on which way the wind was blowing.

Why does this matter?

Pro Football Talk’s Mike Florio explains…

If the actual numbers come in lower, the players still get paid. One major area of dispute has arisen from the question of whether and to what extent the actual performance exceeds the projected revenue growth. The owners’ offer of March 11 omitted that wrinkle; the players want to share in the upside.

The players, we’re told, prefer a “pegged cap” approach to expense credits because it entails simpler auditing and fewer disputes.

I’m on the players’ side in this debate, but if they are getting guaranteed pay no matter how the league is actually doing, then they can’t really demand a substantial share of the upside. If they have no downside, why should they get considerable upside?

Of course, it all depends on the projections used to create the pegged cap. If they’re conservative, and revenue is very likely to be greater, then the players do deserve a share. If the projections are aggressive, then the players should be happy they have stable salaries with no downside and forget about trying to get a piece of the additional revenue.

Florio continues…

As of right now, the two sides are $10 million apart per team on the the “pegged cap” approach, which is driven by projected revenues. The owners have offered $141 million per team in salary and benefits, and the players have requested $151 million. If they can bridge the gap and devise a procedure for handling any excess growth, they should be able to do a deal fairly quickly.

Well, that’s awfully optimistic given the current status of the negotiations, which are at a standstill. The two sides need to get talking again, but that is unlikely since they’re waiting on the courts to decide the fate of the lockout.

Tick-tock, people! (Don’t they know I have fantasy football rankings to put together?)

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