As in most professional sports, the National Football League (“NFL”) restricts the amount of money its teams can give to their players. Each NFL team is confined to a salary cap which limits the amount that they can spend on their roster and no team can exceed their salary cap under any circumstances. As a result, all NFL teams should be spending close to the same amount on their squad. However, the Cleveland Browns have found a way to spend substantially more than the rest of the NFL while simultaneously having the most available cap space.
Despite being restricted by the NFL’s salary cap, which is currently $224.8 million, the Browns have spent $80 million more in player contracts than any other team since 2021.[2] Additionally, the Browns led the NFL in available cap space during the 2022 season and, after spending a league-leading $285 million in 2023, still have the second most cap space available for this 2023 season, with $35.8 million still available.[3]
While spending more money should lead to less available cap space, there are a few factors that can explain this phenomenon at the Browns:
(1) Cap Carryover: The NFL permits teams to take their leftover cap space at the end of one season and roll it over into their cap space for the following year.[4]
(2) Cash versus Cap & Prorated Bonuses: There is a difference between spending money and using cap space. To illustrate, when a team gives a player a signing bonus, the cap hit from that bonus gets distributed across the entirety of the player’s contract. In other words, if a team signs a player to a long-term deal with a $20 million signing bonus, not all $20 million will count against the team’s 2023 salary cap.
(3) Contract Restructuring: The Browns are freeing up cap space by restructuring their players’ existing contracts and turning base salaries, which count 100% against the cap in that season, into bonuses. Then, they carry over high amounts of cap space that is saved from these restructured contracts and add the rollover amount to the team’s cap space for the following year.[5]
Cap Carryover
Every NFL team has the same base salary cap, but they do not have the same team salary cap. To calculate the different team salary caps:
Team Salary Cap = Base Salary Cap + Carryover +/- Other Adjustments (such as for performance incentives).[6]
Carryover occurs when a team with remaining cap space at the end of a season carries their remaining cap room to their team salary for the next league year.[7] The NFL’s 2023 Base Salary Cap is $224.8 million. The Browns carried over a league-leading $27.5 million from the prior league year – more than double the amount of any other team.[8]As a result, the Browns currently have the highest 2023 team salary cap at around $252 million.
Prorated Bonuses
The total amount and cap hit of any bonus (signing bonus, roster bonus, option bonus, etc.) is prorated on a straight-line basis over the term of a player’s contract with a maximum proration of five years.[9] Furthermore, a bonus in connection with a contract extension (before the expiration of an existing contract) is prorated over the remaining years of the unexpired contract and the contract’s extension years.[10]
The Browns take advantage of this strategy by restructuring players’ existing contracts with bonuses. The Browns cleared up around $36 million in 2023 cap space when they turned most of quarterback Deshaun Watson’s $46 million 2023 base salary into a signing bonus.[11] By converting about $45 million of salary into a signing bonus, now only $9 million count toward the 2023 cap room, while the remaining $36 million will be divided equally across the following four seasons.
The Browns also freed up an additional $23 million by restructuring the contracts of other high-profile players such as DE Myles Garrett, OG Joel Bitonio, and TE David Njoku in a similar manner.[12] Altogether, the Browns turned a $74 million cap hit in 2023 into a $15 million cap hit by turning $74 million in base salary (which they would have paid these four players anyway) into signing bonuses.
Browns’ Future Outlook
While the Browns’ strategy is allowing them to spend more money right now, they may be hampered in the future by rising “dead cap” numbers. Dead cap refers to money that counts towards a player’s cap hit that they did not receive in that season. For example, Deshaun Watson’s recent contract restructure carries a $36 million dead cap hit ($9 million in the 2024, 2025, 2026, and 2027 seasons). The Browns currently have the NFL’s highest dead cap hit in 2024 because of their contract restructures.[13]
Despite the concerns that dead cap can bring, a dollar today is worth more than a dollar tomorrow. The NFL’s base salary is determined as a percentage of league revenue, and business has been good for the league. The salary cap has risen over 23% since 2021, when the cap decreased due to the pandemic. If the salary cap continues to rise year after year, and the Browns can continue to carryover big amounts of salary cap into future seasons, they should be able to manage the dead cap hits they will encounter in the future. The pandemic, however, proved that there is no guarantee the cap will continue to rise.
Although it is not 100% certain whether the Browns’ model will be sustainable 10 years from now, it is certainly providing the team benefits right now. The Browns already have one of the most talented rosters in the NFL and, with over $34 million in available cap space, they can easily add more talent in the 2023 season and beyond. In addition, the team has more than $30 million in cap space to carry over into 2024 and could even save another $60+ million by (again) restructuring the contracts of Deshaun Watson, Myles Garrett, Joel Bitonio, and David Njoku in the 2024 offseason.[14]
The Cleveland Browns are unique in their approach for now, but do not be surprised if other teams start to follow suit.
References: [2] Jacob Roach, Browns are spending the most cash than any other team by far, Yahoo Sports (27 July 2023) https://sports.yahoo.com/browns-spending-most-cash-other-224415434.html [3] Overthecap.com https://overthecap.com/salary-cap-space [4] Callie Decort, NFL Salary Cap Explained, 33rdTeam.com (8 May 2022) https://www.the33rdteam.com/category/analysis/explaining-nfl-salary-cap/ [5] Camryn Justice, Browns restructure TE David Njoku's contract, expand 2023 cap space to over $37M, news5cleveland.com (22 August 2023) https://www.news5cleveland.com/sports/browns/browns-restructure-te-david-njokus-contract-expand-2023-cap-space-to-over-37m [6] Decort, supra [7] Id. [8] Brandon Little, A Look at the Cleveland Browns Rollover Cap Space From 2022, SI.com (12 January 2023) https://www.si.com/nfl/browns/news/a-look-at-the-cleveland-browns-rollover-cap-space-from-2022 [9] Overthecap.com, supra. [10] Id. [11] https://www.spotrac.com/ [12] Justice, supra. [13] Overthecap.com, supra. [14] https://www.spotrac.com/, supra.