When the league and its players reached an agreement on a new CBA in December of 2011, simplicity was not one of their biggest priorities. After all, the lockout was an exceedingly complex conflict and any solution to such a conflict was bound to be convoluted and difficult to understand. With so many pages of dense material in the CBA, teams sometimes even struggle to fully comprehend it. If the people being paid to make the decisions don't get it, how can fans be expected to do so?
Today, we attempt to clear up one of the difficult concepts of the CBA, the veteran's minimum. Throughout the season, whenever I get a particularly thought provoking email that merits more than a couple of sentences of explanation, I will try to explain it more fully on the site. Today's question is from Jason Song, from South Korea:
When I read about Marcus Camby's contract online, sometimes I see his salary being about $800,000 while other times it's reported to be over a million. I know that it has something to do with the veteran's minimum, but what exactly does that mean? If they bring him back, does he cost them double the salary (his old salary plus his new salary)?
First, let's talk about the issue of the veteran's minimum. Camby, in his contract with the Rockets, is set to earn about $1.4 million in guaranteed money, but the Rockets are not responsible for all of that. The reason for this difference in payment is that for all players with more than two years of service, the league furnishes the difference between the player's actual salary and the minimum salary of a player with two years of service.
This rule was instituted in order to stop teams from opting to sign younger players in order to save money. Without that rule, a team over the luxury tax line might opt to sign a younger player like Tyler Honeycutt over a veteran like Rasual Butler and save some $500,000 plus the tax savings. Instead, the league pays the difference of the two minimum salaries and the teams pay the two year minimum.
In the NFL, no such rule exists, and we saw this offseason as multiple aging players were squeezed out of the league as teams went after younger players to maintain cap flexibility. A ten year player on the league minimum earns $535,000 more than rookies in the NFL, and with a hard cap to get under, weaker veteran players saw themselves on the wrong side of a number of negotiations.
In the Rockets' case, the team will pay $884,000 to Camby and Camby will receive another $516,000 from the league in his compensation package. For the purposes of calculating the Rockets salary cap figures, only the two year minimum will be included. And therein lies the confusion. Even though Camby will earn $1.4 million total this year, the Rockets are only responsible for a portion of that.
On to the second question, if the Rockets were to re-sign Camby to another deal later in the season, how much of his contract would they be responsible for? Assuming they signed him to a deal that is worth a prorated portion of the veteran's minimum, they would be responsible for essentially a prorated portion of the two year minimum.
In the NBA, when a player is waived and signs another contract while his first contract is still running, the first team is allowed to deduct a "set-off" from the amount owed to that player. That set-off is equal to half the difference between the new salary and the one year minimum. In the case of Marcus Camby, that set-off would be equal to about a prorated portion of $45,000, or half of the difference between the two year and the one year minimum contracts. So, if the Rockets were to sign Camby to another minimum deal, they likely would not be responsible for the prorated portion of $884,000 again but rather a fraction less than that.
However, it's not even so cut-and-dry on that front. Larry Coon noted to me in an email correspondence that it's not even clear whether they retained set-off rights. In the scheme of things, however, it doesn't really matter. If the Rockets sign Camby to another minimum contract, they will essentially be paying him a prorated portion of $884,000, with a chance for a minute set-off from his previous deal.
If you have any more questions about the Rockets, the salary cap, or anything NBA-related at all, feel free to email me at email@example.com or BD34 at firstname.lastname@example.org.