Managing The Salary Cap

July 18, 2012 | Daniel Radov

Navigating the rules and limits of the salary cap can often be difficult. Yet, Ozzie Newsome and the Ravens’ front office continue to defy common logic; the organization manages the salary cap as effectively as any other franchise in the NFL, and Ray Rice’s contract is just another indication.

The Ravens signed the two-time Pro Bowl running back to a 5-year contract worth $40 million, avoiding the restrictive franchise tag in 2012. Rice received $22 million guaranteed, including a $15 million signing bonus this year and a $7 million roster bonus next year.

Rice’s base salary in 2012 is $2 million, meaning he will earn $17 million this season. His signing bonus, however, is pro-rated over the length of his contract, which amounts to $3 million per year. Rice, then, will count $5 million against the salary cap this season; he would have earned approximately $7.75 million with the franchise tag. The Ravens, as a result, save nearly $2.75 million.

Technically, the contract is worth $35 million. Rice can qualify for a $5 million incentive in any of the contract’s first three years. To do so, he must accumulate a certain number of yards (rushing and/or receiving), and the Ravens must finish in the top 10 in total offense.

While Rice will receive approximately $25 million in the first two years under his new contract, his salary cap number increases from just $5 million in 2012 to $7.75 million in 2016.

Clearly, Rice’s deal provides significant salary cap relief to the Ravens in 2012. Now, the organization can aggressively pursue long-term deals with Joe Flacco and Ed Reed; both players will be free agents after the season. Moreover, the Ravens’ decision to delay the biggest salary cap hits until the final years of Rice’s contract reflects the changing NFL landscape. Consider that the salary cap number is $120.6 million this season, but the number should climb slightly for 2013. In the future, as revenues from new television deals factor into the salary cap, that number is expected to increase significantly.

The Bears’ approach with Matt Forte was different. They didn’t have the same short-term salary cap problems as the Ravens. Moreover, most of their big-time players, such as Jay Cutler, Julius Peppers, and Brandon Marshall, become free agents in a few seasons.

Forte is somewhat similar to Rice. Both running backs were second round picks in 2008 and received the franchise tag from their respective franchises. Rice and Forte also were among the league-leaders at running back for rushing and receiving yards.

Chicago gave Forte a 4-year contract worth $32 million. He received $18 million guaranteed and has $4 million in incentives. Now, Forte’s 2012 salary cap number is $6.8 million, about $1 million less than it would have been otherwise.

Forte’s salary cap number is considerably higher than Rice’s in 2012 and 2013; however, Forte’s salary cap figure is nearly $2 million less than Rice’s in 2014. The salary cap numbers for both running backs are almost identical in 2015.

In addition, Forte is more injury-prone. He missed four games in 2011 with knee issues. Forte’s injury history probably led the Bears to limit the length of the contract to only four seasons.

The injury risk is also legitimate for Rice. He is such an integral part of the Ravens’ offense, and with the new contract, the organization also addresses key needs: immediate salary cap relief and more money to spend for impending free agents. Once again, Ozzie Newsome and the front office have made the right decision.