NBA Players Give Back 9 Percent of Pay
The NBA's agreement with the union includes a league-wide cap on salaries and benefits paid to players. Only 57 percent of the league's "basketball-related income" (BRI) can be paid in player salary and benefits each season. Instead of the league billing players for any overages at the end of the season, an escrow system is in place to collect 9 percent of every player's salary right off the top.
If a player has a $5 million, for example, the team pays him $4.55 million and sends $450,000 (9 percent of $5 million) to the league to be held in escrow.
At the end of the season, when the league's basketball-related income is finalized (as happened Tuesday), NBA officials calculate the maximum amount of salaries allowed -- or 57 percent of BRI. Most seasons, total salaries and benefits exceed the cap. That "overage" is taken from the escrow funds and refunded to each team. NBA spokesman Tim Frank confirmed Wednesday that the overage funds are distributed equally among all 30 NBA teams. (It had been previously reported that the league has the ability to set aside some of these funds for NBA projects or special team assistance, but Frank said that is not the case with regard to escrow funds.)
Player salaries and benefits did exceed the 57 percent threshold last year, according to calculations by cap expert Larry Coon. In fact, salaries and benefits went so far over the threshold that for the first time this decade players will not get a cent of their escrow funds back. In recent years, players had received a nominal amount (about 10 percent of what the league collected, or about 1 percent of their total salary). But this season, there will be no payback.
Effectively, players made 9 percent less than you think. So Amar'e Stoudemire, for example, on the books for $15 million last year, only received $13.65 million from the Suns. That other $1.35 million is a part of the $191 million the league will now redistribute equally to teams, to the tune of $6.3 million per franchise.
Players will continue to lose the entirety of their escrow funds for the foreseeable future, as salaries are expected to rise while BRI falls. It will be interesting to see if the league attempts to negotiate an increase in the percentage withheld (even with the escrow system in place, salaries went $39 million over the 57 percent threshold last year) as well as the already-rumored plan to shrink the percentage of BRI guaranteed to player salaries.