NBA Minimum Salary Floor

On our podcast over the weekend the topic of the salary floor came up. I nonchalantly asked the panel if anyone knew what the penalty for not meeting said floor was since I had no clue. LT confidently said, “they just pay the excess into a fund that goes to the league office.” which seemed kind of sensible enough and so I left it at that.

The way my brain works has always been funny, even to me. I generally don’t stop and think about something, it’s more like a kitchen with 8 or 9 dishes in various stages of completion. Throughout the day my mind drifted back to LT’s answer, mainly because the more I thought about it the more it felt out of line with Adam Silver’s campaign to even out competitive balance. The penalties for over-spending felt extremely harsh when compared to “and if you don’t spend enough, just send us a check and we’ll throw ourselves a pizza party!”

So today on my lunch break I did my own research and found that the answer provided to me was incorrect. The penalties for not meeting the NBA minimum salary floor are almost as extreme as pushing past the second apron. I don’t post this just to zing LT, that’s a semi-amusing side effect, at best. I post this because it affects a lot of what could happen in the next month or so. SO here it is, at long last, the not asked for at all rules on the NBA Minimum Salary Floor!!!!!

-Beginning in 2024/25, a team whose salary is below the minimum floor at the start of the regular season won’t receive a share of the end-of-season luxury tax payouts. (last season it was just 50%, this is important because small market owners absolutely rely on this windfall to turn a profit)

-A team whose salary is below the minimum floor at the start of the season will have a cap hold added to its salary in order to reach the minimum floor. For instance, a team with a $117,418,000 salary on opening night in 2023/24 would have a $5MM cap hold added to its salary to reach the $122,418,000 floor and would be unable to immediately access that $5MM of cap room. (For Utah that would be a whopping $21, 983, 000+ million dollar cap hold!)

-A team that begins the season below the floor cannot reduce the shortfall amount it will owe at the end of the season by spending on player salaries during the season. For example, a team that starts the season $5MM below the floor would owe no less than $5MM at the end of the season. The shortfall amount that club owes could increase if its team salary dips further than $5MM below the floor by the end of the season.

So not only would Utah owe nearly $22 mil in league payments they would be denied any payments from the luxury tax pool in addition to having a cap hold imposed on them throughout the season making it more difficult to swing a massive trade or sign someone who is waived. That is nothing to sneeze at folks. Especially for a small market team like the Jazz who aren’t selling out the arena, aren’t the benefactors of a mega local cable market and are one of the more fiscally responsible teams out there.

Now it is possible they could take a one-season hit. After all, Ryan Smith’s net worth is 2.2 billion. It’s just hard for me to see a guy who knows how money works simply throw money away or sacrifice his GM’s team building flexibility.

All of this is to say I expect the Jazz to be involved in some kind of deal where they absorb salary for the cost of a couple picks, maybe even a 1st rounder or 2 . The are plenty of (Zach LaVine) contracts out there that a team would be happy (Zach LaVine) to move (Zach) for a draft pick without taking back more than one (LaVine) player (Zach LaVine). Maybe Zach LaVine…? They can send out my man Jordan Clarkson and balance out the roster and sign some decent talent from the Olympics. It’d be great to see Wenyan get back into the NBA or something like that.