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Understanding the NBA's New Second Apron - Is it Fair, Who Does it Help, Hurt, and How to Work its Angles

Jul 20, 2024

11 min read

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The newest adjustment to the ever-changing world of the NBA's financials could have great consequences among the league's biggest spenders, the implementation of a second apron, a threshold above the salary cap that will include additional penalties for anyone that dares go over it.


To give some background context for what we're about to discuss, let's talk a bit about where the NBA salary cap already stood, and how we got to where we are today. In 2001, the league introduced a luxury tax, requiring teams whose spending went over the league-wide salary cap to made an additional tax. Teams initially would have to pay the league the exact equivalent they went over the cap, dollar by dollar, up until the 2013-14 season where it became an incremental rate based on the total team salary. That luxury tax has remained ever since and generally been effective in straying non-contenders away from eating the additional cost, but the league took it a step further in 2011 by establishing the "first apron", another set of restrictions for teams that went particularly over the cap, 126.7% over to be exact when you apply a certain formula adjusted to the salary cap of that specific year. That formula is calculated by dividing the average of this season and the previous season's salary cap by the last season's salary cap, multiplying that number by the difference between the luxury tax line (the exact amount you can spend before going over), and then adding that to that season's luxury tax line. But don't worry about that part, it's not for you to calculate. And with the new apron came a new set of punishments, banning them from signing bought-out players that were making more than the non-taxpayer mid-level exception, which will be about $12.8M next season, preventing teams from trades with salaries differing more than 110% - a team not over the apron can have up to a 125% difference in the salaries being swapped - and not allowing them to acquire a player via sign-and-trade if it keeps them above the apron. They also won't be able to use trade exceptions that had been established in the previous year, which essentially allows teams that trade players and get nothing back in salary to then be able to spend the player's ensuing year in salary without it going against the cap or luxury tax. These added penalties are designed to prevent even more excessive spending than just going over the luxury tax, with some of the wealthier or even more confident owners willing to bite the tax for a chance at competing, as this first apron went beyond having to pay more money and aimed to hurt teams more from a basketball standpoint. While still impactful, these penalties weren't nearly stiff enough to scare a number of teams from exceeding that first apron, as 12 teams went over the limit and were penalized accordingly.


After more than a decade content experimenting with the first apron, the CBA took it a big step further this offseason, bringing about a second apron with far stiffer repercussions for teams that go over the line. As stated earlier, last season had 12 teams over the first apron. The season prior 9 teams went over, 7 the year before, and only 3 the year before that. It was becoming an ongoing trend of teams more willing to bite the bullet and reach over that apron, to the point where almost half the league was doing it this past season. And on top of that, more teams are going way beyond those limits than ever before, not stopping past that first apron and touching down on where this new second apron would land. In controversial fashion, the league is intervening. This second apron is being added for this next season, a threshold that will be about 134.4% of the salary cap with harsher and more extensive penalties. Everything that applies for the first apron carries over, as well as the following:

  • Can't use mid-level exception

  • Can't trade multiple players in same deal

  • Can't sign-and-trade their own player to acquire another

  • Can't send cash through trade

  • First-round pick in seven years can't be used in trades unless/until team avoids second apron in at least three of next four years

    • If they don't, pick remains frozen and becomes last pick in first round seven years later

So yeah, the NBA wasn't playing around with this one, easily the stiffest penalties we've ever seen in the salary cap era and a potential game-changer in the way teams approach their finances. Of the 12 teams that went over the first apron last season there were 5 - the Celtics, Nuggets, Bucks, Warriors, and Suns - that would've gone over the second apron had it been in effect and 6 that will be next season - those five and the Timberwolves. It's no coincidence the teams in this group are some of the most serious about contending, as teams like the Celtics and Suns had made it clear they'd spend the money it takes to win while other teams like Golden State have been content paying the luxury tax and beyond for years now if it helped generate success. And truthfully, it's not until now that the consequences for overspending were steep enough that a team on the verge of contending might lay back on some additional spending. Going through these penalties, they are sure to make it quite unfeasible for teams in that second apron to add much through free agency or trading, preventing them from the mid-level exception that contenders often utilize and also stopping them from combining salaries to match another or throwing cash into a deal to help match it up that way. And that's to go with already having to match exact salaries in any sort of trade. In essence, these restrictions make it highly difficult for any team in this threshold to improve their roster any further. But for teams perfectly content with their roster as it stands that may not seem much issue in these initial restrictions, it's the final rule that could still deliver the biggest blow. At first glance, a draft pick seven years in advance probably seems too far away to be worth losing sleep over, but we've seen too many examples of teams taking that approach and seeing it backfire in front of them. And in the case of so many of the teams that would be at risk of falling into this category, they've already sacrificed a lot of their future picks to assemble a team good, and expensive enough, to meet this threshold. So having another draft pick guaranteed to be at the end of the round seven years later, where that current title window is likely gone, becomes another tough obstacle lingering in their future. Now that we know what we're dealing with, let's look into what ignited this change, the ways teams can maneuver through these restrictions, and whether or not it is worth the risk.


This decision has not come without justifiable backlash, with many believing this move simply wasn't necessary given the state of the NBA and where it was headed. It's a move designed to even the playing field, making it less desirable for the more wealthier owners in the league to blow past the salary cap and not think twice, which was subsequently giving them better players and a greater advantage in finding success. While this can't be denied, at the same time, basketball from a parity standpoint is actually in a really good place. We have had six straight championships won by a different team, and a team hasn't even reached let alone won a title in back-to-back years since the Warriors in 2019. All of this existed with only the first apron, as even the teams more willing to run through the luxury tax and first apron were by no means ensured success. In fact, it runs a serious risk of hindering a franchise greatly, and there might not be a better example of it than the Suns, who went all in spending on a championship roster, but they're now left with a group that isn't quite there while enduring all the penalties that come with it and a catastrophic loss of draft picks. The Suns are one of the five teams expected to be in the second apron next season, and there's not many teams in a worse spot right now than them, a statement that would've held true had this second apron never been added. This all makes a pretty decent argument this move didn't need to happen, as teams had already been assuming a ton of risk not always worth it when they spend so aggressively, not to mention the NBA's parity is as good as it's been in years even with a trend towards greater spending. It's clear what the NBA is attempting to accomplish, but is too much intervention a bad thing? It sure might be.


Like anything else, teams will be searching for any loophole they can find to maneuver around these latest restrictions as effectively as they can. There will still be teams rather unphased by a second apron and still willing to go over it for a shot at competing, while some will be more mindful of at least avoiding the first-round pick penalty they'd face down the line. The easiest way to do so is probably going over that apron one year, avoiding it the next three, and then getting back to it four years later and so on. But with this logic, teams will only have two seasons over the span of a decade to maximize their spending, being forced to cut down during those other years and almost certainly lose talent as a result. Teams will have to be more careful in constructing specific windows, potentially of only one year, where they'll be able to fully maximize their assets and spend as freely as they want. If they want to avoid the fate of that future draft pick and all the other consequences that come with it, that roster won't be able to stay intact for future seasons. For a team like, say, the Celtics, what does it look like for them? It's no secret how much they're paying their top five guys, but this becomes a lot less feasible when you add in the penalties of the second apron. Now the Celtics are fortunate to have a young enough core, one that in four years time would likely still be able to contend, but for an older team that still feels like they've got a smaller championship window, is it worth it to go all in on a core that you won't be able to alter much AND have a future draft pick hurt as a result. With these new second apron rules, a team in it won't be able to get much better than what they've already got unless they hit it big in the draft, obviously unlikely for a team competing that would be picking late. It would leave them stuck into what could be the later years of their key players where their contracts are still massive but the production isn't there to justify it. There are going to be a lot of teams faced with that reality, and another set of clubs that could be turned away from moves they would've previously made to at least have a shot at competing for a title.


It's always fun seeing teams build a legitimate core from the ground up, drafting well and seeing them grow alongside one another over the years, but the NBA might have unintentionally made that a lot more unlikely with this new second apron. Now faced with harsher penalties for spending big, teams with a strong young core is going to have some difficult decisions to make when it comes time to pay up on that second contract. Take the Thunder, for example, a team already possessing a max layer in Shai Gilgeous-Alexander with two more stars on rookie contracts in Jalen Williams and Chet Holmgrem. It's an exciting, promising young core established rather legitimately through drafting and trading for the future. Without a second apron it would be a no-brainer to extend everybody, but now it's a lot more of a risk, and one teams will have to be extra careful taking with a core not quite there. And even though the Celtics are young enough, does there come a time where they don't find the Jayson Tatum-Jaylen Brown duo is worth the penalties? It makes the chances of a championship-esque core sticking together a lot more unfeasible, and could mark the end of the dynasty as we know it.


All things considered, it's not going to be easy to keep a core of stars around for the long-haul without some serious sacrifice. Just because a player is a superstar doesn't mean he has to be paid quite like it. Tom Brady was constantly taking pay cuts to open the door for more talent around him, and that helped New England surround him with stars and find so much success. Superstars in the NBA might have to go above and beyond in their sacrifice to navigate the numbers. In order for these cores to survive multiple new contracts and exist over many years while avoiding stiff penalties, pay cuts will need to be in order. Jalen Brunson just took a historically large pay cut to offer his team more flexibility, a move that will undoubtedly help this Knicks roster full of big-money names stick together. It's going to take a lot of that if teams want to make it work going forward.


What this is also going to do is spark even more moving around among stars in this league. Teams may not would shy away from extending a guy on a rookie contract they feel is either already a star or is on their way to being one, but it may be less of a given that in a number of years a Franz Wagner type player is getting a max a year in advance. For teams being led by players on rookie contracts, however, it'd already be unlikely that they'd be in danger of hitting the second apron, unless of course the rarer cases like Oklahoma City, so teams will still likely be fine pulling the trigger on a move like that. But later down the line, if the team results haven't been there, it's harder to convince yourself running it back with a now older player would be worth the penalties that may come with it. We've already seen examples just this year, with the Clippers moving on from Paul George with their unwillingness to enter that second apron and move forward with that core and being stripped of the means necessary to build on that roster. And that's a Clippers team that never feels far off from contending that didn't feel comfortable going into that second apron, so you're never really going to see a team do it without enough superstar talent to completely justify it. There might be three guys on a roster that could earn a max contract somewhere, but that no longer means the team they're on is going to be the ones handing them out. It's good news for the owners that been less equipped to absorb massive luxury tax payments, as with more player movement and bigger markets/owners less prone to stacking up on star talent, we could see a greater mix of starpower around the league than ever before. Not every star is going to be like Jalen Brunson - if they're not getting the max, they're going to be out of there, and teams will without question be more hesitant to go all-in on a fringe max guy. We mentioned Phoenix before, but let's go a little deeper in just how bad a spot they're in, and how it is only getting worse. The roster, which they exhausted all their draft capital to get isn't where it needs to be but is being paid like it, yet these rules are completely paralyzing them with what they've got. They won't be able to use the mid-level exception, will have added difficult shedding any contracts they can, and on top of that are in danger of losing one of the only decently valuable draft picks they've got left. They're the sacrificial lamb in all of this, all while possessing two top-10 caliber players and what was called a "superteam" about a year ago.


It's the most aggressive experiment with cutting down on major spending that the league has ever gone through with, a decision made with parity in mind and putting the risk of major spending to the test. Teams and players are going to have to alter their approach to make long-term winning more realistic, and teams are going to pay the price more than ever on star talent that doesn't pay off.

Jul 20, 2024

11 min read

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