Second Apron Blues: How the NBA’s CBA is reshaping team dynamics

The Collective Bargaining Agreement (CBA) sets out the terms and conditions, and respective rights and obligations of NBA teams, players, and the league. On average, a new CBA is negotiated every 5 to 7 years – with the latest taking effect in July 2023 and extending to the end of the 2029-30 season. The CBA defines everything from how income is distributed between the teams and players, to how player contracts are structured, pension benefits, fines and penalties, trade rules, and much more.

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In addition to being a legal document, the CBA also has important strategic commercial functions. The NBA wants to set rules that make the league interesting for viewers and commercial partners, ultimately driving revenue growth. A major component of this, and the area which fans often hear the most about, is with regards to the salary cap because it directly influences team-building. A short way to understand the salary cap is that ultimately, the NBA generates a certain amount of profit which gets distributed between the players and the teams. In theory, this imposes a cap on spending for player salaries. In practice, the NBA has a soft cap. There are various ways of going over the cap – most notably via exceptions (such as the mid-level, bi-annual exceptions) to bring on new players and by provisions that allow for retaining existing players. The previous iteration of the salary cap imposed penalties mainly in the form of additional tax payments. For each dollar over the cap, teams would be required to pay an additional tax – and the penalty became bigger the more you went over the cap. The Warriors lead this metric with a total of $678 million in tax payments in addition to player salaries, over the past handful of seasons. This tax spending was perceived as unfair by NBA teams with owners who are simply less willing (which often correlates with net worth) to spend hundreds of millions of dollars in extra payments annually. Steve Ballmer is worth $130 billion while some NBA owners at this point with team valuations being in the billions have a majority of their wealth tied up in their team. The NBA’s owner class is perceived as all being billionaires, but for practical purposes, there’s a vast difference in how much they can actually spend on their team.

The dreaded second apron

This is where the new CBA comes in to level the playing field and cut down on outrageous spending, which is a competitive advantage. In addition to monetary punishment, teams that now overspend are faced with a long list of consequences that leave a team without any possibility of trading for players, signing anyone not on a minimum contract, and even hampering their long-term future by freezing draft picks. The list of “not allowed” includes: acquiring a player by sign-and-trade, sending a player out via sign-and-trade, using trade exceptions, taking back more money in a trade, sending out cash considerations, and many other restrictions. In short, this is virtually every mechanism teams use today to construct trades when over the cap. Most of these restrictions come into play at the second apron , which is set at $190 million or $50 million above the salary cap, and 2024 free agency has proven that the new restrictions have real teeth.

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The Clippers decided not to offer Paul George his maximum potential extension despite having no conceivable path of replacing him in the pipeline. Klay Thompson is now in a Mavericks uniform at least partially driven by Golden State’s perceived stinginess in his contract extension discussions. The Nuggets won a championship with Kentavious Caldwell-Pope and under every other CBA would have probably retained their entire starting group but decided to lose him for nothing instead. Now this doesn’t mean teams can’t go over the second apron – they just can’t do anything above it so they better be sure what they have is good enough to win. The Celtics are in this category but it’s unclear if any other team is. For example, of the teams with title aspirations and likely above the second apron line the Timberwolves can hope for Anthony Edwards to become an MVP-caliber player. At the same time, the Suns seem to be in a tough spot with their cap tied up in Kevin Durant , Devin Booker , and Bradley Beal – and no flexibility around them.

Who is the NBA trying to punish?

The second apron restrictions are working but have also ruffled some feathers among fans on whether or not it’s producing results that are strictly beneficial to the league. The first trouble is that not being able to retain core players who have been part of successful runs – as is the case with Caldwell-Pope and Thompson – is not fun for longtime fans of teams. Successful teams are expensive to maintain and deeper into those runs the players tend to get worse as they age while still commanding a large salary due to their previous triumphs. The second problem is that teams that draft well will struggle to keep their talent – and perhaps more importantly, will have to make really tough decisions on who they will keep for the long term. Take the Thunder as an example. They have (at least) three players who are your typical max extension type of candidates: Shai Gilgeous-Alexander (already on a second contract), Jalen Williams , and Chet Holmgren (both with two seasons before their extensions). Max contracts in the NBA range from 25 percent to 35 percent, so if you have three that’s the entire cap spent. Part of the reason for dealing Josh Giddey (in a good swap for the Thunder) might have been simply not wanting to deal with the next contract – knowing paying Giddey a larger contract was not feasible. Better to move on now. Traditionally, continuity and smart team-building are exactly the traits you’d like to reward, and punishing teams for doing a good job on those fronts feels unfair. Is it wrong that the Thunder will be forced to move on from much of their young pieces because they are difficult to keep? An interesting question is how NBA teams will approach this problem of retaining their players. For older players, it may be difficult and there’s nothing to do except hope they agree to play for you for a pay cut. Jalen Brunson took an over $100 million pay cut on his next contract and that gives the Knicks a massive advantage in team building. By definition, the large contracts are the ones where it’s possible to save most because max players giving up a small percentage of their contract may mean adding a starter-level player on the roster. NBA contracts may have gotten so large that players are willing to sacrifice dollars more than in the past.

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When teams are negotiating with their young players, in theory, they have more leverage on extension contracts. A second contract in the hundreds of millions sets a person up for (an extremely well-off) life. It will be interesting to see if teams push for small discounts much harder than before because every cent matters for these larger contracts. If you are a player who is close to a max-type contract but still has a lot to prove, you may be willing to give up dollars to guarantee a big payday as early as possible. This theory hasn’t worked out in practice at all during the 2024 free agency, as the Magic immediately maxed out Franz Wagner and the Raptors did the same for Scottie Barnes . But those are the types of contracts that tie you into mediocrity unless their young players become Top 10 quality.

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