The NBA had a salary cap in the mid-1940s, but it was abolished after only one season. The League continued toplay without such a cap until 1984-85, when the current incarnation of the salary cap was instituted in an attemptto level the playing field among all of the NBA's teams and ensure competitive balance for the League in thefuture. Before the cap was reinstated, teams could spend whatever amount of money they wanted on players, butin the first season under the new cap, they were each limited to $3.6 million in total payroll.
Soft vs. Hard Caps
Unlike the NFL and NHL, the NBA features a so-called soft cap, meaning that there are several significantexceptions that allow teams to exceed the salary cap to sign players. This is done to allow teams to keep theirown players, which, in theory, fosters fan support in each individual city. By contrast, the NFL and NHL capsare considered hard, meaning that they offer relatively few (if any) circumstances under which teams can exceedthe salary cap.
Collective Bargaining Agreement
The Collective Bargaining Agreement, or CBA, is the contract between the NBA (the commissioner and the 30team owners) and the NBA Players Association that dictates the rules of player contracts, trades, revenuedistribution, the NBA Draft, and the salary cap, among other things. In June 2005, the NBA's 1999 CBA expired,meaning the League and the players' union had to negotiate a new agreement; in light of the fiasco that was the2004–05 NHL lockout, the two sides quickly came to an agreement, and ratified a new CBA in July 2005. Thenew agreement will expire following the 2010-11 season, but the League has the option to extend it through the2011-12 season if they wish. If so, the League must exercise its option to extend the agreement by December 15,2010.Little changed in terms of the salary cap between the 1999 and 2005 versions of the CBA. In exchange foragreeing to the controversial player age minimum, the players will receive a slightly higher percentage of theLeague's revenues over the course of the new agreement. Additionally, the League's maximum salary decreasedslightly in comparison to the 1999 CBA.
Maximum Individual Contracts under the CBA
The maximum amount of money a player can sign for is contingent on the number of years that player has playedand the total of the salary cap. The maximum salary of a player with 6 or fewer years of experience is$9,000,000 or 25% of the total salary cap (2008-2009: $13,758,000). For a player with 7-9 years of experience,the maximum is $11,000,000 or 30% of the cap (2008-2009: $16,509,600), and for a player with 10+ years of experience, the maximum is $14,000,000 or 35% of the cap (2008-2009: $19,261,200).
Because the NBA's salary cap is a soft one, the CBA allows for several important scenarios in which a team cansign players even if their payroll exceeds the cap. The exceptions are as follows:
A team is allowed to sign one player to a contract equal to the average NBA salary, even if the team is over thesalary cap already, or if the signing would put them over the cap. This is known as the Mid-level exception
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