As a concept, the NFL salary cap is a fairly easy one to understand. Unlike the NBA, with its myriad of loopholes, exceptions, and fine print that allow teams like the Lakers and, well, almost everyone else to zoom past the artificial "cap", the NFL is a simple hard cap. What you spend is what what you spend and you have to stay below the ceiling with one important exception -- signing bonuses can be spread out over the life of a contract.
So when a player gets a $10 million signing bonus on a five year deal, it counts $2 million against the cap each of the next five years. Now, the kicker (in the balls) is that when that player is traded or cut during a contract, all of that prorated bonus money in future years gets accelerated into the present year's spending total.
Hence, the concept of "dead money."
When a team decides it's time to call it a day on a certain player (whether it's by trading him or releasing him), they accept the fact that money spent on signing bonuses in previous years will come back to roost on the present year's cap, a necessary cost of doing business in the NFL.
So when the Texans cut Kevin Walter this past week, sure, they are free and clear of having to pay his $3.5 million base salary for the 2013 season (and any salary in seasons after that they had committed to), but they now must accept the remaining prorated portion ($2 million, to be exact) of the signing bonus they gave him with his new deal a couple years ago into the 2013 cap.
So, yes, the Texans won't pay Kevin Walter any real dollars in 2013 to play football, but they will be counting two million of the dollars they've paid him previously on this year's cap. That money, cap wise, is "dead money," cap dollars that are allocated to the ghost of a player from years gone by.
Now, do you want a decent gauge on which NFL teams are doing a good job of evaluating talent and allocating dollars to players who are a long-term fit? Look at which teams have the least amount of "dead money" against the current year's cap, and you'll find some of the answers.
How do teams stack up (so far) heading into 2013? Funny you should ask, I have those numbers right here! From the teams spending the most "dead money" in 2013 to the least: 1. OAKLAND: $26,601,452 Richard Seymour represents half of that number at $13,714,000, and the recently released Darrius Heyward-Bey is a healthy chunk at $5,260,000. If you're wondering why the Raiders are in the state they're in, consider they drafted Heyward-Bey with their 2009 first round pick and they traded their 2011 first round pick for Seymour. (Also, that little thing about drafting JaMarcus Russell first overall in 2007. That, too.)
2. JACKSONVILLE: $24,012,892 The Jags "dead money" ledger reads like a "Who's who" in shitty Jaguar business decisions: wide receiver Laurent Robinson (cut after one season, $9,000,000 hit), safety Dawan Landry (cut after two sesaons $3,900,000 hit), linebacker Clint Session (cut after two seasons $3,600,000 hit), Mike Thomas (traded to Detroit one season into a long term extension, $3,600,000 hit). There's a reason they're so terrible. Actually, there are a thousand reasons, this just happens to be one of them.
3. KANSAS CITY: $13,326,323 Two biggest "dead money" hits here are quarterback Matt Cassel ($3,950,000) and tackle Eric Winston ($3,000,000), who were both at the center of the whole "cheering for Cassel getting hurt" controversy. I guess they don't have to worry about that anymore.
4. ARIZONA: $12,410,450 Quarterback Kevin Kolb represents about half of this number at $6,000,000 in "dead money." Moving along...
5. ATLANTA: $11,513,432 Ray Edwards was released in November due to a poor attitude. At a "dead money" hit of $4,650,000, he must have been a total fucking asshole. The great purge of March 2013 hits their cap this fall, too, in cornerback Dunta Robinson ($3,000,000), running back Michael Turner ($2,000,000), and defensive end John Abraham ($1,500,000).
6. ST. LOUIS: $10,312,806 Tackle Jason Smith $4,022,000 is the big hit here, although props to safety Quentin Mikell for counting as two separate "dead money" hits of $4,000,000 and $2,000,000. Nice!
7. BUFFALO: $9,500,035 Another desperation quarterback signing gone awry (Ryan Fitzpatrick, $3,333,333).
8. CAROLINA: $9,754,796 9. BALTIMORE: $8,136,837 Retirement "dead money" hits are painful and no one knows this better than Ravens GM Ozzie Newsome (linebacker Ray Lewis $2,950,000, center Matt Birk $1,400,000). Also, Billy Cundiff's missed field goal against New England in the AFC title game two seasons ago continues to cost, "dead money" value of $1,800,000.
10. DETROIT: $7,567,505 11. DENVER: $7,335,301 Over half of this number is courtesy of the Elvis Dumervil Fiasco ($4,869,000).
12. CLEVELAND: $7,262,779 13. NEW YORK JETS: $7,130,453 14. NEW YORK GIANTS: $6,771,306 15. NEW ENGLAND: $6,637,523 The quest to find a downfield threat post-Randy Moss continues to cost New England in "dead money" in 2013 (Brandon Lloyd for $2,000,000, and Chad Ochocinco for $1,583,333).
16. DALLAS: $5,986,584 17. PHILADELPHIA: $5,906,313 Nnamdi Asomugha for $4,000,000, Jason Babin for $900,000. Dream team.
18. INDIANAPOLIS: $5,657,004 19. PITTSBURGH: $5,532,445 Most of this is attributed to the release of James Harrison ($4,930,000).
20. TENNESSEE: $4,398,793 21. WASHINGTON: $3,375,750 22. MIAMI: $3,289,282 23. CHICAGO: $2,325,099 24. MINNESOTA: $2,189,826 Half of that number comes from the trade of wide receiver Percy Harvin ($905,000).
25. HOUSTON: $2,130,742 Nearly all of this money is from releasing Kevin Walter ($2,000,000).
26. CINCINNATI: $1,697,186 27. TAMPA BAY: $1,343,534 28. NEW ORLEANS: $1,170,190 29. SEATTLE: $1,057,668 30. SAN DIEGO: $1,019,422 31. SAN FRANCISCO: $957,674 32. GREEN BAY: $121,297
CONCLUSION: Sure, there are exceptions and surprises along the way, but no big surprise that the two most egregious victims of "dead money" and their own poor decision making are the 2-14 Jaguars and the 4-12 Raiders, while the two most efficient teams in managing the cap and avoiding "dead money" are the defending NFC champion 49ers and the Packers (36-12 and a Super Bowl title in the last three years).
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