Could the NHL have a Flexible Cap?

In this week’s 31 Thoughts, Elliotte Friedman noted that there was an interesting proposal put forward for dealing with the cap. One team suggested that they adopt a “flex cap”, where unused cap space could be rolled over into the following season.

My initial reaction was that this was a terrible idea, for many reasons. To be fair though, there is something that already exists along these lines in the CBA. That would be the performance bonus cushion, a mechanism which allows teams to spend over the cap using performance bonuses. If a team uses the cushion and goes over the cap, a penalty is applied to their cap space the following season.

If you choose to look at it that way, performance bonuses are a way to “borrow” money from the following season, and this would be the inverse of that. That being said the “flex cap” is still the inverse of a good idea, a bad one.

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What Problems does a Flexible Cap solve?

The current cap system has two main purposes; increase parity and limit player compensation. Is there anything about a flexible cap that improves on the current system? Probably not.

You could make the argument that it would increase parity, because teams that are bad can bank cap space and become competitive again. The problem is that this is a league where teams already go to the extremes of the CBA in order to gain a competitive advantage. The “flex cap” would incentivise teams to accrue cap space over multiple seasons in order to take one big run at a cup.

It might not seem obvious why teams would change their strategy, but consider Tampa Bay’s season last year. They absolutely dominated the regular season but fell flat in playoffs. Under the current system, no problem, they bring back the same team and make some minor adjustments. Under a “flex cap”, the Hurricanes that had just swept them would have had $15m more to spend the following season than the Lighting.

If that were the case, Carolina would have been free to add a player like Panarin in free agency, and still have plenty to spend. In my opinion this would create intermittent super-teams that can only be held together for one or two cup runs, before tanking for a few seasons to gain cap space.

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Very quickly the section that was supposed to be in favour of the “flex cap” has turned negative, so I’m just going to leave it there.

What Problems does it cause?

Where to start.

The league and Players Association just moved mountains to complete a CBA Memorandum of Understanding that stabilizes escrow over the next few seasons. This was a necessity caused by a global pandemic, and it temporarily removes the link between Hockey Related Revenue and the salary cap.

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I’m going to oversimplify things to make a point, but the HRR linkage means that the owners and players each get exactly half of the money earned by playing hockey. There is debate whether the players or owners benefit more from the MoU, but there is no debate on the stability it brings. Owners are happy to know how much they will need to spend, and players are happy to know exactly how much they take home.

Under a “flex cap”, teams could spend far less than the midpoint in one year, and far more than the midpoint in another. The mechanism in place to adjust for this is… escrow. The thing the players just rallied to cap would become more prevalent than ever, brought on by the extreme swings in spending.

The UFA market would quickly be reset by the amount of cap space afforded to rebuilding teams, but the term on contracts would have to be shorter than ever. Essentially cap space becomes twice as lucrative, because it can be doubled up the following season. If a team has $5m in cap space, do they sign a $5m player or wait a year and add a superstar for $10m? If the floor is $20m less than the ceiling, why not cut spending for a year and add $40m in a season?

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The teams that are currently competitive would be in a scramble to dump off long contracts, in order to accrue cap space for a season and take one final run with their current core. Teams that are not currently competitive have no incentive to spend money now, they would be smart to tank for a year and use the extra cap space to build a super team in the future.

I feel an urge to use real examples and numbers but that would only serve to highlight the absurdity of the idea. I shouldn’t be so critical because unique ideas can spur change in the NHL, but this just ain’t it, chief.

How would it impact the Leafs?

If you were to look at every current roster in the NHL and say “how can I propose a rule that disproportionately disadvantages the Leafs?”, this is what you would come up with.

Sometimes I need to remind myself, through all the highs and the lows, just how good a position the Leafs are in. I think back to growing up watching Mats Sundin, and wishing that the Leafs could find a dynamic young player like Marner or Nylander to surround him.

Right now the Leafs have four elite forwards signed for at least 4 more seasons, and I would say three of them have yet to play their best season. Toronto spends a huge amount on their core, but they have still found ways to get better and better depth. So much young talent and a secure core is a formula for contending long term, but a “flex cap” is not an environment where a team can successfully contend, year after year.

Perhaps I’m wrong, and the majority of fans want a situation more like the NBA with more player movement and less parity. My impression from the NHL though, especially Gary Bettman, is that they place an immense value on parity and they would not implement a cap system that jeopardizes that.