Anthony Davis had more leverage than most young stars. When he entered contract negotiations last summer, the Pelicans forward was coming off a season in which he finished fifth in NBA MVP voting, started the All-Star Game and was chosen first-team All-NBA. When he signed a five-year deal, many expected it to be the largest extension in recent memory.
Instead, Davis’ extension may not even end up being the largest of last summer. After a 2015-16 season that saw the Pelicans fall from the playoffs to the sixth-worst record in the league and Davis miss 21 games because of injuries, he is in jeopardy of not qualifying for the Rose Rule, the NBA salary exception that allows players who meet one of three criteria (MVP, All-Star starter or All-NBA selection) to make more on their second contracts than less-decorated players.
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Davis now awaits the results of All-NBA voting. If he places on the first, second or third team, his next contract will be worth 30 percent of the record-high salary cap next season. If the voters decide to award other players at forward and center, the 23-year-old could lose up to $24.8 million. The logic behind the rule is complicated and requires a study of its history — and of how the NBA has chosen to limit the pay for many of its best players.
During the most recent collective bargaining agreement negotiations, back in 2011, one of the problems the owners and players wanted to address was how to handle elite players coming off their artificially limited rookie scale contracts. The challenge stems from the league’s policy of having different maximum contract values based on NBA experience. While veterans with 10-plus seasons in the league can get around 35 percent of the salary cap value the year they become free agents, that drops to about 30 percent for those with seven to nine years of experience and about 25 percent for players with six or fewer seasons — which includes everyone coming off their first NBA contracts.
That structure helps older stars get more money and curtails it for young players, even though a vast majority of players are past their prime seasons when they are first eligible for the 35 percent max salary. Foremost among the players eligible for the highest-level maximum this summer is Dwight Howard, whose prime with the Magic was spent earning about $15 million a year.
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In those 2011 negotiations, the parties attempted to partially resolve this disparity through what is known as the “Rose Rule.” The rule allows decorated players coming off rookie-scale contracts to make up to 30 percent of the salary cap rather than the standard 25 percent. In order to qualify, a player needs to make two All-NBA teams, be voted a starter in the All-Star Game twice or win the regular season MVP once. That is clearly a high bar but has been accomplished by a few players, including namesake Derrick Rose. During extension negotiations between a player’s third and fourth NBA season, the team and player can negotiate any proportion of the cap between 25 and 30 percent as the salary, should that player qualify, while the contract defaults to 25 percent of the salary cap if the player does not. Paul George secured a player option on the final year of his Pacers contract in exchange for taking 27 percent if he qualified, which ended up happening when he made his second All-NBA team in 2013-14.
Davis was on track to qualify under any of the three Rose Rule criteria with a strong 2015-16 season. The Pelicans agreed to give him both a player option for the fifth year and the full 30 percent maximum if he qualified, which felt like a forgone conclusion at that point.
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Unfortunately for both Davis and the Pelicans, the 2015-16 season did not turn out as expected. The losses and injuries hurt but the financial stakes took their biggest hit when he was not selected by fans to start the All-Star Game — a year after being the top Western Conference frontcourt vote-getter. (Davis played and starred in the All-Star Game, selected by coaches as a reserve, but that does not matter in Rose Rule eligibility.)
The financial stakes are even higher for Davis because there is no way for him to recoup that salary on the court should he not qualify for the Rose Rule. Since NBA maximum salaries are a hard line for each individual player, max contracts typically do not have any bonuses because the players would rather have their highest possible salary locked in, and teams cannot use either likely or unlikely bonuses as a way to pay a player more than his maximum.
Furthermore, with the rising cap the difference between 25 percent and 30 percent of the salary cap matters even more. If the $92 million estimate for the 2016-17 season holds, Anthony Davis would lose more than $24.8 million over the life of his extension if he fails to make this year’s All-NBA team.
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Despite missing more than a quarter of the season, Davis still has a chance because of the vagaries of the ballot. Last season, Davis was on the first team as a forward but that crop is incredibly strong this season. Kawhi Leonard, LeBron James, Kevin Durant and Draymond Green should occupy the first two teams, which leaves two spots for a group that includes Paul George, Paul Millsap, Carmelo Anthony, LaMarcus Aldridge and Davis.
However, Davis’ camp has a good reason to argue he should be considered as a center this season, which has much weaker competition. Nylon Calculus’ playing time estimator puts Davis at center for an outright majority of his minutes (54.3 percent of the season), giving him a clear case for thar classification. Even so, he will be fighting for a spot with DeMarcus Cousins, Andre Drummond, DeAndre Jordan, Al Horford and possibly Green, all of whom played more minutes on more successful teams.
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The 2012 NBA Draft class also has another potential Rose Rule player. Damian Lillard has never started an All-Star Game or received a top-five vote for MVP but likely will qualify for the Rose Rule by making second or third team All-NBA this season (having made the third team in 2013-14). Lillard agreed to take 27.5 percent of the salary cap as his max contract if he qualified for the rule, even without a final-year player option like George. That gives Portland more financial flexibility and will cost Lillard about $12.4 million over his five-year extension if he qualifies.
There is certainly an argument that Lillard’s performance merits the Rose Rule bump, but him getting it and Davis missing out feels poorly reflective of their impact thus far. That is a symptom of the curious construction of maximum salaries and their tiers in general. The biggest loser this offseason may end up being Anthony Davis.