NEW YORK, July 13 -- The National Basketball Association today announced that the salary cap for the 2004-05 season will be $43.87 million. The new cap goes into effect at 12:01 a.m. on Wednesday, July 14, when the league's "moratorium period" ends and teams can begin signing free agents and making trades.

The salary cap has increased during the current collective bargaining agreement between the NBA and the National Basketball Players Association from $26.9 million in 1997-98 to the new level of $43.87 million, the highest amount since the salary cap was established in 1984. Last season's cap was $43.84 million.

During the current CBA, total player salaries and benefits have increased 57 percent from $1 billion in 1997-98 to $1.573 billion in 2003-04.

For the 2003-04 season, a tax will be collected from teams equal to the amount by which their payrolls exceeded $54.6 million. The tax money is re-distributed to NBA teams.

The 2004-05 minimum team salary, which is set at 75 percent of the salary cap, will be $32.90 million next season.

The expansion Charlotte Bobcats, who begin play in the 2004-05 season, will have a salary cap and minimum team salary equal to two-thirds of the salary cap and minimum salary that applies to the rest of the league. The Bobcats' salary cap in 2004-05 is $29.25 million and their minimum salary is $21.94 million.

GLOSSARY OF KEY SALARY CAP TERMS

A.) Cap Exceptions
The NBA salary cap is often described as a "soft cap" because teams may exceed the salary cap using "exceptions." The key cap exceptions are:

  • The "Bird" Exception: A team may re-sign its own free agent for any amount up to the "maximum player salary" if he played for the team for the prior three consecutive seasons (or, if he changed teams, he did so by trade).

  • The "Early Bird" Exception: A team may re-sign its own free agent for the greater of (a) 175 percent of the player's salary in the last season of his prior contract, or (b) the average player salary for the upcoming season, if he played for the team for the prior two consecutive seasons (or, if he changed teams, he did so by trade).

  • The Mid-Level Exception: A team may sign one or more free agents to contracts with first-year salaries totaling the amount of that season's mid-level exception, an amount based on the league's average player salary. The amounts of the mid-level exception since the beginning of the current collective bargaining agreement are:

    1998-99: $1.8 million
    1999-2000: $2.0 million
    2000-01: $2.3 million
    2001-02: $4.5 million
    2002-03: $4.5 million
    2003-04: $4.9 million
    2004-05: $4.9 million

    Contracts signed using the mid-level exception can cover up to six seasons.

  • The "$1 Million Exception": A team may sign one or more free agents to contracts with first-year salaries totaling the amount of that season's $1 million exception, which may be used up to three times during the term of the CBA, but not in consecutive years. The $1 million exception increases $100,000 per year according to the terms of the CBA, as follows:

    1998-99: $1.0 million
    1999-2000: $1.1 million
    2000-01: $1.2 million
    2001-02: $1.3 million
    2002-03: $1.4 million
    2003-04: $1.5 million
    2004-05: $1.6 million

    Contracts signed using the $1 million exception can cover no more than two seasons.

    B.) Minimum Player Salaries
    The collective bargaining agreement provides for minimum salaries that must be paid to players based on their years of service. The minimum salaries for the 2004-05 season are as follows:
    Years of
    NBA Service
    Minimum Salary
    0 (rookie) $385,277
    1 $620,046
    2 $695,046
    3 $720,046
    4 $745,046
    5 $807,546
    6 $870,046
    7 $932,546
    8 $995,046
    9 $1,000,000
    10 $1,100,000

    A team that is over the cap may nonetheless always sign player contracts for the minimum salary. In addition, so that teams are not deterred from signing more experienced players because of their higher minimum salaries, any amount payable to a player in excess of the four-year minimum salary amount is subsidized by the league (and does not count toward the team's payroll for cap or tax purposes).

    C.) Restricted Free Agency
    If a free agent is "restricted", then his prior team has a "right of first refusal" that enables it to match any offer made to the free agent by another team. Thus if a restricted free agent wishes to sign with a new team, he must first present his prior team with an "offer sheet" that contains the terms of his proposed contract with the new team. The prior team then has 15 days to decide whether it will sign the player on the terms contained in the offer sheet or let the player sign with the new team.

    First-round picks are restricted free agents following their fourth season in the league; all other players are subject to restricted free agency following their first three seasons.

    D.) Maximum Player Salaries
    No player in the NBA may sign a contract with a first year salary that exceeds his applicable maximum salary. A player's maximum salary is based on his years of service in the NBA and is computed as a percentage of the salary cap as follows:
    Years of NBA Service Maximum Salary
    6 or fewer Greater of 25 percent of the salary cap ($10.968 million this season) or 105 percent of the player's salary in the last season of his prior contract
    7 9 Greater of 30 percent of the salary cap ($13.161 million this season) or 105 percent of the player's salary in the last season of his prior contract
    10 or more Greater of 35 percent of the salary cap ($15.355 million this season) or 105 percent of the player's salary in the last season of his prior contract

    Maximum salary contracts signed with a player's prior team may increase 12.5 percent per season and extend up to seven seasons. Maximum contracts signed with a new team may increase 10 percent per year and extend up to six seasons.