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The Giants' offseason budget has a collectively bargained twist

How much money do the Giants have to spend? The answer might surprise you, unless you've been paying closer attention than I was when I sat down to write this article.

Matt Cain, union representative, may be a big contributor to the 2017 Giants.
Matt Cain, union representative, may be a big contributor to the 2017 Giants.
Charles LeClaire-USA TODAY Sports
Well, here we are.

While the last four teams standing bash it out for the pennant, the Giants and the rest of the peasants are picking up the pieces and getting started on 2017’s teams. The good news for the Giants is that they’re an extremely high-payroll team with a solid, cost-controlled core and two clearly defined needs ("hitters who slug over .440" and "relievers who can get three outs with a three-run lead.") The bad news is that most of that high payroll is already spent on said solid core, leaving a limited space to address those needs.

Specifically, the Giants have the first-world-problem of baseball teams, the luxury tax. A quick primer: the Competitive Balance Tax (CBT) penalizes teams who spend more than a defined amount on major-league payroll in a single year. Every year that a team is over that amount (currently $189 million), they pay a higher penalty. The Giants have been over the tax for two years running; their third year would put them at a 40% tax on any overage. The Giants ownership structure, being savvy business-people/miserly oligarchs (reader’s preference), would probably like to avoid that penalty if possible.

There’s a lot more to how the CBT is calculated, and you can read about it here courtesy of our friend Wendy Thurm. Note that the tax doesn’t actually care about a player’s annual salary, but the average annual value of their guaranteed money, which in some cases (Bumgarner, the Brandons) is different by a factor of multiple millions. And there’s also a share of "player benefit costs" (pensions, medical care, etc.) that every team has to pay, which makes the effective tax ceiling more like $176-178 million. While it’s nothing compared to the weapons-grade legalese of the NBA salary cap, there’s still enough for a pretty hefty chunk of wordcount and math. And I had them both all ready to go.

Which is why I feel pretty silly right now.

Because the current luxury tax rules were established in the last Collective Bargaining Agreement between MLB owners and the player’s union, and I realized while checking my math that the CBA expires in December. We’re in a brave new world!

I won’t do a whole deep-dive on labor relations in baseball – though if you find me in the wild, feel free to ask my opinions – but it’s funny, given how large the 1994 strike looms in recent baseball history, that the league has had an unprecedented period of labor peace. The NBA has had four lockouts since then. The NHL has had three, including one that cancelled a whole season. Even the owner-friendly NFL had a lockout! But MLB has achieved a comfortable detente between players and owners, with everyone making enough money to feel comfortable with the status quo. (Except for minor leaguers. But that’s another article, which you should reread every month or so. I keep a print-out between my copies of Capital and Subterranean Fire.) In fact, the commissioner’s office thinks a deal will be done by the end of the postseason.

There are certainly some interesting issues on the table, like the shortened season, which might be a boon to Buster Posey. And a change in the qualifying offer system could have interesting effects on the Giants’ free agent targets. But none of those really have the potential to reshape San Francisco’s impending offseason the way that CBT changes would.

In a different league, like the NBA, you might see tax changes wielded as a punitive measure, the way some people expect NBA owners to try to break up the Golden State Warriors this offseason. But MLB owners don’t have the same history of making radical CBA changes to blatantly screw one another’s franchises; you’re not going to see 29 teams shoot themselves in the foot just to stop the 30th from signing Bryce Harper in a couple years. Part of this is simply because baseball isn’t such a superstar-driven league, and it’s much harder to build a winning team based on "get the best free agents on the market." And by and large, baseball owners are a small-c conservative bunch who know they have a pretty good thing going. Reactionary changes based on a single situation could disrupt that good thing, with limited return.

Still, there are disagreements. Bill Shaikin at the LA Times wrote about the possibility of owners with an axe to grind using the luxury tax against one another:
With players concerned that large-market teams can use the CBT as a self-imposed salary cap, and with baseball's revenues approaching a record $10 billion per year, the threshold would figure to rise in the new labor deal that would take effect in 2017.

"There’s a possibility it could go down," [Angels owner Arte] Moreno said.

That would be unprecedented, under the framework in effect since 2003. Under the current system, teams pay anywhere from 17.5% to 50% on every dollar above the threshold, depending on how many times they have exceeded it.

So that’s intriguing, especially coming from Moreno, who owns one of the few current tax-paying teams and is infamous for stepping over his baseball operations department to make his own decisions. But we also have to consider the wishes of the players’ union, which, if you believe Nathaniel Grow at Fangraphs, is likely to fight for at least a higher threshold if not some major structural changes. It may not be issue #1, but it’s a simple, uncomplicated way to increase the players’ share of baseball’s profits. And unlike other, more contentious issues, the owners won’t be in lockstep opposing it, not when some are already flirting with the current tax ceiling and unlikely to drop below it anytime soon.

Circling back, what does this mean for the Giants’ offseason? Well, we don’t exactly know. But we can start to guess. An experiment: say the Giants filled out their 25-man roster with players who are currently with the organization, whether through long-term contracts, arbitration, or pre-arb club control. It would look something like this:

Catchers: Buster Posey, Trevor Brown

Infielders: Brandon Belt, Joe Panik, Eduardo Nunez, Brandon Crawford, Conor Gillespie, Kelby Tomlinson

Outfielders: Mac Williamson, Jarrett Parker, Denard Span, Hunter Pence, Gorkys Hernandez

Starting pitchers: Madison Bumgarner, Johnny Cueto, Matt Moore, Jeff Samardzija, Matt Cain

Relief pitchers: Derek Law, Will Smith, Hunter Strickland, Josh Osich, George Kontos, Cory Gearrin, Ty Blach

Here is a more detailed version, with salary totals, contract status, and disclaimers. It’s not a thrilling roster, and it has many of the same weaknesses as this year’s first-round exit, but it’s definitely competitive. And the Giants can put it together for $163 million in salary, or $165.7 million in Average Annual Value. Counting the 1/30 share of player benefit costs, that would leave the Giants a pretty dispiriting $11-$13 million to spend on this year’s salaries. Maybe that’ll get you a closer in this market. Probably another late-inning reliever or two. If they wanted to make a meaningful move, they’d be looking at the trade market again, after already shipping off four highly rated prospects and a core piece of the vaunted homegrown infield. Either that, or baseball operations would be trying to talk ownership into dipping even further into their pockets and dealing with the escalating penalty of a third year of the tax.

But thanks to the timely expiration of the CBA, the Giants are going to have more flexibility. How much more? We don’t know; Beyond the Box Score threw $200 million out there, but that seems like largely speculation. And it’s not taking into account the player-benefit share, or whether the repeater penalties will reset, or how much the new penalties will be. It’s a big old mystery box. But whatever’s in that box is almost certain to be better than "$11 million to spend on a closer, a setup guy, maybe a power bat, and also whatever we need in July."

This is an important offseason for the Giants – moving beyond the even years, bidding farewell to a big chunk of the 2012-16 core, building around a resurgent rotation and preparing for the decline of the outfield. It was going to be a tight squeeze. It might still be a tight squeeze. But it’s better than it could have been. Think of this season – it ended with a bullpen implosion, a first-round exit, the death of a mythology. But it didn’t end in New York with Madison Bumgarner getting shelled in a one-and-done game, and it didn’t end in Los Angeles in Game 162, with Vin Scully calling the demise of the Giants.

Better than it could have been. So is this offseason outlook. By December, we’ll know how much better, and we'll most likely have the players' union to thank.