Mar 27, 2014; Memphis, TN, USA; Stanford Cardinal forward Josh Huestis (24) reacts after losing to the Dayton Flyers during semifinals in the south regional of the 2014 NCAA Mens Basketball Championship tournament at FedExForum. Dayton won 82-72. Mandatory Credit: Spruce Derden-USA TODAY Sports

Josh Huestis Deal with Thunder no Issue for NBPA Because Rookies Play for Free, Anyway

Last Saturday, Darnell Mayberry of The Oklahoman reported about the unusual approach being taken by the Oklahoma City Thunder to their 2014 first-round draft pick, Josh Heustis.  In summary:

As the 29th overall pick, Huestis would become the first player selected in the first round to forgo his rookie season to sign in the D-League. In other words, he’d be the first-ever domestic “draft-and-stash” player.

After a few days of percolating, the subject became a significant topic for the NBA Blogosphere. At first blush, this deal does not appear to be according to Hoyle. It’s hard to put your finger on the exact hinky-ness of the situation — Are the Thunder circumventing the salary cap? Was there an illegal under-the-table arrangement made? Is the player being bullied? — but virtually everyone who heard the news was at least a little bit befuddled.

Is this legal, and if it is, why would a player do this?

Valid questions that I’m not here to answer.

In truth, once the “Is it legal?” question is answered, none of the others are of much practical importance to me. For the most complete discussion of the situation, go read Zach Lowe’s write up on Grantland.

The thing that seems to surprise people the most, at the moment, is that the players union, the NBPA, seems to have no issue with the seemingly Faustian bargain that Huestis and his agents, former NBA players Mitchell Butler and Toby Bailey, have made with the Thunder.

Eric Freeman of Yahoo’s Ball Don’t Lie articulated both the confusion and the basic answering reasoning this morning.

…it seems weird for the union to allow such a precedent. While Huestis is an outlying case right now, it’s not crazy to imagine other contenders doing the same if only to increase their chances at adding traded-then-released veterans around the trade deadline. Huestis has absolutely benefited from this scenario, because he wouldn’t have been a first-round pick otherwise, but it’s quite obvious that the Thunder have benefited more. They’ve drafted a player they like, no matter his status as a reach, and don’t have to worry about paying him if he gets injured or doesn’t pan out. The franchise did something similar in 2013, when they drafted Grant Jarrett in the second round (via the Portland Trail Blazers), had him sign a D-League deal, and inked him to a multi-season deal this summer, but Huestis has more leverage than Jarrett ever did. In condoning (or just not criticizing) the move, the NBPA has created a scenario in which one of 30 first-round picks won’t be used to pay a player who can’t make comparable money elsewhere, unlike high-profile foreign draftees. How does that benefit the players?

Well, in short, it helps the guys who are already members of the union. The NBPA theoretically exists to protect draft picks, but those players are theoretical members — a group of as-yet-unidentified young men — until they find their way onto an NBA roster. As actually constituted, the union comprises a group of players more interested in protecting various other benefits than the options of future draft picks. A veteran — and the NBPA is mostly veterans — is always going to be more interested in maintaining the mid-level exception or winning a higher percentage of basketball-related income than in allowing rookies to make more money. It’s a basic issue of self-interest, and it makes sense given the makeup of the union.

Freeman is correct, but there’s a simpler explanation: The Huestis deal won’t cost the players a penny.

This is true, because of one basic ruling doctrine in the CBA:

Collectively, the players are guaranteed to receive at least 51.15% of revenues in salaries & benefits for the 2011-12 season. Starting in 2012-13 they are guaranteed to receive 50% of forecasted revenues, plus (or minus) 60.5% of the amount by which revenues exceed (or fall short of) the forecasts, with a lower limit of 49% of BRI and an upper limit of 51% of BRI. – Larry Coon CBA FAQ Question #18

The guaranteed split of BRI (basketball-related income) is the ultimate arbiter of how much money the players receive. Individual contracts are merely the means through which those dollars are distributed among the players. The CBA uses an escrow system to help balance contracts vs. BRI split. A portion of each player’s salary is set aside each year to reserve against the possibility that the total of the individual contracts will exceed the guaranteed BRI split. In practice, the total individual contracts regularly exceed the guaranteed BRI split – falling short only in the pre-lockout year of 2011.

The net effect is that the players have to return some portion of their negotiated individual contracts to the NBA (and eventually, the owners) each year. Over the three seasons since the new CBA was signed, the NBA has collected over $588 million dollars of escrow. Of that, about $286 million has been returned to the players, while $302 million has been retained by the NBA (and the owners). This is one of those facts that most know, but few really think about.

However, when you put this next to some information about the three rookie classes under the new CBA, it makes for an interesting picture.

scale vs escrow

Based on the rookie salary scale, the absolute most dollars that NBA owners could have paid first-round draft picks during their respective rookie years is just over $189 million. That assumes every rookie was signed immediately and give the maximum offer of 120% of scale (which did not happen). Rolling it out a little further, the liability created at 120% scale for all three classes over all three years of the CBA (three years for Class of 2011, two for Class of 2012, one for Class of 2013) would only be $387 million. This gets even more diluted, when you consider that a new draft class isn’t accretive. In other words, a first-round draft pick is, in all likelihood replacing someone who played the prior season — and their salary.

Put crudely, when viewed in the context of $302 million in returned escrow and BRI splits, rookies play for free. Adding a new draft class does not add cost to the NBA. The only thing that actually adds player cost to the NBA is increased revenue.

Of course, this is a reductive way to put it.

The truth of the situation is: when negotiated contracts exceed the CBA-mandated BRI split, each player ends up making a little bit less than he thought he would. However, it is sometimes instructive to view situations in stark, reductive terms that force thinking back towards the bigger CBA picture.

This calculus combines with the limited number of players involved to become the reason that issues like this Josh Huestis arrangement — and the hue and cry earlier this summer over whether or not stars should take “less money to win” — ultimately lack traction, when it comes to both CBA negotiations and the NBPA rank and file. In the environment created by a guaranteed BRI split, these are player-vs.-player issues, and the CBA is about player-vs.-owner issues.

If you’d like to read more on the Huestis contract, Tom Ziller has the most complete argument against it, and he is currently engaged in a worthwhile debate with our friend, J.A. Sherman of Welcome to Loud City.

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