One interesting aspect to the upcoming season is the shift in the financial strategy of the Pittsburgh Penguins. Almost all of their transactions this off-season have had a common thread: it has saved payroll in the 2020-21 season.
Even re-signings like Juuso Riikola, Jared McCann and Tristan Jarry have been structured in multi-year deals that will pay the players less in 2020-21 and more later down the line.
This is probably a win-win situation for both sides.
For the players, they’re starring down the barrel of a 20% escrow next season, an automatic withdrawal from their paychecks to true up player payroll to hockey revenue. It makes a lot of sense for a player to want to defer money to future years, when hopefully times are better, and they’ll have an opportunity to keep more of their paychecks.
For the teams it’s a no-brainer. Take the structure of Jarry’s recent three year, $10.5 million total contract. It will pay him $2.5 million in 2020-21, $3.5 million in 2021-22 and $4.5 million in 2022-23. The salary cap hit will be the average, $3.5 million, for all three seasons. The Penguins are basically getting a 0% loan for two years to defer $1 million dollars for Jarry. That is a trade off they will gladly make.
When I compiled this update on 9/11 last month (just before the Nick Bjugstad trade), the Pens had $72.2 million worth of actual player payroll commitments, compared to a $73.7 million cap hit. Since then, the disparity has only grown, especially when trading Patric Hornqvist ($5.3 million cap hit and salary) for a player in Mike Matheson whose $4.875 million cap hit is significantly higher than his $3.5 million actual salary in 2020-21.
The upper limit of the salary cap is $81.5 million. The Penguins are coming close to that already at $78.8 million attributed to players. Yet, in real money the Pens are only shelling out $74.1 million to get that $78.8 million cap number. This is an advantage for the business side of the equation for a team that doesn’t know if they’ll get their full allotment of home games next season, or how many paying customers they will have in the house to play those games in front of.
This is also a departure from the norm and will require a shift in mindset as well. The Pens are operating in 2020-21 like a small market team. They don’t really care what their salary cap number is — unlike every other year. The key number the team has prioritized their actual expenditure on the left.
Amazingly enough, in the last three weeks the Pens have re-signed McCann and Jarry plus added Sceuvior and Matheson in trades, and yet they’ve only added a total of $1,825,000 to their total actual payroll, despite adding those four players. How could this be? Because they shed Patric Hornqvist and 50% of Bjugstad. That still goes to show that despite the flurry of moves, Pittsburgh has been able to massage the bottom line into a favorable circumstance.
After getting McCann and Jarry back in the fold, the Pens could be about as done as they want to be. They currently have two goalies, eight defensemen and 11 forwards under contract. Add in Sam Lafferty on a one-year deal (who shouldn’t be cost-prohibitive) and the team is at 22 of a max 23-player roster limit.
And, they could save even more money! Why, simply buyout Jack Johnson and the Pens turn a $3,000,000 expenditure in 2020-21 into a $916,667 cost and open up $2.65 million in suddenly tight salary cap space to find another player or keep for savings as the year goes along.
While you can debate if Jim Rutherford’s moves have been good or bad, helpful or hurtful to the team’s goals to compete on the ice, there can be no debate that he has managed well towards keeping payroll down in what is shaping up to be a challenging year ahead financially.