The NBA’s board of governors was unanimous in voting to approve an amended agreement to the collective bargaining agreement, clearing the way for a number of financial and competitive rule changes to the structure of the 2020-2021 season.
The league’s deal, negotiated with the National Basketball Players Association, sets the stage for a season that will open on Dec. 22 and play a reduced schedule of 72 games.
The NBA and its players’ union reached the agreement in principle late Monday night, before Tuesday’s vote. The deal, officially announced by the league Tuesday night, calls for free agency to begin at 6 p.m. ET on Friday, Nov. 20, two days after next week’s NBA draft.
The salary cap is going to be set at $109.1 million and the luxury tax will be $132.6 million — the same numbers they were during the 2019-20 season, before the league’s finances took a drastic hit as a result of the ongoing COVID-19 pandemic. Teams had been expecting both numbers to remain the same next season for some time now, as it was better for both the teams and the players to avoid a massive drop in the salary cap for next season because of the unplanned drop in revenue.
The salary cap is going to be guaranteed to go up by a minimum of 3% per year — and a maximum of 10% — through the remainder of the collective bargaining agreement.
The two sides also came up with a compromise on the escrow system to spread the losses out across multiple seasons. The typical escrow withholding of 10% will remain in place. If there is a need to reduce player salaries by more than that 10%, that loss will be spread out over that season, as well as the following two — and players can never have more than 20% of their salary withheld in a single season. The hope on both sides is that future seasons will see the league be able to return to normal financial footing as the pandemic subsides.
Sources also said that, in an attempt to ease the tax burdens of teams that had been planning on the salary cap and luxury tax continuing to steadily rise, the NBA will reduce the luxury tax bill for teams at the end of the 2021 season by the percentage amount that the league’s basketball-related income (BRI) declines from initial projections.
For example, if it drops from a projected $8.45 billion to $5.9 billion — a 30% decline — the Golden State Warriors‘ projected luxury tax bill would be reduced from $60 million to $42 million.
Another way the luxury tax relief could benefit Golden State is with regard to potentially using its $17.2 million trade exception generated by trading away Andre Iguodala last summer. If the Warriors were to acquire a player for that full amount in a trade, their tax bill would increase to $149 million. A reduction to leaguewide revenue, however, could slice up to $45 million off that total number.
As of now, there are four teams — the Warriors, Brooklyn Nets, Boston Celtics and Philadelphia 76ers — that are in the luxury tax, though that number is likely to increase because the cap and tax will now remain flat.
Teams aren’t likely to receive formal numbers from the league until near the end of the week, after a final agreement is officially reached. The league’s current moratorium on transactions is also expected to be lifted early next week — shortly before the NBA draft is scheduled to take place on Nov. 18.
That will kick off a frenetic and compacted offseason, with free agency expected to begin soon after the draft — with it all coming less than two weeks before the start of training camp on Dec. 1.
ESPN Staff Writer Tim Bontemps contributed to this report.