An Estimate of Every Team’s Payroll Room

Free agency officially begins on Saturday. While clubs have had the right this week to negotiate exclusively with their own departing players, that stops tomorrow. Tomorrow, anyone can talk to anyone.

As we enter free-agent season and attempt to understand which deals are likely and which are less so, it helps to have a sense of how much each club has to spend. Last offseason unfolded slow: teams and players battled on contract terms until spring. When the dust finally settled, payroll hadn’t actually increased from the previous year — a relatively rare occurrence, especially in an era when the game is so financially healthy.

That lack of upward movement in salaries was attributed, in part, to the impressive free-agent class of this winter. By looking at payrolls from the past couple years, we can get an idea of who has the most money to spend and who will need to significantly increase payroll if they want to get in on free-agent spending.

To begin, let’s consider what payrolls looked like at the beginning of the 2018 campaign.

That massive payroll worked out pretty well for the Red Sox: the World Series winners took advantage of the attempt by others clubs to stay under the competitive-balance tax threshold. At the other end of the payroll spectrum, meanwhile, Milwaukee, Oakland, and Tampa Bay managed to win a bunch of games without spending big, though the relationship between payroll and wins remains relatively strong.

A lot can change in a year, though. Some teams have quite a bit of money coming off the books this offseason. Here are the teams with the most money removed from their 2018 Opening Day payrolls, including a decent surprise at the top.

Joe Mauer’s contract is not the only one for which the Twins are no longer accountable in 2019. Brian Dozier, Phil Hughes, Lance Lynn, Logan Morrison, and Ervin Santana — all present for Opening Day of 2018 — are gone, too. Washington has a lot of payroll coming off the books, but they also have to replace the production of Gio Gonzalez, Bryce Harper, and Daniel Murphy.

The Braves are freeing up a lot of money, as well: not only has Nick Markakis’s contract come to an end, but so have the deals belonging to all the players involved in Atlanta’s trade with the Dodgers: Adrian Gonzalez, Scott Kazmir, Matt Kemp, and Brandon McCarthy. The Rangers are another interesting club because their payroll dropped by about $30 million before last season, and they are losing a whole lot more now.

Last year’s payroll and the terms of departing contracts are two important factors to determining a club’s offseason spending capacity. They’re not the only factors, however. Some players will be getting raises, for example. Others have been acquired since last Opening Day. It’s necessary to account for those, as well. Below we find guaranteed money teams owe already for next season, including options that already have been picked up or are likely to be.

The Cubs appear at the top of this list due to the quantity of free-agent contracts handed out over the last few years, as well as money for Cole Hamels, who proved to be a very good addition for the club. Given where the Twins were in the previous graph, it should come as no surprise that they are near the end of the list for guaranteed money next season. The A’s, Rays, and White Sox barely have any guaranteed commitments for next season, though the A’s find themselves at the opposite end of the graph when we look at both estimates for arbitration and the necessary minimum salaries to fill out a roster.

In some respects, current payroll commitments serve as a proxy for win-now teams. We generally think of win-now teams as those with an aging core, going for it one more time — a club not unlike the San Francisco Giants, who enter the offseason with the third-largest commitment of an club.

But there’s another proxy for win-now teams, as well, and that’s soon-to-be free agents. If a team has a lot of money tied up in arbitration-eligible players, that means they’ve cultivated a core group who will all become free agents within the next few seasons. In Oakland’s case, Khris Davis, Marcus Semien, and Blake Treinen will all enter free agency by the end of 2020. For the Red Sox, it’s Mookie Betts, Xander Bogaerts, and Jackie Bradley Jr. In Arizona, the list includes Nick Ahmed, Jake Lamb, David Peralta, Robbie Ray, and Taijuan Walker. These are clubs that will want to capitalize on having their good, young players still under team control.

When we add the guarantees with the arbitration estimates, this is where we land.

With Cole Hamels, the Cubs have the biggest estimated payroll in baseball before free agency begins. While last year’s salary numbers aren’t a precise indicator of how teams are going to spend next season, they can provide a good estimate for what a team’s payroll might look like. We can then identify teams that will have to spend significantly more to make a further difference in the roster, as well as teams who might be trimming payroll and not necessarily interested in making up that competitive gap. Below, I’ve included the difference between this year’s current pre-free-agency payroll and last season’s payroll with a 5% boost for inflation.

If the Orioles had a general manager, we could ask him or her if the team planned to use all its available money in free agency. They don’t have a GM, but it seems likely the Orioles are at the beginning of some sort of rebuild, rendering them unlikely to add very much in the way of payroll. The Blue Jays’ intentions are more difficult to discern. Last season, the club made some intermediate moves in free agency to see if they could contend before Josh Donaldson, Marco Estrada, and J.A. Happ hit free agency. Those moves didn’t work out, but the team does still have some talent, as well as two of the top prospects in baseball. They have some money to spend, at least, if they want to attempt to contend in 2019. The Rangers might be in position to make a splash given that they cut payroll last season and have a ton of room. The Giants could try to make one more run. The Rays are always interesting, while the Royals seem likely to go further down. The Red Sox, meanwhile, could bring a similar team back for next year.

At the bottom, the A’s, Brewers, and Phillies are all candidates to increase spending to capitalize on positive years, though the A’s are the least likely candidate of the three to do so. It’s interesting to see the Cubs so low and the Yankees and Dodgers not as high, as we might expect them to spend similarly.

I also ran all the teams based on 2017 payrolls with a 10% increase over the two years. This is what that graph looks like.

Detroit is rebuilding, and Baltimore we already discussed, but the Dodgers and Yankees artificially held down spending last season to stay under the tax rate. If we go with their more regular spending habits, the clubs should have well over $100 million to spend on 2019 salaries this offseason.

Performing this same exercise a year ago, I found that about $700 million would need to be spent for payroll to increase by 5%. In the end, only about 70% of that spending actually occurred. This season, there is another three-quarters of a billion dollars to be spent on free-agent salaries to reach an increase of 5%. We heard that teams were saving up last year for this year’s class. If true, there’s going to be well over a billion dollars spent in free agency on 2019 alone. It seems more likely that teams weren’t really saving up for this winter, but were just sitting out the last one. We should see a lot of spending this winter, but nothing that will make up for the inactivity of a year ago.