Even With Face-to-Face Meetings, a New CBA Isn’t Getting Much Closer

Though the owners could end their self-imposed lockout of the players at any time and allow the baseball season to proceed on schedule, the first week of spring training games has been scrubbed. Odds are that more cancellations are to come, and commissioner Rob Manfred’s February 28 deadline to reach an agreement on a new collective bargaining agreement that would preserve Opening Day is fast approaching. With a newfound sense of urgency that stands in marked contrast to Major League Baseball offering one formal proposal in the lockout’s first 10 weeks, representatives for the owners and the players union have been meeting on a daily basis in Jupiter, Florida this week to discuss core economic issues — and those meetings have lasted more than 15 minutes at a time! But even with the more frequent back-and-forth and some minor movement here and there, including a formal proposal from the players on Tuesday, the two sides still appear to be far apart on the most central issues.

If there’s optimism to be had, let us know, because we could sure use some. In the meantime, here’s an attempt to capture where things stand as of Wednesday morning.

Competitive Balance Tax

The lack of optimism regarding an impending resolution to the lockout centers on the players making the tax “the lodestar” of negotiations, to use Jeff Passan’s term, and so far this week, neither side has budged from where things stood as of the owners’ February 12 proposal. I broke down the recent history of the CBT — the threshold for which has not kept pace with the growth of revenue over the past decade — in my previous analysis in the wake of that proposal.

The short version is that the players believe the CBT functions as a salary cap. With teams’ total payrolls down 4.6% from 2017 (from about $4.25 billion to $4.05 billion), and with most of the biggest-spending teams pulling up just short of the threshold in 2021 — the Phillies, Yankees, Mets, Red Sox, and Astros were all within $4 million of the $210 million bar, with only the Dodgers and Padres paying the tax — one can understand their frustration. In Tuesday’s proposal, the players didn’t budge from their previous position from January 24. While generally preserving the previous CBA’s tiered penalties for teams exceeding the thresholds by more than $20 million and more than $40 million, they’ve sought an increase in the base threshold from $210 million to $245 million, growing to $273 million by 2026. That jump in part makes up for the threshold’s meager growth over the life of the last CBA (from $195 million to $210 million over five years, an average of 2.1%), while revenues grew at a quicker rate. The only real difference in that aspect of their proposal is that there’s no draft-related penalty involved, where the previous CBA bumped the draft place for the highest pick of any team with a payroll at least $40 million above the threshold down by 10 spots (unless it was a top-six pick).

The owners, however, have proposed only growing the threshold from $214 million to $222 million over the course of the five year agreement, that while putting forth even steeper penalties even for first-time offenders. Instead of a 20% tax on the first $20 million over the threshold, a 32% tax on the next $20 million, and a 62.5% tax on anything over that, the rates they’ve offered are 50%, 75%, and 100%, respectively. They’ve done away with the repeater penalties, but nonetheless, the rates for a first-time violation in their most recent proposal are as high or higher than the previous CBA’s third-time penalties (50%, 62%, and 95%).

I laid out the whole thing with a couple of tables in my previous analysis, and Ben Clemens followed up with some number-crunching and modeling. Among his findings were that MLB’s latest proposal would have assessed $100 million more in penalties over the 2017-21 agreement than the expired CBA, and the monetary value of draft picks lost would increase from roughly $10 million to roughly $80 million. The payoff:

If the players’ proposal for CBT thresholds had been in effect in the last CBA, with no other changes to the CBA at all, and my modeling holds true, aggregate payrolls would have increased by just under 1% per year over the past five years (instead of declining by roughly 1% per year). If the owners’ proposal for CBT thresholds and rates had been in effect and my modeling holds true, aggregate payrolls would have decreased by nearly 2.5% per year.

Long story short: for whatever convergence the two sides may stumble into on other issues, there won’t be a new CBA until the players are convinced that the structure of the CBT will be more favorable to them than that of the last agreement. Right now, what’s on the table is considerably worse for them than that.

Arbitration

The union initially sought to make every player with at least two years of service time eligible for arbitration, up from the 22% eligible via the “Super Two” system since 2013. In negotiations last week, the union backed off to 80% of those two-plus players, and in Tuesday’s proposal, they lowered that again, this time to 75%. Because they did so, the union felt justified to propose increases to its minimum salary and pre-arbitration bonus offers (addressed below).

The league has been unwilling to move the line. Via ESPN’s Jesse Rogers, “The league says they don’t have the votes to expand Super 2 beyond the 22 percent who enter the system currently — so the union can ask for any amount above that but they won’t get it.”

According to Clemens’ calculations and models from earlier this month, increasing the pool of Super Twos from 46 players (22% of those with between two and three years of service) to 204 (100%) would cost an additional $110 million based on their 2021 production. Ben’s methodology tracked dollars above the minimum salary per win above replacement for hitters, starters, and relievers in arbitration years 1-4. That $110 million figure might sound like a lot — sign me up for a Brinks truck delivery of that amount, please — but that’s less than the 2021 average team payroll of $135 million according to data from the commissioner’s office. Adding another $110 million by bringing all players with two-plus years of service into arbitration would amount to only a 2.7% increase. The relationship may not entirely be linear, but if only 75% of those players gain access to arbitration, the increase would decrease to around 2%, and would amount to less than $3 million per team.

Minimum salary

As noted, in Tuesday’s offer, the union took a more aggressive approach with regards to the minimum salary than it had before, viewing the proposed increases as offset by it dialing back its proposal on the subject of arbitration. Under the previous CBA, the minimum salary grew from $535,000 in 2017 to $575,500 in ’21. The union had previously proposed increasing the minimum salary to $775,000 in 2022, with $25,000 annual increases in each of the next four seasons, up to $875,000 in ’26. In Tuesday’s proposal, they again proposed a $775,000 minimum for 2022, this time with annual increases of $30,000, up to $895,000 in ’26.

By comparison, the owners’ February 12 proposal offered two alternatives. With one, the minimum was based on service time; for 2022, the minimums would be $615,000, $650,000, and $725,000 for players with 0-1, 1-2, and 2-3 years of service time. Correcting a minor point from Ben’s analysis of that proposal, that $615,000 minimum almost perfectly matches the 14.8% increase in the CPU-I over the five years since the previous CBA set a baseline of $535,000 (he erroneously applied that 14.8% to a $570,000 minimum). The second alternative that the owners presented on February 12 was a flat minimum of $630,000 in the first year of the deal, with $10,000 annual increases for the remainder of the deal; under that plan, teams would still be able to give discretionary raises to players as their service time increases, but also able to unilaterally renew contracts with smaller or no raises as well, just as they have for ages. It’s not clear from what’s been reported whether those same $10,000 annual increases apply to the tiered version of the proposal, but it seems like a reasonable assumption.

The minimum salary is of course a big deal to a very large swath of the union, as players on the minimum accounted for about 47% of all service time in 2021, though they took home just 7.5% of the total pay.

Pre-Arbitration Bonus Pool

The players had previously asked for a $105 million bonus pool to be split among 30 pre-arbitration players as determined by some version of WAR (ugh) and major awards such as the MVP and Cy Young. While they had previously lowered that amount to $100 million during negotiations, in Tuesday’s proposal the amount increased $115 million — but in this version, the money would be distributed among 150 players.

That’s a significant contrast to the owners’ position. On Monday, they reportedly increased their previous proposal for the pool from $15 million to $20 million, which would still cover just 30 players. Sigh.

Draft lottery

As a means to counter teams’ temptation to tank in order to secure top draft picks, the two sides have agreed to implement some form of a draft lottery. On Monday, the owners increased their proposal for the number of picks subject to the lottery from three to four. On Tuesday, the players countered by reducing their proposal from the top eight picks to the top seven. This one seems like it should be a meet-in-the-middle situation, though if the number ends up at five or six, one side will be perceived as “winning” that aspect of negotiations.

Minor league rosters and options

In one odd and somewhat ominous aspect of the negotiations, the owners’ February 12 proposal included an ability to reduce the size of Domestic Reserve Lists that govern the number of minor leaguers that each team can roster at any time — that after previously eliminating 40 affiliated teams and reorganizing the minors prior to the 2021 season. Via Passan:

Currently, the Domestic Reserve List — which governs the number of minor league players a team can roster at any time — is at 180. The league proposed keeping the number at 180 for 2022 but allowing the commissioner’s office to reduce the maximum number of players to as few as 150 over the rest of the collective bargaining agreement, sources said. The proposal says the league could adjust the reserve list’s size “up or down.”

MLB, according to a league source, has no plans to reduce the size of the list in 2023 but wants the flexibility to do so in future seasons.

Uh-huh. Leaving aside the grim specter of the further McKinsey-fication of the minors, it’s worth pointing out that the MLBPA does not represent minor leaguers, who alas have no union to represent them. In other words, the owners could simply implement this cut unilaterally. On Tuesday, they withdrew this aspect of their proposal, but took with it their proposal to cap the number of times a player could be optioned within a season at five (some players had as many as 11 or 12 last year). Guys, we see what you did there.

Via USA Today’s Bob Nightengale, each side has been “underwhelmed and disappointed” in the other side’s offers this week. According to The Athletic’s Evan Drellich, “MLB felt that the players’ attempt to raise the proposed minimums was a step backward.” The league believes that it’s the union’s turn to offer a counterproposal for the CBT, and again suggested the involvement of a federal mediator in the proceedings, albeit without filing the paperwork towards that end. Unsurprisingly, the players rejected that suggestion. Elsewhere, Drellich noted that the February 28 deadline to preserve the 162-game schedule might be circumvented if the players agree to the return of seven-inning doubleheader games, which were introduced as part of the COVID-19 protocols in 2020 but which were supposed to be a thing of the past by now. If that doesn’t summarize the backwards direction these negotiations seem to be moving in, I don’t know what does.