Getting Ready For The Amateur Draft, Part 2

Major League Baseball’s amateur draft starts on Thursday. MLB Network and MLB.com will broadcast and stream, respectively, pick-by-pick coverage of the first four rounds: Round One, Competitive Balance Round A, Round Two, and Competitive Balance Round B. In essence, the top 73 spots. The draft will continue untelevised on Friday and Saturday.

We’re getting you ready for the draft with two posts. Last Thursday, in Part 1, I explained the changes to draft selection order brought about by the collective bargaining agreement executed in late 2011. Certain changes didn’t take full effect until this year, so even if you followed last year’s draft, give Part 1 a read as a refresher.

Today, in Part 2, I’ll explain the limits placed on how much each team can spend to sign each draft pick and on all their draft picks combined. The first restriction is known as the draft slot value. The second is known as the draft bonus pools.

For several years in the late 2000s, commissioner Bud Selig tried to impose spending restrictions on the amateur draft. His office issued recommendations for how much teams should spend on each pick, depending on where that player was selected. High first round picks were worth the most, and so on. But the commissioner lacked both a carrot and a stick in his effort to keep draft spending under control. Indeed, the ostensible reason for his proposed restrictions — to keep small-market teams competitive — seemed like a rouse. In reality, it was small-market teams like the Rays, Royals and Pirates that spent big bucks on the draft to restock their farm system as a way to compete with big-market teams.

Nevertheless, under the guise of competitive balance, the owners and players agreed in the new CBA to strict slot values that coupled significant monetary penalties for “going over slot.”  Actually, it’s a penalty on a team’s draft bonus pool, which cover a team’s draft picks in the top 10 rounds plus any bonus money paid in excess of $100,000 to players drafted in rounds 11 through 48. If a player drafted in the first 10 rounds doesn’t sign, his assigned slot value is removed from the team’s pool total.

Our former colleague Jonah Keri explained the penalty structure just after the CBA’s terms were publicly released:

• Any team that goes over total recommended slot spending in any one year’s draft by up to 5% must pay a 75% tax on the overage.

• Any team that goes over total recommended slot spending in any one year’s draft by 5% to 10% must pay a 75% tax on the overage and lose its first-round pick in the next year’s draft.

• Any team that goes over total recommended slot spending in any one year’s draft by 10% to 15% must pay a 100% tax on the overage and lose its first- and second-round picks in the following year’s draft.

• Any team that goes over total recommended slot spending in any one year’s draft by more than 15% must pay a 100% tax on the overage and lose its first-round picks in the next two drafts.

• Any team that goes over total recommended slot spending in any one year’s draft by more than 20% must absorb the contracts of A.J. Burnett, John Lackey, and Barry Zito.

The last one was a joke, of course, but it proved Keri’s point. The new slots value system would bring about a sea change in how teams scout, draft and sign amateur talent in the United States, its territories and Canada.

As the 2012 amateur draft approached, Baseball America explained how the new slot value system would work:

The numbers build off the bonus set for the No. 1 pick, which is $7.2 million this year. Every pick from two to 338 is expressed as a percentage of the No. 1 pick. . . .  A team’s total budget for the first 10 rounds is the sum of the numbers for all of its picks, so teams that have extra picks and early picks have more money to spend. . . .

Teams can spread the money among their picks in the top 10 rounds in different ways so long as they stay under the total budget. . . .  However, if a team fails to sign a player, it cannot apply the budgeted amount for that pick to other players and loses that amount from its overall budget.

For the 2013 draft, MLB increased by 8.2% the total amount that could be spent on players selected in the first 10 rounds. The total value for those rounds is $202,501,600. The Astros’ bonus pool leads all teams at $11,698,800. The Nationals have the least to spend: $2,737,200.  Baseball America lists each team’s bonus pool here and breaks the numbers down by team and draft pick here.

The Astros will select first in the draft and have up to $7,790,400 to spend on the No. 1 pick. The Cubs pick second and are limited to $6,708,400. From there, the slot values decline rather steeply. The Yankees have the last pick in the first round — and 33rd overall — but can sign the player selected for no more than $1,650,100. The full slot value list for picks one through 316 can be found here.

And what about those small market teams? How did these changes affect their spending in 2012, compared to prior years? Baseball America did the math:

The Kansas City Royals’ spending dropped from $14,066,000 in 2011 to $7,573,000 in 2012. This year, Kansas City’s allotment is up to $8,290,700 — but it’s still a far cry from where the team was just two years ago. The same goes for the Rays. Tampa Bay spent $11,482,900 in 2011. That dropped to $4,427,300 in 2012. With the Rays having an off-year last season, their winning percentage dropped and their slot value increased, to $6,694,900. Click on that above link and you’ll a similar story for the Pirates, Diamondbacks and Indians. The Pirates were particularly hurt by their failure to sign Stanford’s Mark Appel. The Bucs selected him eighth overall, but couldn’t reach a deal. Pittsburgh then lost that slot value for the entire 2012 draft.

Tune in this week on MLB Network or MLB.com. Follow along with Part 1 of this series, where I listed the selection order through the first 106 picks. Use our data to see how teams are valuing each pick in relation to the slot values. And then watch as teams work to sign their drafted players by the July 12 deadline.