The Owners’ Latest Offer Gets Us No Closer to Baseball Season by Jay Jaffe February 14, 2022 © Troy Taormina-USA TODAY Sports You didn’t have to be a cynical curmudgeon to know that Saturday’s meeting between Major League Baseball and the Major League Baseball Players Association would not magically produce a deal for a new Collective Bargaining Agreement, thus allowing spring training to begin on time. With its “defensive” lockout and subsequent failure to officially offer more than one proposal to the players on core economic issues over the previous 71 days — a counterintuitive definition of “jumpstart,” never before observed in the wild — the league had already made abundantly clear the fantastical nature of any dates attached to pitchers and catchers reporting. By prematurely calling for the entry of a federal mediator into the proceedings after the barest attempt to negotiate, by telling the media that “phones work two ways” when it comes to bargaining, by downplaying the financial benefits of owning a team relative to investing in the stock market, and by mischaracterizing the owners’ latest proposal for the Competitive Balance Tax rates, commissioner Rob Manfred and the owners have made it clear in recent weeks that they aren’t ready to play ball. And so, for the foreseeable future, there will be no major league baseball played. Manfred has yet to make a formal announcement to that effect because no spring training games have been scrubbed thus far, but via USA Today’s Bob Nightengale, that could happen by the end of this week, as the exhibition season is scheduled to begin on February 26. During his press conference last week, Manfred didn’t offer a deadline for an agreement that would keep the March 31 date for Opening Day intact, though he did express a desire for a minimum of four weeks of spring training, suggesting that the league has absorbed at least one lesson from the frenzied and contentious run-up to the 2020 season and the soaring injury rates that followed. Nightengale reported February 28 as the deadline for an agreement that would preserve Opening Day, though with 197 unsigned arbitration-eligible players and nearly 300 free agents (his figures), such a compressed timeframe would create a level of chaos and logistical difficulty that would make Team Entropy cringe. If you’re expecting this column to both-sides the failure to hash out a new CBA, to assign equal blame to the MLBPA as to the owners, you’ll have to look elsewhere. This is a lockout, not a strike. It is entirely of the owners’ doing — you could say they own it — and entirely unnecessary, because the 2022 season could be played under the terms of the previous CBA until a new one is in place. The two sides would need to agree to restore the old agreement’s Competitive Balance Tax, Joint Drug Agreement, and domestic violence policy — all of which have technically expired as of December 1, 2021 — until such a point, and that may not be trivial, but it would be a rare glimpse of good faith. Based on the minimal concessions the owners have been offering, not to mention the widening gap between revenues and salaries over the past decade, they must like that old CBA pretty well, because they seem reluctant to change things too radically. Yes, the two sides have agreed that the new CBA will include a draft lottery of some kind as well as a universal designated hitter and the elimination of draft pick compensation, as Manfred announced on Thursday. But the owners have refused to budge from the status quo on the years to free agency and arbitration, as well as revenue sharing, and the two sides remain miles apart on the core economic issues addressed in Saturday’s proposal. The players are not amused. Via The Athletic’s Evan Drellich and Ken Rosenthal: There are some [players] who would have preferred that the union had not made its last counter offer at all. Some of the same sentiment cropped up Saturday, based on a feeling that MLB is moving too little to consistently warrant counter-offers. Because Saturday, when MLB made its first economics proposal of February, was predictably just like everything else that preceded it. MLB made moves it thought the players should consider significant, and the players felt, again, lowballed and frustrated. Some players fear that with their counter-offers they essentially are bidding against themselves. The league says it has the same fear with its own offers to players. While there’s certainly interplay between the various economic facets under discussion, no single issue illustrates the distance between the two sides, and MLB’s unwillingness to yield, more than the Competitive Balance Tax structure. Over the past decade, the tax threshold has not kept pace with revenue (or, for that matter, inflation), and it has functioned as a soft salary cap that even the wealthiest teams have been willing to approach but very rarely go over; per The Athletic, the Phillies, Yankees, Mets, Red Sox, and Astros all finished with payrolls less than $4 million below the first CBT threshold in 2021. From that roundtable, using figures from Forbes and the Associated Press, here’s The Athletic’s oft-circulated graph showing the separation between the revenue and the lowest threshold: In Thursday’s press conference, Manfred mischaracterized the owners’ previous proposal as being similar to last year’s structure with regards to the tax. Via ESPN’s Jeff Passan: Manfred said the league had proposed taxation rates that were “status quo.” This was incorrect. In recent years, the tax rate was 20% for teams over the $210 million threshold, 32% at $230 million and 62.5% at $250 million. MLB’s proposal calls for a 50% rate at a $214 million threshold, 75% at $234 million and 100% at $254 million. Additionally, teams would lose a third-round draft pick at the first threshold, a second-round pick at the second and a first-round pick at the largest. Admittedly, things get a bit confusing when trying to distinguish between the penalties for moving up a tier ($20 million or $40 million above the first tax threshold) and those for repeated annual violations. Using MLB Trade Rumors, The Athletic and the expired CBA, I’ve attempted to summarize the CBT’s recent history and the basics of the three economic proposals that have been officially exchanged since the beginning of the lockout (two offered by the league, one by the players). First, here’s a look at the thresholds: Competitive Balance Tax Thresholds Year Threshold ($Mil) Annual Change 2012 $178 0.0% 2013 $178 0.0% 2014 $189 6.2% 2015 $189 0.0% 2016 $189 0.0% 2017 $195 3.2% 2018 $197 1.0% 2019 $206 4.6% 2020 $208 1.0% 2021 $210 1.0% MLB 1/13 Proposal 2022 $214 1.9% 2023 $214 0.0% 2024 $214 0.0% 2025 $216 0.9% 2026 $220 1.9% MLB 2/12 Proposal 2022 $214 1.9% 2023 $214 0.0% 2024 $216 0.9% 2025 $218 0.9% 2026 $222 1.8% MLBPA 1/24 Proposal 2022 $245 16.7% 2023 $252 2.9% 2024 $259 2.8% 2025 $266 2.7% 2026 $273 2.6% As you can see, the first threshold has barely budged in recent years, falling short of even a typical 2% or 3% cost-of-living adjustment, let alone the rate of inflation. As MLB Trade Rumors’ Tim Dierkes explained, “A simple 5% increase per year beginning in 2012 would have put the 2021 base tax threshold around $290MM, yet it sat only at $210MM.” Note that rather than ordering the official proposals chronologically in the table above, I’ve kept the owners’ two proposals adjacent to illustrate how little they differ. The second one increased the thresholds for each of the last three years of the upcoming CBA by a whole $2 million a year. It took the owners a month to come up with that, though to be fair, they did also do away with teams exceeding the first tier losing a third-round draft pick (worth $3.8 million by Craig Edwards’ 2019 estimates, and probably not much more now). Here’s what those penalties look like: Competitive Balance Tax Penalties Amount Payroll Exceeds Base Tax Threshold ($M) 1st-Time 2nd-Time 3rd-Time+ Draft 2017-21 <$20 (Base Tax Rate) 20% 30% 50% — $20-$40 (Base Tax + 1st Surcharge Rate) 32% 42% 62% — >$40 (Base Tax + 2nd Surcharge Rate) 62.5% 75% 95% (1) MLB 1/13 Proposal <$20 (Base Tax Rate) 50% 50% 50% (2) $20-$40 (Base Tax + 1st Surcharge Rate) 75% 75% 75% (2) >$40 (Base Tax + 2nd Surcharge Rate) 100% 100% 100% (2) MLB 2/12 Proposal <$20 (Base Tax Rate) 50% 50% 50% (3) $20-$40 (Base Tax + 1st Surcharge Rate) 75% 75% 75% (3) >$40 (Base Tax + 2nd Surcharge Rate) 100% 100% 100% (3) MLBPA 1/24 Proposal <$20 (Base Tax Rate) 20% 30% 50% — $20-$40 (Base Tax + 1st Surcharge Rate) 32% 42% 62% — >$40 (Base Tax + 2nd Surcharge Rate) 62.5% 75% 95% — (1) = for payrolls at least $40M above threshold, team’s highest pick dropped 10 places unless the pick was among the top six; in that case, team’s second-highest pick dropped 10 places. (2) = third round pick surrendered for teams in Tier 1, second-round pick surrendered for teams in Tier 2, first-round pick surrendered for teams in Tier 3 (3) = second-round pick surrendered for teams in Tier 2, first-round pick surrendered for teams in Tier 3 While the players’ first post-lockout proposal attempts to make up a bit of the lost ground with a substantial jump in the CBT threshold, it maintains the same tiered and annual penalties that were in the last CBA. Meanwhile, the tiered penalties in the league’s two offers have become more severe even while the thresholds have barely moved. Even with the removal of escalating repeater penalties and the draft pick penalties for teams exceeding the first threshold, the owners’ proposal appears designed to continue the effects of the last CBA, during which the average salary fell by 6.4% relative to 2017, with the brunt borne by baseball’s middle class; via the Associated Press’ Ronald Blum, the median salary dropped 30%, from $1.65 million in 2015 to $1.15 million in ’21. Regardless of the other bells and whistles in the deal, the players simply don’t believe that the structure of the owners’ proposals will allow them to grow their salaries. As pitcher Alex Wood put it via Twitter on Saturday: If penalties increase under the CBT/Luxury tax IT DOES NOT MATTER WHAT THE THRESHOLD IS MY GOD. Make the threshold a billion dollars it doesn’t matter. Teams already don’t spend bc they use the current penalties as an excuse not to. Imagine if the penalties got worse. SMH. — Alex Wood (@Awood45) February 12, 2022 Beyond the tax structure, the two sides are far apart on the minimum salary, which in 2021 stood at $570,500, the lowest of the “big four” North American team sports according to The Score’s Travis Sawchick (the NBA’s $925,258 is the highest, and even the NHL comes in at $750,000), and only about 12% higher than in 2016, with annual growth of less than 2% in each of the past four years. What’s more, none of those other sports rely on that minimum-salary labor more than baseball. Via Sawchik, 63.2% of all players in 2019 had less than three years of service time, meaning that they were generally making some function of the league minimum. Those players accounted for 53.6% of all service time accumulated, but only 9.8% of player pay. Via Ben Clemens, in 2021, players making the minimum accounted for 47% of service time accrued, but only 7.5% of player pay. Via Nightengale, 1,145 of the 1,670 players on rosters last year (68.6%) made less than $1 million — a reminder that calling this a fight between millionaires and billionaires is off base. The union has proposed increasing the minimum salary to $775,000. After making a preliminary offer of $600,000 during negotiations in mid-December, the league offered straight salaries of $615,000, $650,000 and $700,000 for players with 0-1, 1-2, and 2-3 years of service time in their mid-January proposal. On Saturday, they proposed raising the salary for the third year to $725,000, and offered an alternative as well, a flat minimum of $630,000 in the first year of the deal; that’s 10.4% above the current minimum, a jump that would be the largest since the 2012 CBA increased the minimum from $414,00 to $480,000 (15.9%), but it’s less than $6,400 ahead of what the minimum would be if the last CBA’s 2017 minimum ($535,000) had grown with inflation. Under that structure, teams would be able to give raises for subsequent years, but would also be able to unilaterally renew contracts with smaller or no raises as well, just as they have for ages. Along with the proposals for the minimum salary come proposals for a pre-arbitration bonus pool, where the gap between the two sides might best be described as a chasm. Via ESPN’s Jesse Rogers: The league increased its offer from $10 million to $15 million while offering a six-person panel — three from each side — to develop a mutually agreeable WAR statistic to allocate the funds. The top 30 players in WAR and award winners would be eligible for the bonus pool. The union has asked for a $100 million bonus pool, down from a previous offer of $105 million. The latter reduction came as part of negotiations since the MLBPA’s first formal post-lockout offer. That the two sides have reduced the gap from $95 to $85 million doesn’t exactly count as progress, though to call back to the aforementioned Clemens analysis of the players’ first proposal, the amount in question is now less than 1% of the league’s annual revenues. The structure of how the money would be divided up isn’t clear, but the league’s figure would mean an average of an additional $500,000 for those top 30 players, while the union’s figure would mean an average of $3.33 million — a substantial difference. Here it’s worth mentioning that nobody who’s in the business of presenting WAR values, not FanGraphs or Baseball Reference or Baseball Prospectus, is comfortable with the idea of its estimates of performance values being deployed in the direct service of determining player salaries. As our own managing editor Meg Rowley said on a recent Effectively Wild podcast: “This assumes a precision to WAR that, I think people who think WAR is a really useful framework through which to understand baseball would be very quick to tell you, is not present. So what happens if you are the 31st-most valuable pre-arb player and the difference in value between you and the 30th-most valuable is less than half a win? You’re probably not the same, but you’re within our margin for error on this.” Other elements of MLB’s proposal that ESPN highlighted pertained to service time manipulation, roster continuity, pre-draft physicals and a restoration of the draft-and-follow system. Via Rogers, “The league increased the incentive for teams to keep their best prospects in the majors, offering them two draft picks within the player’s first three years if he finishes in the top three in Cy Young, Rookie of the Year or MVP voting. Previously, the league had offered one extra draft pick per player within his first three years.” The example Rogers offered was Kris Bryant; had the Cubs kept him up for all of 2015 instead of farming him out for the first 12 days of the season to [check notes] work on his defense — thus leaving him one day short of collecting a full year of service time — they’d have netted one pick for him winning that year’s Rookie of the Year award, and a second one for his MVP award in 2016. On the subject of roster continuity, the CBA would limit the total number of times a player could be optioned to the minors in a season to five, which could make a significant difference in the quality of life for pitchers at the bottom of the bullpen food chain, the ones vulnerable to getting sent down if they’ve thrown so many pitches that they won’t be available for a day or two. To cite just a few extreme examples, the past year alone saw the Rays option Louis Head 12 times, with the Dodgers optioning Mitch White 11 times, and likewise for the Yankees with regards to Albert Abreu. On the subject of pre-draft physicals, in what could be called the Kumar Rocker rule (though, as is often the case for players expected to be drafted highly, the Vanderbilt pitcher did not submit to one), the league has proposed that a player who submits to one and is subsequently drafted will be guaranteed at least 75% of slot value and can’t be failed by the team in a post-draft physical. As for the draft-and-follow, the league has proposed reinstating the ability of team to draft a player who’s not yet ready for professional baseball and then sign him the next year. In this case, the team can draft such a player, send him to junior college for one year, and sign him for as much as $225,000 the next year. For as helpful as those elements may or may not be, they’re of much smaller scale compared to the CBT, the minimum salary, and the structure of arbitration, regarding which “the league has said it won’t move off the status quo,” according to Rogers. Even with the lack of progress and the players voicing their frustrations, it’s worth noting that the immediate asymmetry of the situation favors the union. Players don’t get paid for spring training, so they won’t feel the bite of missed games as suddenly as the owners will when their exhibition dates begin to dwindle. The owners obviously have much more ability to absorb the loss of games long-term than the players do, but given the empty ballparks of 2020 and the reduced attendance last year, their resolve may be tested more quickly than that of the union. The players appear galvanized and geared up for a stand via which they can regain some of the ground they’ve lost, and guarantee their rank and file significantly more security, financial and otherwise, than they currently enjoy.