Not every team can develop or acquire talent that will later turn into draft picks, and even fewer teams have the resources to make up for that fact. (Photo by Len Redkoles/Getty Images)
This off-season, MLB and the MLBPA drafted and ratified a brand new collective bargaining agreement. The new CBA has various ramifications for the game, but one of the most significant changes had to do with how the June amateur entry draft was conducted.
A "draft pool" was created, and its purpose is to create a soft cap for spending on picks from the first 10 rounds of the draft. The more picks a team has -- and the earlier those picks come -- the more money in their draft pool. This all comes up now, as Baseball America has released the draft pools for all 30 teams. The Red Sox have the tenth-most to spend at $6,884,000, as they didn't sacrifice any draft picks this winter, and acquired a first-rounder from the Phillies after losing Jonathan Papelbon to free agency.
This figure is more than a recommendation, even if the soft cap allows teams to outspend their pool: there are penalties in place for spending more than allotted.
Going over by five percent isn't much of a problem, and it's something that we can probably expect to see a lot of if it means a team signs a player they might otherwise lose. Teams have to pay a 75 percent tax on spending over their pool limit if they go over by up to five percent. On average, teams have $6.3 million to spend on their draft picks this June -- five percent of $6.3 million is $315,000, so we're talking a penalty that's less than the minimum salary for a major league player. Taking this into consideration, the Red Sox actually have $7,229,040 to spend if they don't mind paying the tax for five percent overages. They don't have to, of course, but that option is there if a player they think they have to sign is out there but would require an extra $100,000 or so.
Between 5-10 percent, though, penalties start to sting. In addition to the 75 percent tax, the team also forfeits the next season's first-round selection. Not only is the first rounder gone, but the money owning that selection would have allotted to the draft pool will also vanish. Overspending by 10-15 percent means a 100 percent tax and the loss of a first- and second-round pick, and more than 15 percent subs out that second rounder for another first. We likely won't see a whole lot of the other punishments going on, as the loss of draft picks is a significant one.
Teams like the Red Sox won't be able to flex their financial muscle in the draft in the same way they have -- at over $44 million spent since 2007, the Red Sox have averaged $8.8 million per draft the last five years -- but this hurts certain poorer teams even more. The Pittsburgh Pirates spent over $10.4 million on the draft on average over the last five years, for a total of $52.1 million. In 2012, the Pirates -- who went 72-90, finishing under .500 for a record 19th straight year -- have less to spend in their draft pool than the Red Sox. It's not just the Red Sox they are behind, but also the Blue Jays, the Cubs, the Mariners, Mets, Orioles, Brewers, Reds, Rockies and Rangers -- all teams with significantly larger budgets or markets (or both) than the Pirates.
If the Pirates fail to develop high-quality talent, they won't get future compensation picks under the more strict free agency of the new CBA. If they don't get compensation picks, they won't get a larger draft pool. It's a vicious cycle Pittsburgh might have difficulty escaping; the new CBA has closed off the most effective form of catching up that the Pirates had developed in two decades.
The Red Sox don't need to worry about this so much. They develop talent in-house, and they also acquire high-quality players from other organizations in trades and through free agency. They have the financial resources to offer qualifying contracts to outgoing free agents in order to earn compensation picks, increasing both their farm system's talent and their draft pool, and if those quality players decide they want to stay in town for one more year at the qualifying rate, then Boston is still doing well. They aren't alone in this regard, but they do have other ways of competing that helps them get around this new draft pool restriction -- teams like the Pirates do not, since they were so far behind to begin with.
It's to be seen just how much the new draft pool will hurt teams that spent heavily on past drafts, as the assumption is that this will curb draft spending (and the contract expectations of picks) overall -- it's all relative, in a sense. But the fact that the choice about spending has been taken out of the team's hands doesn't bode well for those without the resources of a team like the Red Sox. That's good news for Boston and their ilk, but not so much for the less fortunate.