Dead money evaluation, Part I: Looking at the Cowboys outstanding debt in recent years

We are just a couple of months away from the start of the new season for the Dallas Cowboys when they will test out the latest revision of this retooled football team. This year will feature a new coaching staff as well as several new members, and we are all hoping that the collective sum of their parts will produce better results this time around.

What’s not new, though, is the front office. It’s the same three-headed monster that features owner Jerry Jones, cap specialist Stephen Jones, and talent evaluator extraordinaire Will McClay. With the team under the same upper management they’ve had for many years, some aren’t too optimistic that things will be any different. The Joneses specifically have been the recipients of the blame for this team’s inability to go deep in the playoffs because they are, as people point out, the “one constant” of this organization over their 30-year drought.

There hasn’t been quite as much complaining this year, and that’s because they have been assertive in acquiring outside players and had what most people feel was a good draft. While things have gone relatively well on paper, some still question whether the front office does things the right way, and the biggest questions people have center around spending.

We all know the Cowboys aren’t very active in free agency, so we’re not going to rehash that, but we want to take a look at another element that affects a team’s ability to spend money, and that’s the amount of dead money they’re getting hit with. Do they have a lot of it? Does it hinder their ability to build the roster? Before we dive into that, let’s start by going over what it is.

What is dead money? In layman’s terms, dead money is outstanding debt. It’s a charge on a team’s salary cap for a player who is no longer on the roster. This charge comes due when a player is released, traded, or retires before all their remaining guaranteed money (guaranteed base salary, signing bonus, and restructure bonus) has been accounted for. It’s called “dead” money because the team must cover the cost despite no longer receiving services from the player.

But not all dead money is created equal. It’s important to understand how these charges accrue because sometimes it can stem from an unexpected roster move, while other times it was always part of the plan. There are three main things that contribute to dead money charges, and here is a quick explanation of each.

Cutting your losses

Sometimes things don’t work out. If a team gives a player a big contract only to find that they are not living up to expectations, they might be released early. When that happens, any guaranteed money that has yet to be accounted for on the salary cap accelerates into a lump sum payment (or two payments if they’re a June 1st cut) against the cap. The Cowboys experienced this with Jaylon Smith. He was released four games into the second year of his six-year, $68 million extension, ultimately leaving the team with a $17 million dead money hit. These types of dead money hits are not good because the team endures costs for services not received due to the player’s inability to perform.

Contract restructures

Another culprit of dead money charges is contract restructures. This is a very common bookkeeping trick that simply converts a player’s base salary into bonus money, which is prorated over time. This allows a team to create cap space now and have that charge broken up into smaller charges over future seasons. Eventually, when that player is no longer playing on the team, those smaller restructure charges add up in the form of a dead money hit. This is the dead money hit the Cowboys are now dealing with after Zack Martin played out his contract. This type of dead money isn’t necessarily bad. The team got itself an interest-free loan for a player who delivered strong results and will pay the remaining balance at a time when the salary cap has increased.

Built-in void years

Restructures have become so common that teams are configuring new deals with these restructures already built in. Rather than taking a “wait and see” approach, a team decides to commit immediately and push some of their costs into multiple years when a player is no longer under contract. The Philadelphia Eagles are notorious for doing this, allowing them a lot more cap space now by having several players with contracts that include void-year costs pushed off into the future. This process offers more financial flexibility but also comes with much more risk since the team is committing early.

So, really the determining factor when evaluating dead money comes down to whether or not a player provided good service during their time with the team. If they have, paying off an outstanding debt later is fine. Here are the dead money charges for the Cowboys and Eagles over the last five years that have exceeded $20 million…

That’s considerably different. Breaking it down even further (dead money charges of $4 million or more) looks like this:

Looking at the Cowboys’ dead money charges, you’ll find that most of them are players who provided good service, and the money owed comes from benefits gained earlier in their contract from restructures. There are some wasted resources spent on Jaylon Smith, Michael Gallup, and even Ezekiel Elliott, despite being sensational during his lower-cost rookie deal. But none of these charges are putting the team in a huge hole.

The Eagles are in a much different situation. Their dead money charges are larger both in size and quantity. Some of this is just business, such as the retirement of Jason Kelce, while others are financial mishaps, such as the Bryce Huff free agent signing/trade.

The Cowboys are one of the lowest dead-money-accruing teams over the last five years, while the Eagles have the absolute most. And it’s not even close. Such a discovery would tend to make some believe huge dead money hits aren’t a problem. And considering many associate the Cowboys with failure due to their lack of playoff success, one might also conclude that lower dead money hits show too much complacency and, in some cases, are hurtful. Is that true?

That will be the focus of the second part of this two-part installment, where we try to understand dead money and its impact on roster building. Make sure to check it out tomorrow.