If you've been paying attention to the off-season, you may have heard the term "June 1st designation" or "June 1st cuts." It's a somewhat complicated method of deferring salary cap hits in order to cut players immediately. Typically, it's done when a team wants to get rid of a player whose contract would normally prohibit it for salary cap reasons. Here's a quick rundown on some details about this designation, and how it could impact the Falcons.
1. Only 2 Per Team Per Year
The first thing to know about the designation is that each team can only use it on two players per league year. So, while it would be nice to be able to use it to cut any player ahead of their cap issues, teams have to be wise about how they apply this cut.
Also, you have to wait until the league year begins (March 10th) before you can cut the player and use this designation. So those of you clamoring for players to be cut now, this is a potential reason it hasn't happened yet.
2. Cap Savings Aren't Realized until June 1st
This is an important point and one that can't be glossed over. Even if a player is cut immediately and designated as a June 1st cut, those cap savings aren't realized until June 1st. That means that the money is not available to be used at the onset of free agency in March. So, while the player is shown the door, the savings aren't immediately available. There are still financial benefits to using this designation, but using the money early in free agency is not one of them.
3. How the Cap Hit is Saved
When a player is signed with a bonus, that bonus is often split across the length of his contract - up to 5 years. So, if a player gets a 10M signing bonus on a 5 year contract, the salary cap hit is actually 2M per year. However, when you cut a player, the unpaid portion of that bonus hits your cap immediately. So, in the example above if you cut the player in year 3, 6M of the 10M will hit your cap for that year.
However, by using the June 1st designation, only the portion of that bonus that applies to this league year is applied to this league year. The remaining unpaid portion is thus pushed to the next league year. In the example above, instead of taking a 6M hit against the cap, the team only absorbs 2M of that for this year, and 4M against next year. Ultimately, you still have to take the cap hit but the June 1st designation gives you one more year to spread the hit out.
Potential Falcons Candidates
1. Sam Baker
Given his issues in staying healthy, and the fact that the team drafted Jake Matthews to essentially replace him, Baker looks like a potential cut. The problem is that he still has 9.2M of his signing bonus still to hit the cap. Compared to the savings of cutting him, the Falcons would lose 1.9M against the cap if they cut him immediately. By using the June 1st designation, only 2.8M of the bonus would hit this year, netting a 4.5M savings against the 2015 cap. That would also mean that Baker would account for 6.4M of dead money in 2016 as well.
2. Tyson Jackson
Talk about buyer's remorse: After only one year on the team, many fans are looking for TJax to be given the boot. The problem? 8.4M of signing bonus that would hit the cap. By using the June 1st designation, that cap hit from the bonus would be just 1.6M (for a total cap savings of 2.25M) while he would count as a 4.8M hit towards the 2016 salary cap. It's not an ideal way to handle the situation, but those hoping we move on from Tyson quickly may take solace in knowing that there is a way to do so.
What are your thoughts on this cap savings technique and the Falcons potentially using it?