NEWSLETTER
[The final in a short series of primer posts discussing the upcoming 2012 MLB Draft, which could be huge for the Cubs. The first in the series looked at ten of the players the Cubs might consider with their first round pick, and the second looked at the logics of the Draft. The Draft will take place from June 4 to 6, and you can expect plenty of live coverage here at BN.]
Last year, the Chicago Cubs went nuts in the Draft. They took great players early, they took great players late, and they paid handsomely to sign them. Wouldn’t it be nice to do that again this year?
But, no dice. In the offseason, baseball owners and the Players’ Association passed a new Collective Bargaining Agreement, which, among other things, dramatically altered the Rule 4 Draft (that’d be the June Draft about which we’ve been talking so much). Some of those changes – a competitive balance lottery, for example – don’t kick in until 2013, but a great many will be confronted by teams for the first time next week.
The Pool
Beginning this year, teams will be assigned a “pool” of dollars that they can use to sign players selected within the first 10 rounds of the Draft. The pool is based on the “slot” value of each of the team’s picks (each pick in the Draft is given a certain value, and each of a team’s picks’ values are added up to determine the pool amount). The Cubs’ pool in 2012 is a hair over $7.9 million, the 8th largest in the Draft. That’s the amount the Cubs will have to work with in the first 10 rounds, in which they’ll draft 12 players.
Last year, the Cubs spent just $6.56 million in the first 10 rounds, so they should be good to go, right? Well, not exactly, as you’ll see. Keep in mind that, in the Draft as a whole, the Cubs spent about $12 million. Unfortunately, that ain’t happenin’ this year.
The Penalties
OK, so there’s a pool of $7.9 million the Cubs have to spend in those first 10 rounds, but what happens if they go over it? Why can’t they just spend $12 million again this year? Penalties!
Any team that exceeds its pool by 0 to 5% must pay a 75% tax on the amount of the overage. Any team that exceeds its pool by more than 5% but less than 10% must pay a 75% tax on the amount of the overage AND loses a first round draft pick. Any team that exceeds its pool by more than 10% but less than 15% must pay a 100% tax on the amount of the overage AND loses a first round draft pick AND loses a second round draft pick. Any team that exceeds its pool by more than 15% must pay a 100% tax on the amount of the overage AND lose two first round draft picks.
As you can see, if you go over by more than 5%, the penalties get really steep.
Still, if you don’t care about paying a little extra money, but don’t want to lose future draft picks, you can safely go over your pool amount by 5%. I fully expect the Cubs to fall into that category, so we can actually think about them having a pool of about $8.33 million, rather than $7.9 million. That could make a difference.
The “Other” Draftees and Signees
You’re probably wondering about rounds 11 through 40 in the Draft (yup, the Draft is only 40 rounds now), and about kids who go undrafted. How do the financials work out for them? Pretty simply: teams can spend up to $100k to sign each of them, whether they were picked in rounds 11 through 40, or went undrafted and are signed as free agents. Any amount a team goes over $100k for a given player is counted against the pool.
Gaming the System?
This is what you really want to know. How can the Cubs game the system this year to do “better” in the Draft than other teams? The short answer is: other than going over their pool amount by no more than 5%, I’m not sure they can.
MLB has long had slot recommendations for draft picks. The difference between then and now, though, is that, until this year, the slot amounts had no teeth. That’s why the Cubs were able to draft someone like Dillon Maples in the 14th round last year and pay him $2.5 million to sign. That would be virtually impossible this year, thanks the penalties for going over the pool.
So how do you draft and sign more talent than other teams? Well, the most obvious way is to have more draft picks and have a higher draft position – but obviously there’s nothing you can do about those things on Draft day.
The drafters of the CBA were very careful to exclude any possible gaming you might think of. How about waiting to Draft overslot kids until after the 10th round? No dice – any amount you pay them over $100k counts against your pool. How about signing a bunch of undrafted kids to big money? After all, there are bound to be quality high schoolers who slide in the Draft, and then aren’t drafted at all. No dice. That over $100k rule applies to undrafted kids, too. How about offering a player a Major League contract as an enticement? No dice. Not allowed anymore. How about picking a couple guys in the first 10 rounds that you know you can’t sign, lowball them, have them reject, and then use that money on other, higher upside picks? No dice. If you don’t sign one of your picks in the first 10 rounds, the money slotted to that pick goes out of your pool. They really did think of just about everything.
The only way to pay guys overslot is if you’ve “saved” money elsewhere in the first 10 rounds by signing someone else underslot. For example, let’s imagine that the Cubs take a decent college pitcher – but not one of the top, say, 10 such pitchers – with their number six overall pick. They could probably sign that guy for considerably less than the $3.25 million slot amount, and could use that savings toward some overslot guys in later rounds.
But, here’s the thing: by doing that, you just passed up on the opportunity to take one of the top six talents in the Draft. And however great you might be at drafting overslot types in the later rounds, you can’t get back the opportunity to get someone like the guys who are going to be going in the top 10. So how much did you really accomplish by this approach? Well, not much unless you grab *multiple* overslot types late, and get them all to sign. It’s doable, but it’s also extremely risky.
From my perspective, your best bet is to use your first round pick on the best player you can get, and then try to get him to take slightly less than slot. From there, you go ahead and draft a few overslot types throughout the Draft, and see where the chips fall by the signing deadline (which has moved up to mid-July from mid-August, by the way).
The only other way I see to game the system is super complicated. It involves a Draft that you see as incredibly deep (this year’s isn’t it), and a subsequent two seasons where you see your team being very good. For example, let’s imagine that the 2013 Draft class is viewed as awesome, and full of tough-to-sign types, who are expected to slide in the Draft. Let’s also imagine that the Cubs expect to be very good in 2013 and 2014 (like I said, we’re just imagining for the purposes of this exercise). Then, in the 2013 Draft, the Cubs can go hog wild on drafting overslot types, and pay them whatever it takes to sign. Yup, they’ll incur heavy penalties including the loss of their next two first round picks, but those penalties are softened by the fact that the lost first round draft picks would likely be coming at the end of the first round (since the team is expected to be good in the following two seasons). Thus, your net talent take in those three Drafts is much higher than it would be if you didn’t go hog wild.
As I said, it’s complicated, and involves projections that are almost impossible to make. But that’s how difficult the CBA has made things for teams looking to improve rapidly via the Draft.
I remain hopeful, though, that the new guys in charge of the Cubs have already thought of creative ways to improve more than other teams in the Draft. Theo, Jed, and Jason are a hell of a lot smarter than I am, so they just might pull it off.
