Financial ramifications if Cowboys release Ezekiel Elliott run gamut
What I’m about to state is irrelevant to subsequent conversation, but I figured it is important to have full transparency. I do not believe Ezekiel Elliott is done being a premiere back in the National Football League. I state this because when discussing something that causes a huge divide among a fan base, it’s important to place any biases on the table. There is no question 2020 has been a huge disappointment when it comes to the Dallas Cowboys, and Elliott’s play ranks highly among the issues when discussing the club’s 2-3 start.
For me, that’s where evaluation ends of Elliott’s 2020 season. Everything that happens after the loss of Dak Prescott is noise because of several factors that even the most ardent detractors of Elliott would have to admit. But again, that’s irrelevant here. This discussion is about what options the Cowboys have financially if they decide it best to part ways with Elliott.
My friend Bob Sturm, who is worth the subscription to The Athletic all on his own, wrote a fascinating piece looking into Elliott’s play since he’s been in the league (spoiler: best by far) and over the last season and a half (spoiler: not so good). He weaves it around conversation of how best to build the roster moving forward and centralizes focus on the Elliott extension signed prior to 2019.
I’d lightly quibble with Sturm’s assertion Elliott was the trendsetter in terms of drafting backs high or paying them; Todd Gurley was the No. 10 overall pick in 2015 and got a huge deal a year prior to Elliott’s. That’s insignificant though in the larger context Sturm makes that Elliott’s production has fallen off.
He makes a sound argument in that regard, and while I have my personal opinion about some of the factors in play, even I can readily admit there is a case to be made from the other side of the aisle.
But again, that’s not what this article is about.
We’re here to dissect the proposition Sturm put forward at the end of his piece; that the Cowboys would be wise to eat the cost associated with jettisoning Elliott this offseason because of how quickly his contract will lock them into a 2022 agreement.
Let’s break it all down.
Remaining Contract
Refresher. Elliott had two years of control remaining on his deal when he held out prior to 2019. He had the fourth year of his rookie contract remaining, and the club had already placed the fifth-year option on him. Elliott signed a six-year extension for $90 million, and the length was always more about allowing the team to spread out the cap hit from the bonus across five seasons and to give the club the option to restructure base salary when they saw fit over the first three years of the deal. Also, it allowed Elliott to claim the richest RB contract in NFL history. So entering 2021, Elliott's already made just over $28 million in cash from his new deal. Thus far, only $17.2 million of that has been accounted for on the cap, leaving $10.8 million spread out from the 2021 through the 2024 seasons (in addition to each year's base salary). Elliott's 2021 salary is already guaranteed; that's $9.6 million. The catch is, Elliott's 2022 salary ($12.4 million) becomes guaranteed on the fifth day of the 2021 league year. That is the extent of the guaranteed money in his deal, which is why I've always referred to his deal as a five-year deal in total, that the club could get out of following the 2022 season if they so choose. Can they escape sooner? Yes. Is it wise? That's what is up for debate.
Sunk Cost (Fallacy) vs Relevant Cost
A sunk cost refers to money that has already been spent and which cannot be recovered. Relevant costs are future costs that have yet to be incurred. Shout out to the Econ department at Hampton University. I wish I paid better attention, profs. The prevalent thinking most have about keeping players who are believed to be beyond their value is centered around the sunk cost fallacy which describes a tendency to follow through on an endeavor due to already investing time, effort or money in it, whether or not the current costs outweigh the benefits. How does one properly differentiate between the two when it comes to playing out guaranteed money? The Cowboys have guaranteed paying Ezekiel Elliott $37.7 million through the end of the 2021 season. That money is accounted for; a sunk cost. He has a $12.4 million guarantee for 2022 if he's on the roster in 2021; that's a relevant cost. It's not as easy as saying "avoid the $12.4 million relevant costs" because to do so means to not get any ROI from 25% of that $37.7 million sunk cost. It's gone, yes, but you still can reap the benefit of that investment. It's more complicated then throwing good money after bad.
Cost to Cut
Sturm proposes the Cowboys should cut bait and release Elliott early in the 2021 league year. Again, his 2022 base salary guarantees on the fifth day. There are two choices to do so, as an outright cut and as a "June 1" cut, which would allow the team to spread the costs over two season's caps. Scenario 1: Outright Cut
The Cowboys would still pay Elliott his $9.6 million salary in 2021.
There may be offset language, we have to deal with that separately below.
The Cowboys would still have the $4.1 million of bonus proration for 2021 sitting on the cap.
The Cowboys would avoid Elliott's $12.4 million base salary in 2022.
The Cowboys would absorb the remaining prorations from 2022 through 2024 onto the 2021 cap in the amount of $10.8 million
Cutting Elliott outright in 2021 would cost the Cowboys $10.8 million of additional cap space, $24.5 million total, to not have him play for them in 2021.
All future cap hits are done.
Scenario 2: June 1 Cut
The Cowboys would pay Elliott his $9.6 million salary in 2021.
The Cowboys would still have the $4.1 million of bonus proration for 2021 sitting on the cap.
The Cowboys would see zero financial relief in 2021.
The Cowboys would avoid Elliott's $12.4 million base salary in 2022.
The Cowboys would still have the $4.1 million of bonus proration sitting on the 2022 cap.
The Cowboys would absorb the remaining $6.7 million of prorated cap hits from 2023 and 2024 onto the 2022 cap.
Does it make sense to cut him?
So that was a lot of bullet points and numbers, let's streamline this thing. Dallas would have $24.5 million in dead money from releasing Elliott that would play out either all in 2021, or with $13.7 million in 2021 and another $10.8 million in 2022. Seeing how 2021 cap is going down (COVID), possibly to as low as $175 million, the Cowboys are absolutely not in position to do Option 1. They have to figure out how to shave money off the books, not add to it while subtracting a player. Even if they work out a long-term agreement with QB Dak Prescott and don't have to tag him again for $36.9 million this go round, that extra $10.8 million is way too much to consider. What about June 1? OK, so here's the rub. If the Cowboys released Elliott as a June 1 cut, there'd be no difference in their cap for 2021, but they would save $5.7 million on the 2022 cap. Elliott's replacement in 2021 would negate whatever offset saving there would be. His replacement in 2022 would negate $0.7 million of the $5.7 million. It comes down to, is it better for the Cowboys to have two seasons of Elliott, or an additional $5 million of space in 2022 and $6.7 million in space in 2023? That's the tradeoff. Release him prior to 2021 to get savings in 2022 and 2023. For comparison purposes, the Cowboys have around $5 million of dead money on the cap in 2020 for Everson Griffen and Ha Ha Clinton-Dix.
The Offset Salary conundrum
Offset clauses are one of the big mysteries of NFL contracts because it varies from one contract to another and are never revealed publicly in advance of a player being released. Basically they say that if a player has guaranteed money, the amount the releasing team is on the hook to pay is reduced, or offset, by whatever that player makes in a new deal. This is the fundamental piece in whether Dallas could consider releasing Elliott. The amount a player gets paid in his first year of a deal with a new club, is the amount that is offset. Say the Cowboys release Elliott on Day 3 of 2021. If he signs with Washington (you know they'd be in on him) on a one-year deal, he could sign for the league minimum ($990,000) an Dallas would pay him the remaining $8.61 million. But if Elliott, at Age 26, signed a multiyear deal somewhere else, then the all of the first-year compensation is included in the offset. If he signed a 3-year, $25 million deal with a $9 million signing bonus, then the Cowboys would be off the hook for his entire base salary in that situation, even if his salary was only $990,000. While one cannot speak for Elliott, knowing he'd be released at the start of free agency and the fact he sat out for long-term security, it's a reasonable consideration if Dallas released him he'd look for a long-term deal and making sure the Cowboys suffered would not be the foremost thing on his agenda of finding a new home. It seems at least plausible Dallas could make this move IF there was offset language included in his deal. Full disclosure, I am not 100% certain of how the timing of the cap credits are doled out in an offset scenario, but it would seem logical the space frees up once a deal with a new team is secured.
Release options IF offsets are possible
So let's run through the options if Dallas could shave off the majority of his 2021 base salary. Pre-June 1st Cut Dallas has $4.1 million of 2021 bonus allocation stay on the cap, but theoretically eliminates Elliott's $9.6 million base salary. The unallocated amount from his bonuses accelerate onto the 2021 cap to the tune of an additional $10.8 million, totaling $15.9 million. The Cowboys pay an additional $1.2 million to not have Elliott on the team in 2021 and have no costs associated with his deal in 2022 and beyond. Post-June 1st Cut Again, under the theoretical that Elliott signs a deal that eliminates the Cowboys' responsibility for paying any of his 2021 salary... The Cowboys avoid paying Elliott's $9.6 million in base salary, thus resulting in $9.6 million in cap savings in 2021. The $4.1 million proration amount remains on the cap. The timing of the release eliminates the Cowboys from having to guarantee Elliott's $12.4 million in 2022 base salary. His 2022, 2023 and 2024 proration now sit on the 2022 cap, costing $10.8 million in dead money, but giving them $5.7 million in additional room.
Summary
Again, putting aside my personal belief that this is a better team in 2021 with Elliott as RB1, the discussion here is about what options the Cowboys have if they do not believe that to be the case. If there are no offset scenarios as detailed above, I don't think it's a wise business decision to part ways with Elliott for cap relief that doesn't help in the season when it's needed most. The 2021 cap is going to plummet — we've already discussed how that could play a role in the futures of linebacker Jaylon Smith and wide receiver Amari Cooper — and unless a move is helping a team manage that, than it seems pretty counter productive. If one thinks Elliott is holding the offense back (I don't, others may), then that conversation changes a bit. If there are offset scenarios where releasing Elliott could result in an abundance of immediate cap space, that conversation changes even more. If that were the case, and Dallas chose to part with the face of their franchise, then discussions about the savviness of the front office in their negotiations probably has to take on a different spin.
