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Payroll issues and Major League Baseball

Major League Baseball and the players’ union have expressed concern that the Marlins aren’t using enough revenue-sharing money to increase players’ salaries. The team said it will increase payroll. – Miami Herald

Here’s the story from the Sun Sentinel, and from the Palm Beach Post, and some reaction from Fish Stripes, a Florida Marlins blog. On a day when the Pirates officially signed Ryan Church, at a bargain ($1.5M had been my most optimistic prediction, and I think he’s well worth having at that price), the biggest news comes from the unprecedented joint statement by Major League Baseball and the Players’ Union citing the labor agreement in asking the Marlins to spend more on payroll. As a Pirate fan, I am well aware of the grumbling surrounding the low payroll of the team, which is far below the rest of the NL Central. To start with, note that the Marlins’ spending over the last few years has been well below that of the Pirates, and there should be (and rightfully so) no conspiracy theories as to why the Pirates were not mentioned in the statement. The amount spent on payroll is one reason, the present state of the team (rebuilding) is another, and finally, it seems Major League Baseball is confident that the Pirates are not pocketing the revenue instead of working on building a winner.

What, if any, are the implications of a statement like this? Does it put pressure on other teams? More importantly, should it? The Marlins have been competitive for a while- what effect does being asked to spend more money have?

To start with, the profits of baseball teams are not public knowledge, for better or worse. Using numbers available from Forbes, Matthew Galbraith put together this list. Note, at the outset, that the Marlins have a $43M leftover that could potentially be channeled into the team. Next, Maury Brown has similar findings in his article in the Hardball Times. That provides some grounds for justification of the joint statement that was issued.It’s fair to assume that some portion of this goes into the farm system, maintaining the scouting teams, and so on- Major League payroll isn’t the only thing that a club has to consider in its costs. However, Matt does claim the amounts given include operating income or overall profits, available to the club.

Should this statement affect the way the Marlins do business? I would argue that the answer to this is a bit of yes and no. Yes, in the sense that they shouldn’t be trading a Dan Uggla who would be making in the range of $8M perhaps after arbitration, and all similar scenarios. However, should they now go out and look for free agents so that their payroll rises sufficiently to satisfy the union? I’d say no, no team should be forced into that, if they have internal options. The condition is important, though. I see no reason they should look to sign a Johnny Damon or Adam LaRoche.

What about something like the Josh Johnson extension? This is where it gets really unclear, because I understand the argument for giving someone a longer extension, but its hard to say how something like that might handicap a team in the future, 4 years down. Further, should MLB or the union have a say in such a discussion? The Marlins have every right to look for a bargain in dealing with its players, and in attempting to use the money as efficiently as possible. I don’t like the potential effects of such precedents.

What if the Marlins were a team in the Pirates’ position? Rebuilding, with the likelihood of competing in the near future being low? Shouldn’t they look to trade their better players (who would presumably be making the larger chunks of the payroll) for prospects? How then do you enforce a “good way” to use the money from revenue sharing? Salary floor would seem to be the most obvious answer, but it’s hardly that simple. Wasting money for no good reason doesn’t serve any purpose, while teams must still be held accountable.

Maury Brown of the HardBall Times has a very good take on the issue, and how it might relate to other clubs (the Pirates come up a few times in his article)- Link.

The solution has to lie in the way revenue sharing is used. However, as Brown points out in a previous article, how much money is available is not really up to Coonelly or Huntington (in case of the Pirates), that depends on the owners. And here’s where the revenue sharing has to come in, and be creative. Certainly, there needs to be much deeper analysis before deciding how to implement it, but I would suggest something on the lines of forcing the teams to use it in baseball in the following way:

  • Keep tabs on expenditure and carefully check balance sheets, in case of expenditure such as in improving facilities in the Dominican, or other international locations.
  • Barring a small percentage (perhaps), a team should be obligated into spending the entire amount it receives in revenue sharing. If it doesn’t do so, in a particular year (because the team is rebuilding or because there do not seem to be appropriate investments to be made), the money should be held by Major League Baseball for a fixed number of years, when that money may be drawn upon to help finance legitimate baseball expenditure, whether it be the draft, free agency, and so on.
  • Any amount not spent by the team in the stipulated team could be returned proportionally to the payor teams, as defined in the revenue sharing policy. Alternately, it could be donated to charities, used to support amateur baseball, or in similar activities.

These are thoughts just off the top of my head, and I m curious to hear what others have to say to these, or about the issue in general. This is hardly likely to be all there is on this issue- we are going to hear a lot more of this in the near future, especially since the re-negotiation of the Collective Bargaining Agreement is close at hand.

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