Restraints on MLB draft spending mean likely $100M less for amateurs in 3 years of new rules

NEW YORK, N.Y. – Baltimore Orioles pitcher Kevin Gausman sees eight-figure signing bonuses for some young Cuban amateurs and thinks he might have been shortchanged when he signed for $4.32 million after the 2012 draft.

Baseball’s players’ union agreed to restraints on bonuses for amateur draftees several months before Gausman was selected in the first round. While teams have strictly followed those budgets, some haven’t been deterred by similar fiscal rules for international players, giving out four bonuses of $8 million or more since December to Cuban prospects.

“It’s definitely unfair,” Gausman said. “Guys are getting punished for their families growing up in a better country.”

Adding up all the impacted players, a group that includes Cubs slugger Kris Bryant and White Sox pitcher Carlos Rodon, the new rules arguably have cost amateur draft picks more than $100 million over the last three years.

The 30 teams combined to spend $234 million in the 2011 draft on amateurs residing in the United States, Canada and Puerto Rico. The total dropped to $223 million in the first year of restraints, fell $220 million the following year and rose to $224 million in 2014, according to figures compiled by Major League Baseball.

Though volatile year to year because of the money commanded by top players, draft spending rose an average of 4.9 per cent annually in the 11 years before the rules changed and often outpaced increases in big league payroll.

Spending on big league payroll rose 5 per cent in 2012, 6.2 per cent in 2013 and 8.6 per cent in 2014. Had money for draft picks mirrored that pace, the total would have been around $286 million last year. Had it more conservatively risen at the 4.9 per cent average rate in the 11 years before the rule change, 2014 draft spending would have been about $271 million, giving players subject to the draft $106 million more than the deals they signed.

Atlanta Braves President John Schuerholz understands why American players feel the restraints have cost them.

“I guess if you were a parent of one of those kids, you’d probably say the same thing,” he said.

Baseball’s collective bargaining agreement runs through the 2016 season.

Teams are penalized if they overspend a pool set each year to govern spending on picks in the first 10 rounds plus portions of bonuses above $100,000 for players taken in the remaining rounds. Each selection is assigned a value that increases annually based on the growth rate of MLB revenue, and a team’s slots are added together to form its pool total.

There is a tax for those 0-to-5 per cent over, and a tax plus the loss of future first- and/or second-round draft picks for those in excess of 5 per cent.

In the three years of the new system, no team has gone over its pool by more than 5 per cent.

Agent Scott Boras, who has represented 15 first-round picks in the last three drafts, says top talent has been among the most hurt. Bryant got a $6.7 million bonus and Rodon nearly $6.6 million — both are his clients.

“Those two guys alone lost $15 million total,” Boras said. “They would rather sign unproven Cuban players, spend that money on them, than sign quality, proven free agents because of the loss of draft picks.”

Last year’s spending would have been higher had Houston signed No. 1 overall pick Brady Aiken, who wound up needing Tommy John surgery. And money not spent on draft picks may have been added to big league payroll.

“If major league salaries have gone up substantially and draft bonuses have remained constant,” New York Mets general manager Sandy Alderson said, “I guess intuitively one would believe that the money has been redirected.”

Big leaguers appear pleased more money was directed toward veterans and away from beginning professionals.

“For the most part, the Rule 4 draft has functioned as anticipated following negotiations in 2011,” said Tony Clark, head of the Major League Baseball Players Association.

International signings also have restraints, with teams exceeding their pools paying taxes and those going over by more than 5 per cent losing the right to give international signing bonuses over specified amounts in future years.

Arizona, Boston, the Los Angeles Angels, the New York Yankees and Tampa Bay won’t be able to give out signing bonuses of more than $300,000 to international amateurs from June 16 through June 15, 2017, and the Red Sox face a tax of about $36 million.

But that international spending won’t cost those teams valued draft picks.

“Two years ago, I would have said to you that we are also pleased with how it was working on the international side,” new baseball Commissioner Rob Manfred said. “Unfortunately, I think that the increased flow of talent from Cuba has stressed that system, and it hasn’t done as well in response to that stress.”

Baseball management has debated whether to propose an international draft and will revisit the subject ahead of collective bargaining next year. If teams do want an international draft, they would have to decide whether to propose a separate selection or to integrate the foreigners with the high school and college players.

“Certainly one of the plusses of a merged draft is that everybody is treated the same,” Alderson said. “As far as separate drafts are concerned, it may give some clubs, the lower-ranking clubs, two bites at the apple.”

Complicating an international draft are protocol agreements some nations have with MLB that set the rules for their relationship.

“Korea, Japan and Taiwan, they’ll never be an international draft regarding those countries. They won’t approve,” Boras said. “So immediately the draft is not international. So now we’re going to treat the Latin counties, the third-world countries different than we do the countries that are healthy economically? Is that justified?”

Still, Gausman tried to put the new rules in perspective. While he thinks “it’s kind of taking money out of your pocket,” he admits it is a small difference in the big picture for what big leaguers earn and the lifestyle they enjoy.

“I’ve been lucky. I got to the big leagues pretty quick,” he said. “I don’t have anything to complain about.”