The new NBA Collective Bargaining Agreement impacts the Indiana Pacers

The NBA and the NBA Players Association agreed to terms on a new Collective Bargaining Agreement (CBA) that will govern teams through the 2029-30 season, though either side can opt out after the 2028-29 campaign. The revised document determines the terms of employment for NBA players.

The new CBA has several rule changes from the old version, which runs through June 30. Every new directive impacts every team in that each franchise must follow the same rules. But because some changes affect teams at certain spending levels compared to the salary cap, each team is uniquely impacted by the new CBA.

The Indiana Pacers are currently right at the salary cap line, but when the new CBA kicks in come July, they project to be an under the cap team. Their present situation leads to some new rules that they must abide by — though it’s possible their salary cap outlook could change (as a result of trades or other transactions) prior to July.

One CBA change that alters the details of contracts that can be given out relates to salary cap exceptions. The Mid Level Exceptions (MLE) — both the Non-Taxpayer and Taxpayer version — have been expanded, though Indiana won’t have either of those if they are below the salary cap on July 1. Instead, they will have the Room Mid-Level Salary Exception, which has also increased — it’s now 5.678% of the salary cap (roughly $7.6 million for 2023-24, depending on the cap) and can be up to three years in length instead of two previously. The Pacers used this exception to sign Kyle O’Quinn and Justin Holiday in recent seasons. It could help them land a talented player this summer if they are in a position to utilize it.

Traded Player Exceptions are now more lenient for organizations with a team salary below the “First Apron” (more on this later), which the Pacers have. That makes trades easier as teams don’t have to make their incoming and outgoing salaries as close as they did in the past. Indiana already has enough cap space to make lopsided trades, but they (and other teams below the new First Apron) now have even more wiggle room to make deals.

The rules for contract extensions have been altered. Going forward, players who are eligible for a veteran extension can get a salary boost of up to 140% from their previous year salary in year one of their new contract. That number used to be 120%. This makes more veteran extensions plausible, though it likely won’t influence any of the Pacers negotiations given who is veteran extension eligible for them (T.J. McConnell, Daniel Theis, and Buddy Hield) this offseason. Any of that trio could still get a longer deal with Indiana, in theory, but a 140% raise is not necessary given the current salary of those players.

Rookie extension rules have changed, too. Any player eligible for a rookie extension can get an additional five years added to their contract. Previously, that number was four unless a player received a maximum salary rookie extension. This is relevant for Indiana wing Aaron Nesmith, who is extension eligible this summer. It is also possibly relevant for Tyrese Haliburton, though the superstar guard is likely a maximum salary rookie extension candidate and could have gotten five additional years (six total) under the old rules anyway. The questions for Haliburton will be more about options and escalator terms than total years, if the Pacers are fortunate.

The minimum team salary (a.k.a salary floor, which is set at 90% of the salary cap) regulations have slightly changed. If a team is short of the salary floor on the first day of the NBA regular season, then a few things happen.

• The organization will have to pay the difference between their total team salary and the minimum team salary to the NBA, and the league will distribute those funds to every player in the league. The old CBA stated that those dollars would go to the players on the team that is below the floor.
• The franchise will not receive a luxury tax distribution from tax paying teams. That’s a significant amount of revenue for a team to potentially lose. In 2023-24, this rule will pay teams 50% of the tax distribution as the CBA is eased in.
• The difference between a team’s total salary and the salary floor will be added to a team’s salary cap situation as a cap hold. This makes signings limited to 10% of the salary cap during the season for a team that enters the campaign below the floor.

The Pacers entered the 2022-23 season below the salary floor. They ended up using their space in two shrewd transactions — a trade that netted them two players and three draft picks as well as a renegotiation and extension of Myles Turner’s contract. Indiana would not have been able to do those maneuvers midseason under the new rules, and in the coming season, they (and all other teams below the salary floor) will likely make sure to reach the team minimum salary before opening night.

A new salary cap exception has been created for second round picks in the new CBA. The exception permits three or four year deals with small salary bumps over the rookie minimum in the first few seasons to be given to draft picks. This intentionally helps teams with high salaries sign their second round selections to reasonable deals, but it also helps every team use their cap space and other exceptions more effectively. Now, parts of the MLE won’t need to be earmarked for draft picks. For the Pacers, who have the 32nd and 55th picks in the 2023 NBA Draft, this exception could prove useful, though they are not certain to actually pick a player with both of those selections given their roster and financial situation.

While all of the above rules impact every team, the Pacers current outlook makes the previously-listed directives more relevant to the blue and gold than other franchises right now. Other CBA changes are significant, too, and could impact the Pacers in the future despite not being less important in the near term.

Perhaps the biggest change in the entire CBA from a team-building perspective is the addition of the “First Apron” and “Second Apron”. They are team salary thresholds above the luxury tax line that make transactions extremely prohibitive, and even impossible in some cases. The Second Apron isn’t quite a hard spending limit, but some teams may act like it is, especially with a rule that makes draft picks “frozen” and unable to be traded unless certain salary decreases are made by the team that exceeded the second apron.

In response to those rules, franchises way above those salary levels may look to shed money in the next one or two years. The Pacers, who currently have a cheap roster and lots of flexibility, could benefit from salary dumping elsewhere. The timing has to be right, though.

Another rule change that impacts every franchise, including the Pacers, relates to roster sizes. Teams may now carry 21 players into training camp, as opposed to 20 before, and every roster may now have three players on two-way contracts instead of two. That is a win for players trying to break into the league as well as the NBA G League, who could see more talent getting chances at the minor league level. For the Pacers, who have late picks and may want to retain young forward Kendall Brown, an additional two-way deal provides them with more flexibility.

Other general CBA changes that will alter the NBA landscape include a games played threshold that players must reach to be eligible for league awards (65 games), the creation of an in-season tournament, and more investment opportunities for players. Those are revenue paths for both the league and players, which could lead to growth for the NBA.

As is customary, teams will look to use the new rules to their advantage when they are implemented. Alterations to the CBA can be made between now and the conclusion of the document’s power. But these are the biggest changes that will lead to the biggest changes for both the Indiana Pacers and other franchises in a similar situation come July 1.