Since July 2020, the Dodgers have racked up close to $1 billion in deferred salaries.
When the defending champions Los Angeles Dodgers signed Blake Snell to a 5-year, $182 million contract with $62 million deferred, my rookie baseball brain immediately searched three questions on Google:
Spoiler alert: There is no salary cap, deferred salaries are the Dodgers’ new favorite financial tool, and no, the ownership group doesn’t have any Saudi connection… yet.
For those who are financial novices (like me!), deferred salary is essentially a team saying, “We will pay you later when we feel like it, and if you’re lucky, we won’t go bankrupt before then.”
It is a tactic often used to manage payroll flexibility. Think of it like layaway at Walmart, except the stakes are $100 million instead of $100.
But while Walmart wisely scrapped its layaway program, the deferred payments in MLB are not going anywhere!
In MLB, deferred salaries allow teams to keep their books in check in the short term while making massive free-agent signings.
But how much is too much?
Since July 2020, the Dodgers have racked up a staggering $964 million in deferred salaries:
Shohei Ohtani: $680M out of $700M
Mookie Betts: $115M out of $365M
Blake Snell: $62M out of $182M
Freddie Freeman: $57M out of $162M
Will Smith: $50M out of $140M
Let’s get one thing straight; deferred payments are not inherently bad. Other teams use them too. However, the Dodgers have taken this strategy to cartoonish levels.
To put this into perspective, the deferred contracts for all other MLB teams combined total just $271.5 million.
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Deferred salaries help teams manage MLB’s luxury tax rules, spreading out the financial hit and allowing for bigger signings. For players, it’s a sweet deal: who wouldn’t want guaranteed millions when you are retired?
However, when the Dodgers keep deferring contracts to sign every star player, it skews the competitive balance.
Here’s the million-dollar (or, in the Dodgers’ case, billion-dollar) question: Should MLB intervene? A salary cap feels unlikely, but maybe a “deferred money limit” could level the playing field.
Alternatively, other teams could start playing the Dodgers’ game; after all, it’s not like they are paying players with Amazon gift cards!
Whether MLB will intervene remains a question for the future. Until then, good luck to whoever is stuck holding the bag in 2040.
Image Credit: Brad Penner-Imagn Images
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