How does the escrow system work? What is it for?
The escrow system tries to ensure that salaries & benefits do not exceed a designated percentage of BRI. The designated percentage is 57% in each season, however: • The designated percentage increases to 57.5% in any year in which BRI exceeds the 2004-05 BRI* by more than 30% ($3.948 billion). • The designated percentage increases to 58% in any year in which BRI exceeds the 2004-05 BRI* by more than 60% ($4.859 billion). * BRI was $3.037 billion in 2004-05. In order to keep salaries & benefits at or below the designated percentage, money is withheld from players’ paychecks and deposited into an escrow account. At the end of each season they compare the league-wide salaries & benefits to the designated percentage of BRI to see if there was an overage. If there was not an overage, then all of the money in escrow (i.e., the full value of their contracts) is given to the players. But if there was an overage, then the overage amount is returned to the owners (which lowers salaries back to t
The biggest factor behind the 1998 lockout was the amount of revenue that went to player salaries. The owners did not want salaries to exceed 53% of BRI, but by the 97-98 season salaries had risen to 58%, which triggered an “out” clause allowing the owners to terminate the previous CBA. With the new agreement, they put in the escrow system to ensure that salaries & benefits did not exceed a designated percentage of BRI. As described in question number 7 , the designated percentage of BRI that salaries & benefits cannot exceed is as follows: Season Designated Percentage 01-02* 55% of BRI 02-03 55% of BRI 03-04 55% of BRI 04-05 57% of BRI * Escrow did not exist prior to the 01-02 season. In order to keep salaries & benefits at or below the designated percentage, beginning in 01-02 money is withheld from players’ paychecks and deposited into an escrow account. At the end of each season they compare the league-wide salaries to the designated percentage of BRI to see if there was an overage
