How The New CBA Changes The Draft

Major League Baseball and the players union agreed to the terms of a new Collective Bargaining Agreement on Dec. 2, and it was ratified on Wednesday. Details of the new CBA are trickling in, but here are some of the key changes that affect the draft.

Draft Pick Compensation

The system of draft pick compensation will change drastically. Under the previous agreement, teams signing players who had rejected qualifying offers from their previous team would forfeit their highest unprotected pick. Now, a team signing a QO free agent will be subject to the following rules, according to MLB:

• A non-market disqualified Revenue Sharing Payee team (i.e. a team that receives revenue sharing money) will forfeit its third highest remaining selection.
• A Competitive Balance Tax paying team (i.e. a team whose payroll exceeds the luxury tax threshold) will forfeit its second-highest and fifth-highest remaining picks—in addition to having its international signing bonus pool reduced by $1 million in the next full signing period.
• All other teams will forfeit their second-highest remaining pick and will have their international bonus pool reduced by $500,000.

Teams that lose free agents who rejected qualifying offers are subject to the following rules:

• A non-market disqualified Revenue Sharing Payee team will receive a pick immediately following the first round if the player signs a contract with a total guarantee of $50 million or more.
• A Competitive Balance Tax paying team will receive a pick immediately following the fourth round.
• All other teams will receive a pick immediately after the Competitive Balance Round B.

Notably, these changes to the compensation system will not take effect until next offseason. So teams signing free agents who rejected QOs this offseason will still forfeit their highest unprotected pick, and the team losing the player will receive a pick immediately following the first round.

Bonus Pools And Slots

The next critical area of draft changes relates to the bonus slotting system, though many of the same rules remain in place. Each top 10-round draft pick comes with an individual bonus slot value. The sum of the slot values of a team’s draft picks is the team’s spending pool, and can be distributed among any players that team acquires in the draft—including non-drafted free agents. The penalties for exceeding the bonus pool remain the same:

• Teams that exceed the pool by 0-5 percent will pay a 75 percent tax on the overage.
• Teams that exceed the pool by 5-10 percent will pay a 75 percent tax on the overage and lose a first-round pick in the next draft.
• Teams that exceed the pool by 10-15 percent will pay a 100 percent tax on the overage and lose both a first-round pick and a second round pick.
• Teams that exceed the pool by more than 15 percent will pay a 100 percent 100 on the overage and lose first-round picks in the next two drafts.

According to MLB, the aggregate money in the slots has stayed constant, but some of the money has been redistributed from the very highest picks into the rest of the first round.

We don’t know all of the individual slot values yet, but we do know that the first overall pick will have a slot value of $7.4 million in 2017. In 2016, the slot for the first overall pick was more than $9 million.

Individual bonus slots will continue to rise in line with MLB’s revenue growth, meaning that the spread between picks will grow each year. This shouldn’t present much of an issue early in this CBA, but will lead to larger divisions in bonus pools later in the term of the agreement.

This is significant because it allows teams with high bonus pools to target players who fall in the draft due to high bonus demands. One example of this in 2016 was Taylor Trammell, who signed with the Reds for $3.2 million—approximately $1.4 million over slot value—as the 35th overall pick. Cincinnati was able to pull this off in part because it signed Nick Senzel for $6.2 million, which was significantly under slot value for the No. 2 overall pick. The top bonus slots will remain high, but some of the financial flexibility that they afford teams will be gone.

Competitive Balance Rounds

The next key changes relate to the Competitive Balance Rounds. Previously, the order of those rounds was determined by a lottery. The lottery system is gone, and has been replaced by a new system for assigning picks.

Teams in bottom-10 markets and with bottom-10 revenue have been assigned picks in either Competitive Balance Round A—which follows the first round—or Competitive Balance Round B—which follows the second round.

Those assignments are based on a formula that takes winning percentage and local revenue into account. In lieu of a lottery, the eligible clubs will alternate between Round A and Round B over the duration of the five-year CBA, so teams that pick in Round A in 2017 will again have Round A picks in 2019 and 2021.

Round A and Round B designations also correspond with international bonus pools. Teams picking in Competitive Balance Round A receive a $5.25 international allotment, while teams picking in Round B receive $5.75 million.

The Competitive Balance Round assignments for the 2017 draft are as follows, in order of how they will pick:

Competitive Balance Round A:

• Tampa Bay Rays
• Cincinnati Reds
• Oakland Athletics
• Milwaukee Brewers
• Minnesota Twins
• Miami Marlins

Competitive Balance Round B:

• Arizona Diamondbacks
• San Diego Padres
• Colorado Rockies
• Cleveland Indians
• Kansas City Royals
• Pittsburgh Pirates
• Baltimore Orioles
• St. Louis Cardinals

These picks can be traded after the beginning of the season.

MRIs

The CBA includes a procedure for pitchers to participate in a voluntary magnetic resonance imaging program. The commissioner’s office will select the top 50 draft-eligible pitchers each year to be invited to participate in the program.

If a player participates in the MRI program and subsequently fails a team-administered physical for an issue that was revealed in the pre-draft MRI, the team must offer the player at least 60 percent of the individual bonus slot value of the pick used on that player to retain the right to receive a compensatory pick if the player does not sign. In the past, a team only had to offer 40 percent of slot value to receive compensation.

For pitchers who elect not to participate in the pre-draft MRI program and later fail team-administered physicals, the team does not have to offer the player any bonus to retain compensation.

Mets prospect Anthony Kay is a good example of a case that could have been effected by this procedure. Kay pitched effectively late in the college season for Connecticut, but his physical with the Mets revealed issues with his elbow. He ended up signing for $1.1 million as the 31st overall pick, receiving approximately 56 percent of slot value ($1,972,100). Under the new rules, Kay would have earned a higher bonus had he participated in the MRI program and still been selected in the same spot.

At least one National League scouting director is satisfied with this arrangement.

“No one is happy when a player fails his physical,” the scouting director said. “It’s not good for the player and it’s not good for the team. Hopefully the players will participate. You can’t force them but it makes a difference in your evaluation if you know for sure that the guy you’re taking is healthy.”

An American League scouting director also weighed in.

“A clean medical can really help a kid’s stock,” the scouting director said. “A full medical (report) could also make your decision a lot easier in some cases.”

Before insurance contributions, MRIs cost (on average) nearly $3,000, according to a 2014 report by Time Magazine.

College Scholarship Plan

The College Scholarship Program allows teams to offer to fund the remaining college education of players who sign, and the cost of education does not count toward the team’s bonus pool. The plan does not force teams to pay for the education; the exact terms are negotiated before the player signs. There are two key changes to the College Scholarship Plan.

First, there is a two-year redemption window for the player to take advantage of the scholarship after his career ends.

Second, players can now redeem the CSP at most accredited institutions (including vocational schools), but not at for-profit universities with graduation rates below 50 percent.