Cubs

Explaining Cubs' budget woes: Why Theo Epstein's front office is limited this winter

Explaining Cubs' budget woes: Why Theo Epstein's front office is limited this winter

Money makes the world go 'round.

It's also been the main topic of conversation during this pivotal Cubs offseason. 

Fans want the Cubs to spend more money — namely on a guy like Bryce Harper, but really on anything or anybody that could help the team get back to the Promised Land.

The Cubs owners and business operations, however, have other ideas in regards to the budget for Theo Epstein's baseball operations department.

There are a lot of questions about the Cubs' budget and while this is no means a comprehensive rundown of the situation, here's what's going on and how it's affecting the team this winter:

The timeline and a tough end to 2018

Let's start at the beginning of this Payroll Saga.

The Cubs, their fanbase and pretty much all of baseball expected the North Siders to be playing more than one playoff game in October 2018 (even Milwaukee anticipated another run-in with the Cubs in the NLDS).

It didn't work out that way, leaving Cubdom stunned and searching for answers. Some 15 hours after the Cubs' season ended in abrupt fashion, Epstein sat in front of the Chicago media and answered questions for 75 minutes, passionately speaking about how the front office and coaching staff need to figure out how the team broke down and ensure it never happens again.

Epstein's presser made it seem like a giant offseason was coming, teasing the potential for major shake-up on the roster and surely seemed to validate the long-rumored pursuit of Harper.

So what's changed since then?

Well, for starters, that was an emotional moment for Epstein. Nobody can blame him for his impassioned rants about the Cubs' offense or lack of urgency, etc. The sting of a surprising loss was still so fresh.

At that moment, Epstein also didn't have the Cubs' budget for the winter and heading into 2019. The Cubs set their official budget typically in late October or early November after sorting through everything once the playoffs end.

Epstein and the Cubs front office had a decision to make on Cole Hamels' $20 million option at the end of October and they subsequently traded away Drew Smyly and his $7 million 2019 contract to help make room for Hamels. That's when word started to trickle out about the Cubs' money issues.

The Cubs then talked about their budget problem publicy at the GM Meetings in Southern California in early November and they did not sway from that stance throughout the Winer Meetings that ended in Las Vegas last week, where the Cubs insisted nothing has changed with the budget and they haven't suddenly discovered more wiggle room.

There are those who believe this all may be a smokescreen from the Cubs, who are playing coy in an effort to gain a competitive advantage or bring the price down in the Harper Sweepstakes.

Sooo...do the Cubs have the money to go over the budget if it's the *right* player?

"It doesn't do us any good to ever talk about specifics with money," GM Jed Hoyer said at the Winter Meetings last week. "It just doesn't help. Ultimately for us, we try to keep those numbers internal as the most important thing. I guess I never really answer that question directly."

Luxury tax — it's not just the Cubs

Sure, Major League Baseball does not have a technical salary cap like the NFL, NHL or NBA.

But this new iteration of the luxury tax is essentially acting as a salary cap for teams around the league because the penalties are so severe. Only two teams went over the luxury tax in 2018 — the Nationals and the World Champion Red Sox.

Even while franchise valuations are continuing to climb at record levels, player payroll is plummeting. For the first time in nearly a decade (since 2010-09), MLB teams spent less money in 2018 than the year prior — payroll was down more than $115 million.

MLB teams spent only $4.548 billion on players in 2018. Your first thought may be to focus on the word "only?!?" but the Cubs franchise alone is valued at $2.9 billion in April 2018. That doesn't mean the Rickettses have $2.9 billion in liquid assets, but it illustrates how the franchise (like others around the league) is thriving and yet a smaller percentage of the overall revenue is going to players.

It's not just the Cubs — look around baseball. The Phillies initially kicked off the winter saying they were going to spend "stupid" money and now they are downplaying their interest in Harper and Manny Machado. The Yankees have printed money for the last 20+ years and are supposedly not shopping at the top of the free agent market this offseason. Even the Dodgers, who have come up short in the World Series two years in a row, have been making a concerted effort to cut payroll.

Current player salary

This is the old "the proof is in the pudding" aspect of the budget. Want to know why the only true addition the Cubs have made so far this winter is the $5 million over two years committed to a utility infielder?

They're on track for a 2019 payroll that will climb over $209 million and that's before they add any other pieces this winter (like a bullpen arm or two and a backup catcher). And that's an OPENING DAY payroll projection and doesn't account for any salary the front office picks up midseason (as they did last year with Hamels, Brandon Kintzler, etc.).

The Cubs' previous record for Opening Day payroll came in 2018 at a little north of $182 million. 

So not only are the Cubs on track for the highest payroll in franchise history, but they're on pace to obliterate the previous record by nearly $30 million. If they actually signed Harper and added a veteran backup catcher and another reliever or two, that number would jump to $60-$70 million over the previous high water mark for payroll unless they could shed some serious salary before Opening Day.

It's totally understandable fans want the Cubs to do more and improve the roster, but it's not fair to say the team is "cheap" considering they're paying more for the roster than they have at any other point in the 143-year history of the team.

At the moment, the only other MLB team set to go over the $206 million luxury tax threshold for 2019 is the Red Sox, who just re-signed Nathan Eovaldi for a $17 million/year coming off a World Series championship.

Now, there are two numbers that matter to teams — the yearly salaries and the AAV (average annual value) of a contract. The latter is what counts against the luxury tax, so even though Jason Heyward is set to make $20 million in actual take-home pay in 2019, the average annual value of his 8-year, $184 million contract is $23 million per season. So Heyward counts as $23 million toward the $206 million luxury tax mark.

With regards to the Cubs' budget, they are focused on how much they're actually paying players in 2019, not the average annual salary. So even Daniel Descalso is getting deferred money on a very minor deal — he'll take home $1.5 million in 2019, but his average annual salary is $2.5 million for each 2019 and 2020.

Barring anything crazy occuring over the next two months, the Cubs will assuredly surpass the luxury tax threshold and thus will be paying extra money after 2019. For reference, the Red Sox were forced to pay nearly $12 million in 2018 strictly for taxes. The Cubs had to pay $2.96 million to the tax after their World Series run in 2016.

The more the Cubs go over the luxury tax, the more they have to pay.

Here's a breakdown of the Cubs payroll (as of Dec. 19) that impacts the 2019 budget (so not the luxury tax):

Jon Lester - $27.5 million
Cole Hamels - $20 million
Jason Heyward - $20 million
Yu Darvish - $20 million
Kris Bryant - $14 million*
Ben Zobrist - $12.5 million
Tyler Chatwood - $12.5 million
Anthony Rizzo - $11.29 million
Jose Quintana - $10.5 million
Brandon Morrow - $9 million
Kyle Hendricks - $8 million*
Javy Baez - $6.5 million*
Steve Cishek - $6.5 million
Pedro Strop - $6.25 million
Addison Russell - $5.25 million*
Brandon Kintzler - $5 million
Brian Duensing - $3.5 million
Kyle Schwarber - $2.75 million*
Carl Edwards Jr. - $2.25 million*
Mike Montgomery - $2 million*
Daniel Descalso - $1.5 million
Willson Contreras - $600,000**
Albert Almora Jr. - $600,000**
Ian Happ - $600,000**
David Bote - $600,000**
Victor Caratini - $600,000**
Kyle Ryan - $550,000

(Note: * denotes projected arbitration salary; ** denotes player is pre-arb and will make roughly $600K as league minimum salary)

That's 27 players — a complete 25-man roster plus Morrow (slated to begin the season on the disabled list) and Russell (suspended through at least April). 

Russell's suspension is without pay, so the Cubs will not have to pay him roughly $870,000 of his 2019 projected arbitration figure.

So...how did we get here?

Last winter, it seemed like a guarantee that the Cubs would at least have a seat at the table in the Harper Sweepstakes but now that this star-studded offseason is upon us, the Cubs are on pace for the slowest offseason of Epstein's regime.

How did the Cubs get to this point?

—Last offseason's hangover

This front office has been famously aggressive each winter since the Cubs' contention window opened in 2015. First it was adding Heyward, Zobrist, John Lackey and bringing back Dexter Fowler ahead of the 2016 championship season. Then it was trading for Wade Davis and signing Koji Uehara, Jon Jay and Brian Duensing before 2017. That led to last winter, when Epstein and Co. signed Chatwood, Smyly, Morrow, Cishek and Darvish.

It's that last offseason that really has a carry-over effect to this winter. Say what you want about Heyward's contract and there's no denying a guy making $23 million/year has a huge impact on the budget. But he's at least given the Cubs 4.0 WAR, a strong clubhouse presence, Gold Glove defense and delivered the most important speech in the history of the franchise.

Chatwood, Smyly, Morrow, Cishek and Darvish combined to contribute only 1.1 WAR to the 2018 Cubs while taking home $56 million. The team still owes $145 to this group of pitchers (minus Smyly's salary now that he's been shipped off to Texas) over the next few seasons and each of the four remaining pitchers carries a rather significant question mark entering 2019.

Last winter serves as a pretty damn effective cautionary tale that the Cubs can't keep spending wildly each winter with no repercussions. It's also a much tougher sell from Epstein's front office to ask for more money when the budget increase they were afforded last offseason failed to deliver (through one season, at least).

—Lack of young pitching

This has been discussed ad nauseam, but the main reason the Cubs are at this point with a tight budget is because the only way they've been able to build a big-league pitching staff during these years of contention is by spending an exorbitant amount of cash. 

Rob Zastryzny is the most accomplished drafted-and-developed pitcher in the Epstein regime and he has appeared in just 18 games and tossed only 34.2 innings over the last three seasons.

Almost 64 percent of the Cubs' projected 2019 payroll is going to the pitching staff, with more than $133 million committed to the 13 arms under contract at the moment. Only Ryan is projected to make less than $2 million and three pitchers (Lester, Hamels, Darvish) will pocket at least $20 million.

The Cubs badly need some cheap and effective pitching to help turn around their payroll/roster issues and the best way to fix the issue is having pitchers come up through the farm system to eat up some big innings in the majors.

—The Cubs have gone all-in to contend the last few seasons

It's not as if the Cubs haven't been spending money on the payroll. Prior to 2016, the highest Cubs year-end payroll for the 40-man roster came in 2010 with a $142.4 million tab.

The Cubs have obliterated that total the last three seasons (per Cot's), racking up year-end payrolls of $205.9 million (2016), $183.3 million (2017) and $193.3 million (2018).

Other factors

The Cubs would not suddenly be able to afford Harper if they had played another week or three in the postseason, but that extra revenue certainly would've helped.

The Ricketts family has spent more than $750 million in rehabbing Wrigley Field and the surrounding area, as Epstein pointed out at the GM Meetings last month. Sure, that hardly impacts the team's on-field success (if it even affects it at all) and it's not like the billionaire Rickettses are suddenly using food stamps or flying Spirit airlines because of the renovations to Wrigleyville.

The Rickettses have also made an insane amount of money from the Cubs' recent success (again, want to reference the franchise valuation of $2.9 billion), but we're simply pointing out that there have been other expenses beyond the payroll.

—The Cubs’ TV rights beyond the 2019 season are still up in the air. But the Cubs have discussed starting their own network, which will take a significant financial investment, like those poured into Wrigley Field and the surrounding area. That includes a financial risk without guaranteed revenue from an established network, but the Cubs hope it could be more financially lucrative at some point.

Cubs Talk Podcast: Kimbrel, blisters and the business of baseball

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USA TODAY

Cubs Talk Podcast: Kimbrel, blisters and the business of baseball

Luke Stuckmeyer, David Kaplan and Tony Andracki tackle all the pressing topics surrounding the Cubs, including the Brewers' reported connection to Craig Kimbrel (:45), Yu Darvish's blister woes (5:15), how the current run of extensions in MLB will affect the Cubs in the future (9:10), and Tony makes the case for Kris Bryant to be the regular lead-off hitter (16:00).

Listen to the full episode in the embedded player below:

Cubs Talk Podcast

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2019 MLB preview and predictions: How Cubs stack up against Brewers

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AP

2019 MLB preview and predictions: How Cubs stack up against Brewers

The National League looks as strong as ever, with as many as 12 of the 15 teams planning to contend in 2019.

The Cubs had a quiet winter, transactionally speaking, but almost every other team in the NL bolster their roster this offseason. 

But expectations haven't changed at the corner of Clark and Addison. After a disappointing finish to 2018, Kris Bryant and Co. once again have their sights set on another World Series.

With that, let's take a look at all of the teams that could stand in the way of the Cubs getting back to the Fall Classic:

Milwaukee Brewers

2018 record: 96-67, 1st in NL Central

Offseason additions: Yasmani Grandal, Alex Claudio, Ben Gamel, Bobby Wahl, Cory Spangenberg, Brett Lawrie, Tuffy Gosewisch, Jake Petricka...and maybe Craig Kimbrel??

Offseason departures: Domingo Santana, Keon Broxton, Jonathan Schoop, Wade Miley, Xavier Cedeno, Curtis Granderson, Gio Gonzalez, Jordan Lyles, Dan Jennings, Joakim Soria

X-factor: Jimmy Nelson

The 29-year-old right-hander emerged as the ace of the Milwaukee pitching staff with a breakout 2017 campaign (12-6, 3.49 ERA, 10.2 K/9) but hasn't thrown a pitch in a game since Sept. 8 of that season.

He's been dealing with a shoulder injury that kept him on the shelf all of last season and will ensure he won't break camp with the club this spring. But he is currently on the comeback trail and still expected to take a spot in the rotation at some point early this year.

When he returns, what kind of pitcher will he be? Is he the guy that struck out 199 batters and walked only 48 in 175.1 innings (as he did in 2017)? Or is he the pitcher that led the NL with 86 walks against only 140 whiffs in 179.1 innings in 2016? 

And how healthy will Nelson be? After missing an entire season, will his innings limit be somewhere around 100 frames?

Not much has changed for the Brewers from a year ago in that they still have a clear weakness in their rotation but a dynamite bullpen. But they obviously made it work last year.

If Nelson can return and give the Brewers some really valuable innings to begin games before he hands it over to Josh Hader and Co., that could be a huge asset to a squad that won 96 games and made it a one victory shy of the World Series without him.

Projected lineup

1. Lorenzo Cain - CF
2. Christian Yelich - RF
3. Jesus Aguilar - 1B
4. Travis Shaw - 3B
5. Ryan Braun - LF
6. Mike Moustakas - 2B
7. Yasmani Grandal - C
8. Orlando Arcia - SS

Projected rotation

1. Jhoulys Chacin
2. Chase Anderson
3. Zach Davies
4. Corbin Burnes
5. Freddy Peralta

Outlook

For all the talk of the Cubs' quiet winter, the Brewers were just as silent. Then again, they were the ascending team heading into the winter after they caught the Cubs from behind to win the NL Central and took the Dodgers to a Game 7 in the NLCS.

The Cubs finished 11-9 against the Brewers in 2018 with a +4 run differential, illustrating how neck-in-neck the two teams were a year ago. But the Brewers' arrow is pointing up in the rivalry while the Cubs now have a Year of Reckoning. 

The Cubs jumped out to a 7-1 record against their neighbors to the north by the end of April, but that took a turn for the worse as Milwaukee went 8-4 the rest of the way (including that Game 163).

The Brewers also didn't necessarily need to add much to their roster this winter since they had so many answers in house to fill needs. 

Still, they're potentially close to making a huge splash to further improve an area of great strength. Reports trickled out from Ken Rosenthal and Robert Murray of The Athletic Tuesday night that the Brewers were in talks with free agent closer Craig Kimbrel. Jon Heyman doubled down on that info and said the talks were "getting serious" Wednesday afternoon:

That would be an incredible addition to what was already the best bullpen in the NL a year ago. Pairing Kimbrel with Josh Hader and Corey Knebel puts three of the best relievers in the game at the back end of the Milwaukee relief corps. That unit would only get better once veteran Jeremy Jeffress returns after his bout with shoulder discomfort that's limited him this spring.

The Brewers adding Kimbrel would also be a huge slap in the face to the Cubs, who have a clear need for elite bullpen arms yet maintain they don't have "any more money" to spend on the roster. 

Beyond that, the Brew Crew made some shrewd moves this winter in bringing back Moustakas and also adding Grandal on one-year deals.

Grandal is one of the best defensive catchers in the game and shores up a potential hole on the Milwaukee roster. Last season, the Brewers finished 13th in MLB in catcher WAR, but much of that was based on defensive value. The collection of catchers — Manny Pina, Erik Kratz and Jett Bandy — ranked 21st in OPS (.657) from the position. Grandal has a career .782 OPS and has hit at least 22 homers every year since 2015. 

Moustakas wasn't necessarily a game-changer for the Brewers last year when he came over in a midseason trade (.767 OPS), but he gives the lineup more length and has clubbed 66 homers with 180 RBI the last two seasons combined.

There are certainly question marks about this group of position players.

Aguilar was fantastic last year while clubbing 35 homers with 108 RBI, but he had just 16 homers in his MLB career prior to 2018 and he was a completely different hitter in the second half. Before the All-Star Break (and his appearance in the Home Run Derby), the big slugger hit 24 homers, knocked in 70 runs and posted a .995 OPS. After the break, he hit just 11 homers with 38 RBI while sporting a .760 OPS and watched as his slugging percentage fell nearly 200 points. Was that a sign the league figured him out? Was the first half simply a hot stretch and the real Aguilar is a late bloomer who is a servicable slugger, but not necessarily a 35 homer/100 RBI threat each year?

Shaw crushes righties but can't hit lefties. Braun is 35 now and coming off arguably the worst season of his career. Cain had a fantastic first season in Milwaukee, but he's 33 now it's certainly possible his best seasons are behind him. Yelich is a legit star, but will he put up a .598 slugging percentage and 1.000 OPS again this year? 

And what will Arcia's production look like? Already a defensive whiz at shortstop, the 24-year-old hit .310 with a .733 OPS the final six weeks of 2018, including going 4-for-4 against the Cubs in that Game 163.

All that being said, the Brewers should have no trouble putting up runs this year and have some remarkable depth with Eric Thames, Hernan Perez and Ben Gamel on the bench, plus guys like Spangenberg in the minors and top prospect Keston Hiura potentially right around the corner.

Milwaukee is also one of the best teams in baseball in terms of executing the shift and preventing runs, especially with elite defender Cain patrolling the outfield. That run prevention will help a rotation that again has concerns.

Chacin-Anderson-Davies isn't exactly a three-headed monster, but they've all had good seasons in the past (including Chacin last year when he certainly had the Cubs' number).

Then there's Nelson, who could play a huge role this year as well as young arms Corbin Burnes, Freddy Peralta and Brandon Woodruff — all guys who can pitch at the back end of the rotation or move to the bullpen and help bridge the gap ahead of Hader and Knebel (and maybe Kimbrel??).

The reason I have the Brewers in the middle of the pack in the division is the Chuck Tanner Rule, as David Kaplan has discussed several times on the CubsTalk Podcast. So many guys on the Brewers roster had career seasons and baseball typically normalizes over a larger sample with regression to the mean. Some of those breakouts are legit (Yelich, particularly), but to what extent?

Meanwhile, the Cardinals improved their roster this winter the Cubs are banking on positive regression for their group. Make no mistake: Even with a slight regression across the board, the Brewers are still plenty good enough to contend for the NL Central crown and potentially even the NL pennant.

Adding Kimbrel to the Brewers bullpen might push them over both the Cardinals and Cubs in my personal projections. But really, you could create any combination of how these three teams finish in the division and it'd be an easy sell.

For now, let's go with the Brewers in 3rd place, close behind the Cubs and Cardinals in the division and just out of the final Wild-Card spot.

Prediction: 3rd in NL Central, just outside the Wild-Card race

All 2019 previews & predictions

San Francisco Giants
Arizona Diamondbacks
San Diego Padres
Colorado Rockies
Los Angeles Dodgers
Miami Marlins
New York Mets
Atlanta Braves
Philadelphia Phillies
Washington Nationals
Cincinnati Reds
Pittsburgh Pirates
Milwaukee Brewers
St. Louis Cardinals

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