MLB 2012 Draft: What Are the Penalties for Exceeding Slot Budgets?

Are you chewing gum, Philadelphia? See me after the draft, please.

As we lead up to the draft on Monday, Twinkie Town be covering a few topical points of interest based off the new collective bargaining agreement. Last week we talked about the Twins having the most money to spend in the draft's first ten rounds, thanks in no small part to having $6.2 million to spend on their first selection - the number two overall pick. Along with these signing bonus allocations will come penalties for exceeding the total budget.

In past years, Major League Baseball would politely offer recommendations to teams about how much they should be spending on draftees based off of their draft position, but they were suggestions which were largely ignored. To curb spending and to take a step in the right direction for the purpose of a competitive balance in the game, the guidelines are now much more strict.

Essentially, all possible selections in the draft are allocated a dollar amount. Add up the dollar amounts for each pick that a team has in the first ten rounds, and there's the signing bonus budget for that team. The Twins have a little more than $12.3 million to spend on their 13 picks.

How do the penalties work? Join us after the jump.

  • Going over designated amounts on an individual player will NOT subject teams to a penalty, provided all players in the first ten rounds of the draft were still signed within the overall allocation. (Example: Although the number two overall pick is allotted a $6.2 million signing bonus, if the Twins sign Kevin Gausman for $6.5 million they will not be penalized provided the total spend on picks in the first ten rounds is $12,368,200 or less.)
  • For any player whose signing bonus is greater than $100,000 and signs after the tenth round, their total goes against the team's pool.
  • An escalating penalty scale will be applied based on how far over the allocated pool a team goes. Here are how the numbers work out for the Twins, along with the matching penalties.
% Over Budget
Corresponding Maximum
Twins Spend
Penalties Leveled
0% $12,368,200 None
Up to 5% $12,986,610 75% tax on overage
Up to 10% $13,605,020
75% tax on overage,
loss of next season's 1st round pick
Up to 15% $14,223,430
100% tax on overage,
loss of next season's 1st and 2nd round picks
> 15% $14,223,431 +
100% tax on overage,
loss of 1st round pick next two seasons
  • The cash penalty on up to 5%, for the Twins this year, would be as much as $463,807.50.
  • The cash penalty on up to 10% would be as much as $927,615.
  • The cash penalty on up to 15% would be as much as $1,855,231
  • Essentially, once you go over the budget allotted you by the powers that be, every dollar you spend becomes $1.75. Unless you go more than 10% over your budget, in which case every dollar you spend becomes $2.00. (Example: if the Twins are already at their limit by the time their second pick decides to sign, if he signs for the draft allocation of $1.55 million the Twins would be more than 10% over their budget. That $1.55 million becomes $3.1 million, and they lose their first two picks in the 2013 draft.)
This is a completely new wrench in the happenings of roster building and roster construction, and no doubt we'll get to see these penalties in action. At what point do teams decide that having a player in the long term is worth more than the penalty? At what point do they choose to be one or two or three players down in the top ten rounds of the draft, in order to keep themselves under a certain level? Whatever the case, this will be a development to follow as the sport continues to evolve.
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