Five is the best selection the Pacers could have sent the Clippers this year – Indiana would have loved to hold on to their pick. “Disappointed because this is a great draft,” Pacers president of basketball operations Kevin Pritchard said about 15 minutes after the draft order was revealed. He’s happy to have Zubac but felt the missed opportunity. “We wanted to pick, but we’ll be okay.”
The Pacers ideal outcome for the offseason certainly involved picking inside the top four. They now have other paths available to them, though, and that is largely due to their salary cap reality.
What can the Pacers do now?
Prior to the draft or any decisions about free agents, the Pacers are at about $200.9 million in salaries for the coming season. That’s spread over 14 players – Kobe Brown is the team’s only guaranteed free agent. In theory, the Pacers have a nearly full roster that makes good sense right now.
In reality, they’d like to improve. And that’s why their spending numbers are so noteworthy. The projected luxury lax, as of the latest estimates from the NBA, is about $201 million. That’s barely above the Pacers current team salary. And the first apron, a restrictive spending barrier that makes certain types of transactions difficult if not impossible, currently projects to be $209 million.
There are ways the Pacers could cross the first apron. But given their spending level, doing so would not be a smart use of resources. Even with all of that in mind, Indiana does have some spending power to use this offseason to make their team better after their lack of luck in the draft lottery. Some of that spending would not have been plausible if they landed a top-four pick last weekend.
Pacers head coach Rick Carlisle touched on this in late April. “If [the Pacers lose their pick in the NBA Draft Lottery], there are other ways to improve the team. There’s a pretty significant salary slot for a top-four pick,” Carlisle began. “Theoretically, there’s the opportunity to use that money, if it’s not being spent on a high draft pick, on some players in free agency or use that gap of money to be a part of another transaction that could help us. Time will tell.”
Time has told, and the Pacers don’t have a first-round draft pick. They now move toward the “another transaction” part of Carlisle’s quote, and there is one main roster building tool that could be used by the Pacers as a result: the Mid-Level Exception (MLE).
It’s not the only resource available to the Pacers, or other teams over the salary cap. The Bi-Annual Exception (BAE) exists as well, and any non hard-capped team can sign a player to a minimum salary deal at any time. But the MLE is the most powerful tool Indiana will have at their disposal this offseason, and it thus provides the cleanest path toward adding an impactful player.
INDIANAPOLIS, INDIANA – OCTOBER 02: Jarace Walker #5 and Ben Sheppard #26 of the Indiana Pacers pose for photos during Indiana Pacers Media Day at Ascension St Vincent Center on October 02, 2023 in Indianapolis, Indiana. (Photo by Dylan Buell/Getty Images)
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“We’re going to try to make moves this summer, maybe around the edges, maybe big,” Pritchard said.
To do that, the Pacers will have to spend some money. That’s not simple, though, given the team’s proximity to the luxury tax. If the Pacers aren’t willing to pay it, they’ll have to shed some of their non-core players in money-trimming moves to open up spending power.
And that’s not the only spending barrier facing the Pacers. The aforementioned first apron is less than $10 million higher than their current total roster costs, and some team building restrictions come when a team is hard capped at the first apron or crosses it in team salary. So the Pacers have some salary walls to keep an eye on as they approach free agency.
The MLE can be used in two ways – the Non-Taxpayer MLE (NTMLE) or the Taxpayer MLE (TMLE). It’s technically the same exception, just with different usage. The TMLE is smaller, it’s an exception that allows teams to offer a deal up to three years in length that starts at just over $6 million. In total, the max offer using that tool would be a three-year, $18.8 million agreement.
The NTMLE is much bigger. It can start at just over $15 million in 2026-27 and can be used to sign a player for up to four years. The largest possible contract created by those outlines is a four year, $64.7 million deal. If a team signs a player using the MLE and the first-year salary of the contract is above $6.065 million or the agreement is longer than three seasons in length, then it counts as using the NTMLE.
Doing so hard caps a team at the first apron – in layman’s terms, a team cannot cross $209 million in total team salary for a full league year if they use the NTMLE to acquire a player. For the Pacers, who are right now projected to be about $9 million shy of the first apron, that means they can add a player with a first-year salary of about that $9 million number at most.
But they would be subject to first-apron restrictions by doing so since that number is above $6.065 million. Those restrictions make certain types of transactions (receiving talent in sign-and-trades, taking back more salary in trades, and more) much harder, if not impossible. Using the TMLE instead keeps the Pacers away from those limits and thus may be smarter business if the team doesn’t lower their total team salary in other deals.
In short: because using the NTMLE hard caps a team at the first apron, and the Pacers are closer to the first apron (about $9 million) than the total first-year value of the NTMLE ($about $15 million), the Pacers can’t use the entire salary cap exception without first lowering their spending.
“I think there’s a chance, but I don’t know yet. The truth is, you don’t know,” Pritchard said when asked directly if he planned to use the MLE in the offseason. “What happens is everybody goes through their draft. They redo their roster with roster depth, and then teams look at trades. Then the free agency starts to come.”
If the Pacers stick to using the TMLE, they wouldn’t have to shed salary and wouldn’t be subject to any restrictions outside of possibly crossing over the luxury tax. But they would be limited to worse players in free agency since they’d be offering a lower salary. It’s a fine balance for a franchise that believes it can contend right now.
The BAE, as mentioned above, allows a team to add a player on a one or two-year deal that starts at just under $5.5 million. It can only be used every other season, so front offices usually don’t sign players with this exception unless they have to – it also hard caps a team at the first apron. There’s not much strategy to minimum salary deals, and basically every team can use them.
Between those cheaper deals and exceptions, the Pacers have more routes to adding players via trades and via free agency in the offseason than they would have if they kept their draft pick. Securing a veteran rotation piece won’t make up for not having a top-four selection, but it could be a meaningful pivot from misfortune. The Pacers have the salary cap tools to do it.