Is There a Limit to Salaries? : Baseball: Bankruptcy for a major league team is considered possible by some executives because of the cost of free agents.

The 1990 baseball free-agent auction is nearly over, a hyperactive exercise in free enterprise. Along the way, contracts worth millions of dollars were bestowed upon great and mediocre players.

In one 30-day stretch between November and December, 29 players were signed to contracts totaling $209 million, at an annual average salary of $2.4 million for an average of three years.

In neon, the figures flashed across the tote boards of the national pastime: Darryl Strawberry for $20.2 million! George Bell for $9.8 million! Franklin Stubbs for $6 million! Matt Young for $6.4 million?

If ownership’s apparent desire to mug itself so willingly leads fans to assume that surely the money must be there, there is another way to look at baseball’s increasingly bizarre balance sheet: What if a team went broke trying to pay the free-agent freight?

It’s not so strange a thought. Sure, there are still three years left on CBS’ and ESPN’s $1.46-billion deals, which gives each owner about $14 million annually. Sure, baseball attendance keeps breaking records.

But with so much money being spent so freely, the idea that one day a ballclub’s salary expenses may so exceed its revenues that it could go broke is not out of reason’s realm.

“I think you might have more than one team go bankrupt and no buyer out there willing to take the responsibility for it,” says General Manager Al Rosen of the San Francisco Giants, who in the last month committed $33 million of owner Bob Lurie’s money to lure pitchers Bud Black and Dave Righetti and outfielder Willie McGee to Candlestick Park.

Lurie had previously made commitments totaling $30 million to Will Clark and Kevin Mitchell.

“You’d hope it wouldn’t come to bankruptcy,” says Bob Quinn, general manager of the Cincinnati Reds. “But knowing (baseball’s) history, it might have to come to it. We always come close to the brink before taking action.”

The question to answer over the next few years--assuming a continuing salary spiral that could produce an average player salary of $1 million, from the current $597,000--is this: Would a team’s bankruptcy make a dent in the skyrocketing salaries?

“It would certainly be a rare occasion for a sports club to go bankrupt,” says the Kansas City Royals’ president, Joe Burke. “But you know, I don’t even know if a bankruptcy would stop the salary spiral.”

Says Lurie: “If a club went bankrupt tomorrow, I don’t even know if it would matter. Teams would say, ‘It’s your problem, not ours.’ ”

If Lurie is right, it is even more likely that little sympathy would come from the players’ side. After all, the players’ association has proved highly unsympathetic to the owners when they cry poverty.

Agent Jack Sands, who negotiated a two-year, $2.2-million deal for Willie Wilson on Dec. 3 that shifted him from Kansas City to Oakland, says: “Bankruptcy won’t happen. But if it does, the players wouldn’t say the party’s over, the owners were right and let’s give back the family jewels.”

Sands insists that a team owner on the brink of bankruptcy would find willing buyers, especially in the four cities recently eliminated from consideration as expansion-team sites. “The commissioner won’t let a team go broke,” Sands adds.

In fact, a team going belly-up would not be a Chapter 11 bankruptcy. If no successor owner loomed in the wings, the team would be handed over to the league to operate and sell.

“I don’t want to talk about a team going broke,” says Deputy Commissioner Steve Greenberg. “But to remain competitive on the field, you have to compete for talent. Some teams will have to make a decision to lose millions of dollars by signing players or to compete with less expensive, less experienced players, which means you don’t compete. Going broke is an extreme, and a rational person would hopefully choose to go with a skeleton crew.”

Even if the sight of an owner filing a bankruptcy petition at federal court is unlikely, though, it is probable that some financial woes will descend upon some, maybe even many teams, for several reasons. Increased salaries are the obvious culprit. Payrolls of $30 million will soon be common, and revenues must flow in if those obligations are to be met.

And consider the future financial stability that seemed assured with the CBS-ESPN contracts that expire after the 1993 season. Some teams barely put their hands on the cash before handing much of it right over to the players.

“That TV money went through us like ships passing in the night,” says Pirate President Carl Barger.

The Giants, for instance, will pay $17.7 million to their five free-agent signees this season, $3.7 more than the club’s share of the TV riches. The Athletics have far exceeded their annual national TV booty with their re-signings of Jose Canseco, Dave Stewart, Dave Henderson, Bob Welch, Dennis Eckersley and Rickey Henderson.

Not to be ignored in the equation is the effect of the $280-million collusion penalty levied against owners earlier this year for rigging the free-agent markets in 1985, 1986 and 1987. Each team will pay $10.76 million to the players’ association in installments over 15 months, starting Jan. 2.

Also of concern to some recently purchased teams, such as the Texas Rangers and Seattle Mariners, is the cost of paying bank loans used to finance some of the acquisition costs.

“Some teams will have to make some very difficult decisions,” says Jeff Smulyan, part owner of the Mariners, who adds that the Mariners’ debt is not onerous. “I don’t see a bankruptcy happening, but you could see some economic misery.”

Owners in small markets certainly have the greatest reason for financial concern, especially when they see how much more in TV-and-radio rights fees their big-market brethren receive. How can the have-nots, with no more than $5 million to $7 million in broadcast fees, play the free-agent sweepstakes game when the haves play the sport with $15 million to $50 million?

Well, in some cases, they can. Take the peculiar case of the Royals, with only $5 million in rights fees. Weep not for the Royals--at least as long as owner Ewing Kauffman is there. Kauffman is a generous, civic-minded septuagenarian who built a billion-dollar fortune in pharmaceuticals. He wants to win so badly that he will spend obscenely to make Kansas City proud.

So what if bestowing millions of dollars last year on pitchers Mark Davis and Storm Davis proved to be a bust? Since November, he has signed pitcher Mike Boddicker for three years at $9.25 million, outfielder-designated hitter Kirk Gibson for two years at $3.3 million, and left-hander Dan Schatzeder for a year at $700,000.

“We thank the good Lord every day Mr. Kauffman’s here,” Burke says. “He’s not operating the ballclub for his own profit. We lost money in 1990 and we’ve assured him we’ll lose money in 1991.”

So profoundly does Kauffman want to win that he does what other fabulously well-to-do owners won’t: He subsidizes player signings with his own cash.

Says Burke: “We can’t compete with other teams as far as our income, so we have to have an owner willing to spend his own money. We don’t pass higher salary costs on to the fans. We pass it on to Mr. Kauffman.”

In Pittsburgh, however, the thought of going back to the team’s partners is unconscionable, says Barger.

“They won’t subsidize the team,” he says. “We won’t go back to them for operating capital.”

Obviously, when the Pirates’ bill for future free-agents Bobby Bonilla and Andy Van Slyke comes due next year and the bill for Barry Bonds and Doug Drabek comes due in 1992, Barger will play with fiscal fire if they pay all four what they’re worth, or community fire if they let their corps of stars depart. Already, the Pirates have allowed free-agents Sid Bream and R.J. Reynolds to leave for the Braves and Japan, respectively.

“If I said every one of our players will be with us, I’d be frivolous,” Barger says. “We have a strategy that we hope will keep us competitive.”

In fact, small-market teams such as the Pirates, Braves, Royals and Reds must find ways to resist the impulse to bid on free agents the way such big-market giants as the Dodgers, Angels and Mets do. Developing a productive minor league system is certainly the alternative, but free agents are so tempting when a team has a hole tailor-made for the right free-agent veteran.

The Reds’ Quinn has a quaint credo--”Know when to say when!”--when costs butt up against need. Having lost pitcher Danny Jackson, Quinn re-signed pitcher Tom Browning for four years at $12.5 million, and second baseman Bill Doran for three years at $7.3 million, then chased Zane Smith around the financial bases--but stopped when he felt Smith’s agent manipulating the Reds to jack up the Pirates’ offer.

“Sanity comes in when you hang up the phone,” says Quinn. “I said, ‘Consider the click of the phone your answer.’ We know our fiscal restraints, but you have to be man enough to live by them.”

Still, adding $19.5 million in new salaries (while shedding Jackson’s $1.15-million 1990 contract) does not presage the dawn of austerity.

Both players and owners are looking toward a newly named joint economic study committee to sort out the future of player compensation. Earlier this year, during the 32-day spring training lockout of players, owners proposed a revenue-sharing plan. The players balked and the owners shelved the idea.

Any type of revenue-sharing--modeled partly on the NBA’s revenue-sharing and salary cap system--must mediate the disparities in local TV-and-radio income between the rich and poor clubs. Persuading the Yankees to pool their $50-million-plus in annual rights fees with teams getting $5 million will surely be difficult for the have-not owners.

The question now is whether the study committee, whose members include Paul Volcker, former chairman of the Federal Reserve Board, can resolve the knotty compensation issues that have roiled baseball’s management-labor relations.

Well, Volcker wrung inflation out of the national economy in the 1980s. Maybe he can find a way to solve baseball’s salary inflation in the 1990s.