Could the Royals take advantage of deferred contract payments like the Dodgers?

In short: yes, but it’s complicated

About a year ago, Shohei Ohtani signed the biggest baseball contract in the history of whatever. It was a gigantic, 10-year contract with a total value of $700 million, demolishing the previous record held by Aaron Judge of $360 million.

Ohtani is of course a unicorn, an MVP hitter who also just happens to be a top-tier starting pitcher. He is the face of baseball, arguably the biggest superstar in the history of the game given his international appeal. So it was not quite a shock that his free agent contract was a unicorn, too. In the contract, Ohtani makes $2 million a year for the next decade—the same amount that Adam Frazier and Garrett Hampson made in 2024, mind you—before making a whopping $68 million a year for the decade following that.

Deferring money has always been a thing, as plenty of acclaimed players have deferred money years or decades after retirement. Most famous is Bobby Bonilla Day, where the New York Mets send the former infielder a little over $1 million every July 1. Bonilla retired after the 2001 season, but he’ll keep making money through 2035. But Bonilla isn’t alone: the Cincinnati Reds just wrapped up on paying Ken Griffey Jr.’s $57.5 million of deferred money, for instance. Griffey retired in 2010. Other players with active deferrals as of 2024 include Todd Helton, Manny Ramirez, Chris Davis, and Matt Holiday.

However, the Dodgers seem to be on a roll here with deferring money like it’s going out of style. Most players aren’t in Ohtani’s position to make gobs of cash from selling their likeness to hawk products and aren’t interested in deferring a majority of the contract. So most deferments look like Blake Snell, who is deferring $65 million of his $182 million contract, or Tommy Edman, who is deferring $25 million of his $74 million contract.

The Dodgers are not doing anything that other teams can’t do. So the question here: should or could the Royals take advantage of deferred contract payments like the Dodgers? Put simply, yes, the Royals can technically take advantage of deferring payments—to an extent.

One of the benefits of deferring payments is how those deferred dollars count against the competitive balance tax limit. If you’re over the limit, there are escalating consequences. so teams want to stay under said limit. Now, a team’s real payroll and their competitive balance payroll are linked, but not the same. Competitive balance payroll is calculated by taking the total contract value divided by the total number of years. Bobby Witt Jr., for instance, will make $8.1 million in real money next year but will count for $26.2 million against the competitive balance payroll because that figure is his average figure over the course of his extensions.

You can see where this is going: if you add more years to a contract via deferred money, you lower the overall per-year hit in the eyes of the competitive balance calculations. But the issue is that this benefit only really applies to big market teams. The competitive balance tax threshold is $241 million in 2025. The Royals are never going to be in a spot where they have to worry about that because there’s no scenario in which they are anywhere near that payroll number, and so they won’t be able to take advantage.

So, could the Royals offer defer money to entice a player to sign with them? Technically, yes. The problem is that every other team in baseball can offer the same, which means that the big market teams once again have an advantage. This whole thing reminds me a little of the period before the 2012 CBA was signed where small market teams were offering way more money than large market teams to top draft picks. For a while, it was an efficient way to creatively beat those large market teams—until the large market teams realized that they could just outbid the small market teams for amateur talent, too, and then the league had to step in to put limits on the spending for league fairness.

There’s a lot of consternation about this right now, but I think that we’ll see a limit on deferred contract payments in the next CBA. Besides, there’s a downside to deferred payments, too. The Dodgers also put deferred money in the Mookie Betts deal, and they’re going to end up paying Betts and Ohtani a sum of at least $76 million a year every year from 2034 through 2044.

I’m not sure if I want to see the Royals paying, like, Anthony Santander a decade from now. But deferred payments could still be a tool in the toolbox—it just depends how the Royals use it.