FanPost

Examining the theory of Different Budgets and the Implications

I have read numerous times in posts that the Draft Budget, International Budget and Major League Budget are different, or independent.  And some posters have drawn the following conclusion:

 

  •  If the PBC spends or doesn’t spend money at the major league level then it can not be used for draft/international signings.

So I did some research and developed some opinions.  First, I will provide some background on budgets in general and the PBC Budgets.

 

General

 A budget is generally a list of planned revenues and expenditures.   Many corporations compile the annual Budget that typically runs one year (the budget is static). 

 

PBC

Based on my quick research, when the PBC talks about a budget, they refer to a static, annual amount.  From an operational standpoint the PBC, appears to reference three separate budgets: 1) Major League ($54 million in 2008) 2) Draft (approx. $10 million based on recent spending) 3) International ($2 million in 2009). 

 

The financial statements seem to support the above numbers:

 

 

2008

2007

Total Revenues

$145,993,437

$138,636,326

 

 

 

Player Salaries (1)

51,040,233

50,871,186

Player Development (1)

23,182,677

21,166,850

Other

49,980,125

50,400,736

Operating Expenses

$124,203,035

$122,438,772

 

 

 

Operating Income

$21,790,402

$16,197,554

 

(1)   "Player contracts represent amounts paid to major and minor league players for signing bonuses, and are capitalized and amortized as player as player salaries and player development costs, respectively."

 

A few internet quotes or stories about the PBC budgets are below:

  • "Though the Pirates' fixed budget is $2 million [International Budget], any substantial money that the Pirates offer will come from a separate source, Huntington explained. An offer to Sano, or any other player commanding a seven-figure bonus, would come with the approval of Nutting, who would then make additional funds available as necessary."  (http://pittsburgh.pirates.mlb.com/news/print.jsp?ymd=20090701&content_id=5649994&vkey=news_pit&fext=.jsp&c_id=pit)
  •  "Signing Sano would have put us over our international budget, but we were willing to go over budget for the player," Coonelly said. "The international signing season may not be done yet, but, if it is, we will be slightly under budget there. The limited dollars not spent on the amateur side this year will be applied to those budgets next year." (http://www.post-gazette.com/pg/09278/1003090-63.stm)
  • ·         "The Pirates will slightly increase their budget for major league payroll in 2009 from the current $54 million, team president Frank Coonelly said last night.  But that should not be taken to mean, Coonelly stressed, that the figure would be maxed out." (http://www.post-gazette.com/pg/08258/912140-63.stm)

 

From my brief research I have formed the following, hypotheses/conclusions:

 

  • When the PBC refers to Budget they are referring to some static annual budget and also not a funded account of cash that will be allocated to the purpose of the budget.
  •  The PBC categorizes their expenditures into many categories including 1) Major League 2) Draft 3) International and correspondingly has budgets for these categories of expenditures.
  •  If the PBC spends less money than their budget in any one year, it is not applied to another budget.  Actual money not spent in one year, would not be applied to that year’s budget.  To say so is commingling of two separate concepts.
  •  Money not spent in one year is saved and used in future years (as described in Coonelly’s statements above).  Although not necessarily the same budget.
  •  The PBC can exceed budgeted expenditures and useless available resources.
  •  If the PBC needs more to fund expenditures in a certain category (draft spending), they will utilize money available (as described in the article about Sano).  They do not take it from another budget.  Because once again this is commingling of concepts, the budget does not actually have any money it is just a list of planned expenditures.
  • The PBC's budget is an integrated effort and expenditures are dependent on planned revenues, other planned expenditures, available resources and rates of return.
  •  Actual money spent on a category of expenditures is dependent on the money available (yearly cash flow + prior cash balance).
  •  Not spending money on Major League Level this year would increase money available.
  • Suggesting that not spending money now on any expenditure would not impact future plans/bugdets/actuals is not accurate (sorry that is a lot of nots).

I guess this leads to my fundamental disagreement with the line of thinking - don't worry that the PBC spent $5 million on Overbay, it is not like they could have used it to sign International Prospect X, or draft high school pitcher with a solid commitment Y.  They have to do something with their money at the major league level so why not get the Bopper and his 1.7513489041 wins per year. 

This is a FanPost and does not necessarily reflect the views of the managing editor (Charlie) or SB Nation. FanPosts are written by Bucs Dugout readers.

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