Testing the new draft restrictions

The new bonus restrictions in the collective bargaining agreement promise to have a significant impact on the way the Yankees, and other teams, approach the draft.  Previously, the Yankees had the freedom to use their financial resources to deal out overslot bonuses to players who dropped in the draft for various reasons.  However, the new CBA assigns every team a bonus pool that depends on their draft slot, and teams spending more than their allotted amount face a luxury tax and loss of future draft picks.  The Yankees will have a $4,192,000 bonus pool for 2012 per Baseball America, a fairly low figure because they will have only one 1st-round pick, and it is a low one (#30 overall).

The goal of this restriction is to ensure that the worst teams in the league are able to sign the best talents in the draft, and prevent these players from falling to big-market teams who can pay way over the recommended slot values.  In most situations, it looks like it will be an effective strategy.  While paying a luxury tax is not a major impediment to a wealthy team, losing future 1st-round draft picks for exceeding the bonus pool by more than 5 percent (or losing 2 1st-rounders and paying an 100 percent tax by going 10 percent over) is not a sustainable long term strategy for any team.

I assumed that these restrictions would keep the Yankees’ draft spending activities pretty much in check, because they would prevent top tier talent from falling to them in the draft, and limit the amount that they could offer without severe consequences.  In a normal draft year, this would likely be the case.  However, a recent injury to one of the top prospects in the 2012 draft class could cause the Yankees (and other teams) to reconsider their strategy.

Lucas Giolito, a high school RHP from California, has been considered one of the top 5 prospects in the 2012 draft class for some time, and even a candidate to go #1 overall.  At his best, the 6’6″ Giolito can pitch in the mid-90′s in his fastball (touching the high 90′s) with a good curveball and changeup, a repertoire that ranks him among the top high school pitchers of recent years (Jameson Taillon, Dylan Bundy, Shelby Miller, etc.).   This is the type of player that the Yankees would seemingly have no shot of drafting under the new system.

Giolito recently suffered an unfortunately-timed elbow injury, reportedly a sprained UCL, which may keep him out for most if not all of the season and threaten his draft stock.  While he apparently doesn’t need surgery, it’s not too hard to imagine risk-averse organizations dropping Giolito on their boards somewhat (depending on the severity of the injury and the time it takes for him to start pitching again).  For Giolito, the is an unfortunate occurrence, possibly costing him millions of dollars.  For the Yankees, however, this may present an opportunity.

While teams may drop Giolito on their list somewhat, presumably Giolito will still value himself as the top-5 talent that he is, and will demand a comparable bonus.  If teams shy away from drafting him in the top 5 or top 10, then signing Giolito would likely require a team to greatly exceed their bonus pool, and lose one or more 1st-round picks.  This may increase the likelihood that Giolito honors his commitment to UCLA, or perhaps enrolls in junior college for a year and re-entering the draft in 2013.

This injury may present a chance for the Yankees to blow through their bonus restrictions and sign a top talent, if he falls.   For a team that consistently picks at the bottom of the 1st round as the Yankees do, giving up early picks is not a tremendous loss.  Consequently, the cost of exceeding the bonus restrictions would be lower for them than for pretty much any other team.  If they value Giolito as a legitimate top 5 talent, they might think the picks are worth losing to bring a talent like Giolito into the system.  Additionally, the lost picks could be replaced over the next few years if they let free agents walk to stay within the austerity budget (such as Swisher, Martin, or Granderson).

It may be premature to think about Giolito’s draft stock at this point, and it is very possible that even with his injury he doesn’t even make it to the Yankees.  That said, he may present the rare opportunity under the new CBA where breaking the budget and paying the penalty may actually worth it.

Follow Me On Twitter