BYC explaination courtesy of BSG link

[kevin.lok@lycosmail.com (kevin)]

http://chicagotribune.com/sports/printedition/article/0,2669,SAV-0006040155,FF.html
BASE-YEAR COMPENSATION BIGGEST NBA TRADE BARRIER
Sam Smith
June 4, 2000
OK, class, let me have your attention. Class!
Mr. Payton and Mr. Maxwell, can you please put down the weapons?
Today we're going to talk about base-year compensation.
Class!
I know, base-year compensation may be the most sleep-inducing three words since "Bill Bradley speaks."
But it probably is the biggest obstacle to making trades in the NBA. It is one of the reasons players such as Philadelphia's Allen Iverson, New Jersey's Keith Van Horn, Vancouver's Shareef Abdur-Rahim, New Jersey's Kerry Kittles, Phoenix's Cliff Robinson and Washington's Rod Strickland are likely to stay with their present teams, although they're some of the most frequently mentioned names in trade rumors.
It won't affect Glen Rice's status with the Lakers even if they win the NBA championship, which seems like as good a possibility as the prospect of Rice being traded.
They've kept it quiet, but the use--or lack of use--of Rice has been a point of contention within the Lakers' organization all season. Rice cost them Eddie Jones and Elden Campbell last year. General Manager Jerry West has been irked by coach Phil Jackson's refusal to run specific plays for Rice. Jackson insists Rice must fit into the team's system.
Rice has remained mum, although not happy.
"I'm not really doing the types of things I normally do, but we're winning," Rice said. "People around the league know what I can do. Whatever comes along, we'll see what happens."
For Rice it probably means re-signing with the Lakers for a figure within 15 percent of his current $7 million annual salary, say $8 million, and then being traded to Toronto for Charles Oakley, whom the Lakers tried to acquire last summer. Or maybe he'll go to the 76ers for Toni Kukoc, whom the Lakers tried to acquire during the regular season.
That 15 percent raise figure is the key because it ignites base-year compensation in a player's contract. The NBA, essentially, doesn't want much player movement because it increases salaries and tends to hurt smaller markets or weak ownership that cannot pay the big contracts. So "base year" has become the biggest obstacle to deals.
It's also one of the big mysteries of the NBA.
Yet the meaning of base year is clear: fewer trades. Still, it doesn't stop rumors.
Once a player gets a raise that exceeds 15 percent, his contract becomes base year. That would include all players with big contract extensions, such as Minnesota's Kevin Garnett, the Los Angeles Lakers' Kobe Bryant, Boston's Antoine Walker and Iverson. The base-year period lasts for two years, and it severely handicaps a team's ability to deal unless it is dealing with a team that's under the salary cap.
One of the most talked-about players recently is Iverson, who has been heading for a split with coach Larry Brown after a year of frequent blowups. Team insiders say Iverson challenges Brown at virtually every practice.
"I don't want to break up the core of this team, but we have to investigate every opportunity," Brown said when asked about dealing Iverson. "We're not going to be afraid to make a move if we feel it benefits our club."
The Sixers dealt Moses Malone in 1986 and Charles Barkley in 1992 and came away with little. Brown does not want a repeat.
"If you're going to make a trade with key players," he said, "you'd better make sure you improve your team."
There has been talk of a deal with the Los Angeles Clippers involving Lamar Odom, but it's unlikely the penurious Clippers would give up a relatively low-paid Odom for a highly compensated Iverson.
Iverson made $9 million last season. Because of base-year compensation, the 76ers couldn't trade him for another player making $9 million, such as Walker. They could only take back a player making $4.5 million, or half of Iverson's contract. It goes to 75 percent in the second year, but the team acquiring Iverson would need $9 million in salary-cap space.
Because every team but the Bulls, Magic and Clippers is over the salary cap, no team could make that deal. Those three teams could deal for base-year players or be a conveyor in a three-team deal because once a base-year player goes to a team under the salary cap, the base-year provision is erased, even if the player is with that team just for the purpose of being moved to another team.
Mr. Mason, put down the blackjack and listen!
The likelihood of the Bulls or Magic helping out others is limited because they would risk their own salary-cap situation by taking other players in complicated three-team deals.
So you can probably forget about Iverson being traded, or other base-year players such as Cleveland's Shawn Kemp, Dallas' Michael Finley, Milwaukee's Ray Allen, Golden State's Jason Caffey, New Jersey's Stephon Marbury, New York's Marcus Camby and Charlie Ward, Orlando's Darrell Armstrong, Portland's Jermaine O'Neal and Rasheed Wallace and Denver's Nick Van Exel.
But did you hear the one about Grant Hill for . . .