01:00 AM EST on Thursday, February 19, 2004

BY ART MARTONE
Journal Sports Editor

The Yankees have had the highest payroll in baseball in every season since 1999, and in every season but one since 1994. In 2004, their payroll will probably be about 40 percent larger than the second-highest team (the Red Sox), and more than double that of the fifth-highest team (the Cubs).

And Sox owner John Henry is throwing up his hands in frustration.

"It will suffice to say that we have a spending limit and the Yankees apparently don't," Henry wrote in an e-mail to reporters yesterday. "Baseball doesn't have an answer for the Yankees.

"Revenue sharing can only accomplish so much. At some point it becomes confiscation. It has not and it will not solve what is a very obvious problem."

The answer to that problem, accoring to Henry, is something he's argued against in the past: A salary cap.

"One thing is certain -- the status quo will not be preserved," Henry wrote. "There must be a way to cap what a team can spend without hurting player compensation . . . without taking away from the players what they have rightfully earned in the past through negotiation and in creating tremendous value. There is a simple mechanism that could right a system woefully out of whack."

The cap is needed, says Henry, because "there is really no other fair way to deal with a team [the Yankees] that has gone so insanely far beyond the resources of all the other teams."

As might be expected, Yankee owner George Steinbrenner's reaction was swift and pointed.

''We understand that John Henry must be embarrassed, frustrated and disappointed by his failure [to complete a month-long attempt to acquire Alex Rodriguez, who was traded to New York earlier this week]," Steinbrenner said in a statement distributed late yesterday afternoon.

"Unlike the Yankees, he chose not to go the extra distance for his fans in Boston [in his pursuit of Rodriguez]. It is understandable, but wrong that he would try to deflect the accountability for his mistakes on to others and to a system for which he voted in favor."

(Steinbrenner was referring to the 2002 collective bargaining agreement betwen the owners and the players, which eschewed a salary cap for a luxury tax on teams exceeding a certain payroll amount. The Yankees' luxury-tax bill was $11.82 million in 2003 -- they were the only team to pay a luxury tax in '03 -- and will leap to approximately $28 million in 2004. Between the luxury tax and baseball's revenue-sharing mechanism, the Yankees paid out a record $60.6 million in 2003 and that figure may exceed $70 million in 2004.

(The Yanks were the lone team to vote against ratification of the CBA in 2002.)

The Yankees' yearly revenue stream -- estimated at approximately $290 million -- means that even with a payroll exceeding $180 million, they can still operate profitably.

"What the Yankees have been able to do," Rodney Fort, a Washington State University economist told the Washington Times, "is continue to grow their local revenues to the point where it makes sense to pay the [luxury] tax and continue to acquire talent."

What frustrates Henry -- and the rest of baseball's owners -- is that it's impossible for most teams to approach that level of revenue.

"More often than not," Henry wrote, "$50 million, on average, will not allow a major league baseball franchise to field a highly competitive team. Every year there will be an exception, but that is really the baseline number. So what has meaning are the dollars spent above $50 million.

"Most clubs can perhaps afford to spend $10 million to $25 million above that figure trying to compete. A few can spend as much as $30 million to $60 million above that.

"But one team can and is spending $150 million [above that], and at some point 29 owners and their players say to themselves, 'We can't have one team that can spend $10 above the baseline for every incremental dollar spent by an average team.' "

Steinbrenner called on Henry to "get on with life and forget the sour grapes," in his statement, but Henry insisted he has no sour grapes.

"We will be ready . . . The Yankees will have spent more than double the incremental dollars we will spend this year. It's a huge advantage, but we're not waving a white flag.

"We're going to continue to work just as hard to bring home a championship," he concluded, "and are fortunate to have fans that are as uncompromising as we are when it comes to demanding excellence."