Because of Stat, Melo, and Chandler (60 million owed to these 3 players in the last year), the Knicks will still be over the salary cap/luxury tax even though they declined to match Lin's offer. The only reason that they had the money available to match Lin was because of the Early Bird Rights. So, even though the 14 million counts on the cap, it does not affect the flexibility of the Knicks FO, since there is no flexibility even without signing Lin. So, anybody who justifies this move by saying we can spend the money on other players is dead wrong, which is what the reporter rightfully cleared up. There are reasons not to match Lin's offer, but spending the money on other players is not one of them.
Hope this clears it up for you. Let me know if anything in this wasn't clear.