I have a 35 year old SP who is a pending Free Agent after my current season is over.  I would like to resign him, but he is asking for a 1 year/$5M deal, and I think I could get him cheaper if I let him hit the open market.  I was wondering if he would see a more significant offseason decline if I let him go to free agency rather than just signing him to the $5 mil deal now, before he becomes a free agent and the season rolls over (I have $20M in training).

Any idea? 

You can check any older pitcher in your world but, in my experience, they start to decline after rollover at 36,
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His decline, if he is going to decline over the offseason, will be the same whether he is a free agent or already signed by you.  Factors such as his age, makeup, your training, all go into whether or not he is going to decline and if so, by how much.  If he has already started to decline, you can get a sense of how fast he is plummeting (same as progressions, except it is now called regressions), if he has not started to decline yet, I would not worry too much about it as they usually start small and a 1 year contract is not going to hurt you.

As for you thinking you may be able to get him cheaper, it is a considerable gamble.  The free agent period has a tendency to create overspending for value, especially in the pitcher arena.  If you think he is worth 3.5M, someone else is going to think he is worth 5M most likely, so you should have just resigned him in the first place.

Mike's right.  Small decline at 36...bigger at 37.  If it is Eric Hill for the Sacramento Savages, don't bother.