As far as I’m aware, points don’t come in to the equation for any club who hasn’t manipulated their picks via academy/FS. So it’s simply a matter of pick 2 moves up a spot if the pick 1 club is in deficit. If there was potentially no penalty for going hundreds of points in to deficit the next year it would be massively exploited.
It can't be that simplistic though? The amount of deficit clearly comes into play as how else do they calculate how many picks you drop down (and subsequently how many picks move up? E.g. if you're 1 point in deficit vs 700 points in deficit.