Service providers take note, as efforts are now underway to limit executive pay and administrative spending for organizations that receive state funding. On January 18, Governor Andrew Cuomo issued an executive order asserting that for any state-funded service providers (whether nonprofit or for-profit), reimbursable costs will be restricted to ensure that government funds will be largely devoted to programs, rather than to operational costs and executive salaries.
The order will cap state-funded executive pay at $199,000, and will also dictate that at least 75% of state-authorized assistance must be applied toward direct care and services. By April 1, 2015, that percentage will rise to 85%.
The new measure was quickly put into action following the January 17 budget address. In his talk, Cuomo noted that approximately one third of the New York budget goes toward service providers. He elaborated, "In certain instances, providers of services that receive state funds or state-authorized payments have used such funds to pay for excessive administrative costs and outsized compensation for their senior executives, rather than devoting a greater proportion of such funds to providing direct care or services to their clients." In an effort to control state spending and ascertain that government dollars are being spent responsibly, commissioners at the affected state agencies will have 90 days to fully implement these new regulations, amending any agreements with organizations as necessary.
Agencies that will be affected include the Office for People with Developmental Disabilities, Office of Mental Health, Office of Alcoholism and Substance Abuse Services, Office of Children and Family Services, Office of Temporary and Disability Assistance, Department of Health, Office for the Aging, Division of Criminal Justice Services and the Office of Victim Services.
Some large organizations, such as hospitals, receive the most significant portion of their funding from the federal government and from private donors, and therefore their executive compensation levels may not be impacted by Cuomo's order. However, nonprofits that receive the bulk of their funding from the state will need to act swiftly to ensure that they abide by the new regulations.
Foundation Center-New York