Gov. Andrew Cuomo released proposed regulations today that would limit executive pay for organizations that receive more than $500,000 in state funding each year and have annual budgets composed of at least 30 percent state money. The maximum compensation would be $199,000 a year. If an organization wanted to pay a director more (from other funding sources), it would have the approval of its board of directors and keep compensation below the top 25 percent in the field (based on a compensation survey).
The regulations would implement an executive order Cuomo issued in January to limit “excessive” compensation and administrative costs for non-profit and for-profit service providers that receive state funds or state-authorized payments of federal funds. One provider that receives $19 million in public funds (which comprise 99 percent of its annual budget) had administrative costs of $3 million and paid its chief executive officer more than $2.2 million, plus $1 million in shareholder options.
“These regulations are designed to ensure that New York taxpayers are protected and the public’s money is spent efficiently and effectively,” Cuomo said in a statement. “Our providers of services in New York State are the finest in the nation. To ensure public confidence in those hard-working providers that play by the rules, these regulations will allow the state government to identify and stop the few providers that pocket taxpayer dollars rather than use them to serve the public.”
Thirteen state agencies are releasing the regulations today. The public comment period begins May 30 and runs for 45 days. The regulations will be finalized after that.
The new rules would also control administrative expenses for groups that receive state money. At least 75 percent of a provider’s operating expenses paid through state funding would have to be spent on program services and not administrative costs. The percentage would increase 5 percent a year until it reached 85 percent in 2015.
Waivers from the regulations would be possible under certain circumstances. They would not affect how much groups spend on capital expenses.
The regulations also would require service providers to submit annual reports on public money they receive, how much they compensate their executives and highest paid employees, and their administrative expenses. There would be an administrative review process for providers that appeared to be non-compliant, and they would have at least six months to correct any problems. If that was not done, the organization could be fined or have its state funds redirected.
Cuomo’s statement included comments of support from the New York State Rehabilitation Association, the Human Services Council, the Greater New York Hospital Association and the New York Association of Regional Councils.
“While technical details will need further discussion during the public comment period, these standards strike the right balance in identifying ‘bad apples’ while not overburdening the vast majority of nonprofit providers who ably care for our neighbors and family members in need,” said Michael Stoller, executive director of the Human Services Council.