NJ governor's planned cap on non-profit executives' salaries could affect disability groups

From The Star-Ledger in N.J.:

TRENTON, N.J. -- In the midst of a battle with the teachers unions about pay and benefits, Gov. Chris Christie (pictured) is turning his attention to nonprofit social service agencies that do business with New Jersey by limiting how much the state is willing to pay for CEO salaries and employee benefits.

Beginning July 1, the state would cap the salaries of the top-earning executives to $141,000, for any nonprofit social service agency with a budget over $20 million, according to an April 16 Department of Human Services draft memo obtained by The Star-Ledger.

Executive directors of nonprofit groups who oversee budgets between $10 million and $20 million could receive no more than $126,900 in state compensation. Those overseeing a budget between $5 million and $10 million would get $119,850 a year from the state, and those with a budget below $5 million would get $105,750 in pay from the state, according to the memo.

At least 32 executive directors at community nonprofits made more money last year than the new structure would allow, according to a 2009 analysis by the Office of Legislative Services. The analysis only examined 62 random agencies out of hundreds that do business with the state.

Among the 45 agencies with an annual budget below $9.9 million, 17 paid their CEO’s in excess of the proposed salary limit. All of the executives, whom the analysis did not identify, would either have to take a pay cut or have the difference in their salaries made up through fund-raising, under the administration’s proposal.

The state would save about $5 million by paying less money in CEO salaries, as well as cutting back on travel, education, severance, and vehicle expenses for all nonprofit employees, said Nicole Brossoie, spokeswoman for Human Services Commissioner Jennifer Velez.

Human Services relies on private community agencies to serve more than 1 million needy families and people with mental illness and developmental and physical disabilities. In most cases, these agencies receive almost all of their funding from the state.

"In light of the state’s fiscal challenges, the department has been exploring cost efficiencies in every part of our budget," Brossoie said. "The department’s continued goal is to ensure that state dollars are being spent in the most efficient ways."

The administration intends to adopt the same pay restrictions with contractors that work for the Department of Children and Families, the state’s child welfare and mental health agency, according nonprofit agency officials. Interim Commissioner Janet Rosenzweig, who has since withdrawn from seeking the post permanently, agreed to the changes when they were proposed in March, according to two officials familiar with the matter, but are not authorized to speak publicly on the issue.

Social service agency executives and the lobbyists that represent them said they worried that cuts to salaries and benefits, like tuition reimbursement, would make it harder to attract and retain skilled administrative and direct care employees. The agencies hope to negotiate a compromise before the new fiscal year begins July 1.

Richard Mingoia, president and CEO of Youth Consultation Services, the largest mental health service provider in the state for children, said he doesn’t understand why the state is singling out CEOs from community social services agencies.

"If they are going to apply these rules, they ought to apply the rules across the board - to Corrections, Transportation, food service, counsel for bond deals," Mingoia said. "They should include for-profits that do business with the state."

Debra Wentz, executive director of the New Jersey Association of Mental Health and Addiction Agencies, Inc. said it isn’t fair to compare state salaries with those working in the nonprofit sector because public employees receive such plum benefits and better pay.

"The state wants to be a prudent purchaser, and we couldn’t agree more. But in saying they want to bring non-profit providers in line with the state, this is very one-sided," Wentz said.

Executives are not the only target for contract changes, according to the memo:

• State money shall no longer be used for any employee seeking reimbursement for tuition, textbooks and supplies "unless such courses are required by the contract, licensing certification and Medicaid standards."
• Agency officials must seek state permission before they buy a new vehicle. They must justify its use to fulfill the state contract, demonstrate they have sought three bids, and shall not to exceed $25,000 unless they are buying a passenger van or vehicle for disabled people.

• Agency officials must seek state approval before spending more than $250 per person, per event on travel expenses.

• State money may not be used to defray severance costs unless the employee served more than a year with the company. And that would be capped at two weeks of severance pay and benefits.

The state has not given a raise to its community providers in three years, forcing many people who work one-on-one with disabled people to seek multiple jobs and apply for food stamps and state subsidized health care, Lowell Arye, executive director for the Alliance for the Betterment of Citizens with Disabilities. "Offering tuition reimbursement shows the agency cares about these employee by helping them move forward in their careers," he said.

The idea of limiting state contract spending is not new. Under Gov. Jon Corzine’s administration, then-Children and Families Commissioner Kimberly Ricketts placed restrictions on mileage, travel and tuition reimbursement.

In last year’s budget analysis, the non-partisan Office of Legislative Services scrutinized CEO income at nonprofits working for departments of Children and Families and Human Services and encouraged imposing limits on executive and administrative pay. Doing so would be "reasonable . . .as the majority of funds contract agencies receive are from public sources," according to the OLS report released last spring.

At that time, six community agencies earning more than $20 million a year paid their executive directors between $156,000 and $250,000 -- above the $141,000 the Christie administration wants to pay in the future.