August 8, 2010 | Read Time: 2 minutes
As states look for ways to close their budget deficits and protect charitable assets, some are focusing on the salaries of nonprofit executives.
Legislators in New Jersey recently passed a budget that places limits on what charities can pay their executives and other staff members if they are providing services for the Department of Human Services or the Department of Children and Families. The pay limits, which took effect July 1, are part of a broader effort to rein in compensation for state workers.
Executives at the largest charities—those with revenues of more than $20-million apiece—can receive no more than $141,000 in compensation from the state under the new contracts. Smaller charities cannot pay their executives more than $105,750 to $126,900, based on a sliding scale of revenue. An organization whose executive earns compensation that exceeds the cap could lose a portion of its state contract.
Linda M. Czipo, executive director of the Center for Non-Profit Corporations, a statewide association of charities, says charity leaders are working with state officials to try to come up with an approach that applies to all state contractors, not just nonprofit organizations.
“We haven’t heard any similar reports of compensation limits for investment bankers or attorneys, and the state contracts with those workers countless times,” Ms. Czipo says. “Why this social-services segment is being singled out is a big question.”
Review of Hospital Pay
In New Hampshire, Attorney General Michael A. Delaney announced in May that he would review the compensation of executives at more than 20 nonprofit hospitals.
In a report that reviewed the proposed merger of two health systems, Mr. Delaney expressed concern about the pay for Alyson Pitman Giles, chief executive officer of Catholic Medical Center, in Manchester. Ms. Pitman Giles earned $1.4-million in 2009. “Nonprofit leaders must be aware that they are the stewards of the charitable assets they oversee, and those assets are held in trust for charitable purposes, not individual gain,” Mr. Delaney wrote.
Kathy Bizarro, executive vice president of the New Hampshire Hospital Association, which represents 32 hospitals, says she believes the inquiry will find that the boards of nonprofit hospitals are paying executives appropriately. “The boards are doing the survey work, the comparatives,” Ms. Bizarro says. “They are following the guidance the Internal Revenue Service has given.”
