Compensation Caps Proposed for Mass. Nonprofit Leaders
April 24, 2012 Two state legislators have filed a budget amendment, which, if passed and enacted into law, would impose compensation caps on top executives of Massachusetts nonprofits that receive state funds, based on their organizations annual operating budgets.
The caps would apply to public charities that receive at least 30% of their annual budget from state funds. The proposal defines compensation to include salary, bonus and incentive pay, deferred compensation, and nontaxable level benefits.
High salaries at nonprofits are an issue about accountability in how we spend public money, said Rep. Peter Durant (R-Spencer), who filed the amendment with Rep. Keiko Orrall (R-Lakeville). State funds should come with strings attached in the form of compensation caps.
Noting that many nonprofits are doing a fantastic job and keep tight budgets, and we applaud them, Durant cited several recent high-profile news stories focused on what he described as outsized executive salaries.
In particular, he noted the executive pay of Nancy Brennan, who is paid $185,000 a year as executive director of the Rose Fitzgerald Kennedy Greenway Conservancy, a nonprofit that receives state funding to oversee 16 acres of public parks and green space in Boston. Her salary, and state support for the organization, became an issue last February after The Boston Herald reported that Brennan initially rebuffed its request to disclose pay levels for herself and her senior staff.
Under the proposed amendment, given the Conservancys approximately $4 million annual budget, total compensation for its executive director would be capped at $128,117.
Rick Jakious, CEO of the Massachusetts Nonprofit Network, the states nonprofit trade association took issue with the proposed amendment, saying, The strong partnership between state government and nonprofits allows for an efficient and effective delivery of important services to the citizens of the Commonwealth.
Policy decisions that could have a significant effect on this partnership ought to be taken up through the established legislative process, not a budget amendment that does not allow for appropriate input and deliberation.
Durant said that the proposed caps (see table below) were developed based on salary surveys conducted by Third Sector New England (TSNE), a Boston-based nonprofit that provides management resources to other nonprofits.
The proposal exempts hospitals from the caps, Durant said, because many physicians who already earn more serve in an administrative capacity and capping their compensation could force them to step down.
We will learn more as we go along, Durant said. We dont have a real sense of how widespread the problem is among Massachusetts nonprofits.
Jonathan Spack, TSNE executive director, contested the use of his organization's survey findings, which he said showed "that many nonprofit workers in Massachusetts are significantly under-compensated in relation to the cost of living. It is disingenuous at the very least to use our survey data to support a proposal that is completely at odds with that data."
Asked how confident he is the proposal will get legislative approval, Durant thinks it has less than 50% chance of passage. If the amendment were enacted into law, the caps would go into effect next Jan. 1.
We researched what other state have done, New Jersey and Minnesota in particular, and similar proposals they put forward were shot down, he said.
Following are the caps on total annual compensation that Durant and Orrall have proposed:
The figures shown here, based on a 2010 survey of 202 nonprofits primarily in Massachusetts, were described by TSNE as "average executive director/CEO base pay." Durant's office said these numbers represent the total upper limit of proposed executive compensation.