Last week, New York governor Andrew Cuomo proposed capping the compensation of nonprofit executives at $199,000. According to the New York Daily News,
The pay package could be higher, but an organization would have to find other funding sources to make up the difference and get special permission. The regulation would also require that the salaries -- no matter how they are funded -- fall no higher than the 75th percentile for that field in order for an organization to qualify for state funding. Only nonprofits that receive at least 30% of their overall funding from the state would be impacted.
The announcement was not entirely surprising. Cuomo suggested in his January state of the state address that he would be cracking down on executive compensation. He pointed to an executive who earned $3.2 million a year -- reporters later revealed her name was Ellen Cooper -- at a Long Island-based organization that provides early intervention and special education services to children. “How do we justify this spending to the taxpayers of this state?” Cuomo asked. “It has to stop. It has stop this year.”
I have no idea what this woman does to earn that much money. And I doubt Andrew Cuomo does either. The state could well determine that another organization is acting as a better steward of its resources, that you don't need such a highly paid executive in order to deliver such services well. And if another organization did a better job with lower overhead, the state should certainly switch to that organization. The problem with bemoaning executive compensation of any sort is that these matters aren't decided in a vacuum. You could claim that the head of a bank or a baseball player or a musician is overpaid. But compared to what? The head of another bank, a different pitcher or another lead singer? Or just compared to what feels right in your gut?
On its face, capping the salary of executives at $199,000 in New York state seems unreasonable. Perhaps in Buffalo it is possible to raise a family on that salary but in New York City and its suburbs, it would definitely be more of a challenge. Nonprofits want to attract talent just as much as any other employer of professionals. Why shouldn't they be able to compete?
The state accepts bids from different companies to do construction or provide other public services without the state demanding to see the pay stubs of every employee. Why shouldn't they do the same with nonprofits? If you think that paying someone several hundred thousand dollars will mean your organization is going to be run better and enable you to serve more people better and at a lower cost, who is the governor to question you?
Nonprofits that do business with the government are always vulnerable to legislators who have an agenda. Whether those legislators want a more racially diverse board or a lower level of executive compensation, the government's camel has its nose under the nonprofit tent. But if taxpayers are truly concerned about this issue, they should not support the governor's plan just because they think nonprofit executives should be making more of a sacrifice. If these are legitimate organizations doing important work, they should be able to lure good leaders just like any other sector of the economy.