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Nonprofit Director Wages Under Scrutiny

I hear from some people in Jacksonville that there are nonprofit directors who are overpaid. The drop in the economy and commensurate budget strain is making this issue come to fore. There are many, many dedicated nonprofit directors in our town who give their all for the agency. You can not separate them from the mission. When everyone was making big money, people would tell me that they couldn’t imagine being in the nonprofit sector and “working so hard for so little money.”

Now, in light of funding shortfalls, director salaries are perceived to be a budget buster .

Here is an interesting excerpt from a recent Baltimore Sun article:

Led by Senate Finance Committee Chairman Charles E. Grassley, an Iowa Republican, Congress is moving toward the biggest overhaul of nonprofit regulation since 1969. There are plenty of targets for reform: inflated gifts that fraudulently reduce donor taxes; foundations that benefit donors more than any worthy cause, and insiders vacuuming up charity dollars with rip-off vendor contracts.And executive pay. Disturbed by reports of high nonprofit remuneration, Grassley’s committee is considering making charity boards more accountable for justifying CEO pay.

The panel also may try to restrict what charities can spend on junkets and other perks.”More and more, we’re seeing that some people view charities and charitable gifts as a chance to help themselves, not others,” Grassley said last month in a prepared statement. “It’s time for comprehensive reforms to shut down personal enrichment at the needy’s expense.”Of course, one man’s personal enrichment is another’s deserved pay for a job well done.Mimicking corporate America, nonprofit organizations claim they must pay lucrative executive salaries to get and retain the best people. (They hire slick consultants to bless the packages as “reasonable” — and then pay the consultants with tax-exempt assets.)

But according to this logic there is no such thing as excessive pay for nonprofit executives, no absolute level at which everybody might agree: Yeah, this is pretty gross.Is that the best we should demand from these organizations that operate with extraordinary privilege and leeway?

Nonprofits pay few or no taxes while getting the same government services as everybody else. Americans give billions to the groups, and the donations further reduce government revenue because they are deductible against taxable income.All these gifts and subsidies help underwrite big time nonprofit salaries. But charities want the freedom to enrich their executives similar to that enjoyed by the for-profit, tax-paying sector. Go ahead and complain about, say, the $1.3 million paid last year to Robert E. Prince, CEO of Duratek, a Columbia for-profit processor of radioactive waste. But at least Duratek writes checks to the IRS and doesn’t go around shaking a can for donations. Unfortunately, there is no sign Congress would substantially control pay at tax-exempt organizations. The farthest anybody has gone has been to suggest changing legal rules to make it easier for the government to prosecute potential salary violations.

True to history, the nonprofit lobby seems to have no interest in substantial reform. Last week an advisory panel of nonprofit executives working with Grassley recommended that nonprofit boards approve CEO pay (What a concept!); that compensation consultants report to the board, not the CEO; and that executive pay be calibrated primarily against that of other nonprofits.Nice ideas, but what about limiting pay as a portion of a charity’s assets or revenue, phasing out deductibility for gifts to charities that pay CEOs over a certain level or seeking antitrust exemptions to let nonprofits regulate compensation?

The good news is that disclosure of nonprofit pay is better than ever and will probably improve under Grassley’s reforms. Perhaps potential donors will think twice after they learn what nonprofit executives make.

Here is another article from WCAX in Vermont:

“At one organization alone– it’s top seven people, when you add their salaries together make over $1 million,” said Rep. Patty O’Donnell, R-Vernon, Vermont.
Republicans say times are tough and people leading nonprofits are doing OK; they found many are making over $100,000.

“These are taxpayer dollars. All over Vermont we are watching people lose their jobs and people are hurting. It’s time to say enough,” O’Donnell said.

Republicans say at a time when the people these nonprofits serve are taking cuts, so should the bosses. A bill calls for any nonprofit that gets over half of its funding from the state to cut salaries of people making over $60,000 by 5 percent. The state can’t mandate salary cuts, but can reduce funding. The money saved would go toward not cutting pharmacy programs for seniors.

“If they can’t take their medication they die. It’s not a game. So where do we put our priorities? Do we put them in our most vulnerable citizens or do we put them in people who are making over $60,000? I think we put them in our most vulnerable citizens,” O’Donnell said.

“Representative O’Donnell has put this proposal on the table– I don’t think it in anyway should be dismissed,” said Ken Libertoff, of the Vt. Association for Mental Health.

Libertoff makes $73,000 a year and would face a 5 percent cut under the bill. He says at a time when people he represent face cuts this may be fair, but adds it’s a short-term plan that ignores long-term funding problems for programs.

“I think it should be considered but only after the details are well refined,” Libertoff said.
Democrats strongly control the Legislature and they did not endorse the plan.
“Well I think it’s well intentioned but it’s a narrow view to look just at nonprofits. There are a lot of businesses that do business with Vermont that if we want to look at executive salaries– I want to look at all executive salaries– not just pick on nonprofits,” said Rep. Michael Mrowicki, D-Putney.

The bill also calls for the state auditor to audit all nonprofits that get state funding and see how many share the same goals and if they can be consolidated.
A bill sure to spark debate at the statehouse and beyond.

Kristin CarlsonWCAX News

Keep in mind that the true targets are state, regional and national nonprofit director salaries, that have been the subject of news articles for years. Nevertheless, national or locally, there is an emerging trend to scrutinize director’s salaries.
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