Following up on our Feb. 20 post on New York State’s proposed limits on nonprofit executive salaries:  Gov. Cuomo issued Executive Order 38 on January 18, 2012, seting the basic groundrules.  Proposed regulations implementing the Executive Order have been issued for public comment by 13 state agencies, notably including the Department of Health and the Office of Mental Health.  The regulations cover service providers who receive more than $500,000 per year of state funding and more than 30% of their funding from the state.

The proposed regulations set a limit of $199,000 per year on compensation for “covered executives”; a term which covers directors, trustees, and other officers whose salary and/or benefits are at least partly “administrative” expenses.  The limit is implemented in two ways.  First, entities covered by the regulations may not use state funds to pay compensation in excess of the limit.  Second, the limit applies regardless of the source of the entity’s funds if the compensation exceeds the 75th percentile of compensation provided to comparable executives, as established by a compensation survey “recognized” by the agency and the Director of the Division of the Budget, or it was not approved by the entity’s board including at least 2 “independent” directors, or it was reviewed by the board but without appropriate comparability data, and the entity is unable to substantiate that it has complied with these requirements.

The proposed regulations will clearly require close attention to executive compensation by the numerous service providers receiving fundng from New York State.  The comment period on the regulations closes July 14.  Lawrence Associates will continue to monitor the developments in this area and keep you up to date via this blog.