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Salary cap for service providers still on hold
Gov. Andrew M. Cuomo made a splash in January 2012 when he announced a new salary cap on executives at organizations that provide services to the state.
Fourteen months later, the governor’s executive order still hasn’t taken effect, state records show.
The cap initially was to become effective in April 2012. But it has been delayed a couple of times. The Department of State now has pushed back the effective date to July 1 of this year as officials continue to struggle with making it work.
Under the order, providers who contract with the state as part of an extensive network offering largely health-related services will have to devote no less than 75 percent of their state funds to care or other services. They also will have to cap at $199,000 the amount they spend from state funds on individual executive salaries, though they may choose to augment the pay with money from other sources.
Capitol observers and lobbyists say it's proved tough on two fronts: figuring exactly how to calculate what portion of an executive's salary should apply toward the cap, and applying the cap to hospital chief executives, who typically earn more than $500,000.
A Cuomo spokesman acknowledged the difficulties and said the executive order, once effective, will be a “a strong, comprehensive executive compensative cap that directs precious taxpayer funds to services and cracks down on well-documented abuses.”
“This order involves 13 separate state agencies and a regulatory process that prompted hundreds of responses that had to be reviewed and considered,” Cuomo spokesman Rich Azzopardi said in an email. “Many providers requested a delay for as long as a year. In response, the state agencies agreed to a short delay to facilitate an orderly compliance process.”
The issue has come back to the fore as the governor and state Legislature wrestle over funds for the developmentally disabled in this year’s budget fight. Cuomo has proposed reducing state funding $120 million to non-profit service providers – a result, he said, of a federal cut in New York’s Medicaid share due to years of overbilling.
Because the federal government matches spending, the full impact of the cut is $240 million.
Republican and Democrat legislators have vocally opposed the cuts, along with activists and parents of adults with disabilities. Sources said recent negotiations centered n restoring about $90 million in state funds.
Cuomo, who intends to reach a budget deal with lawmakers in a matter of days, said last week he wants to drive reductions in overhead and excessive compensation. He said that, still, too often expenses don’t go toward services.
“We have a salary cap,” Cuomo said. “But it doesn’t mean there aren’t 11 other ways to drive overhead.”
Several non-profit organizations contacted for this story declined comment, citing the sensitivity of the issue. But groups raised a number of concerns when the Department of State asked for public comments.
For instance, some said the cap wasn’t compatible with Internal Revenue Service rules that make organizations responsible for executive salaries. Others noted the complications of differentiating between receiving funds directly from the state budget and being paid by a state agency and how that impacts the cap. Or whether being a “subcontractor” makes an entity subject to the cap.
Some complained that the limits “do not allow for program expansion and will result in an underinvestment in organizational growth.”
Tags: Andrew Cuomo