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Cuomo plan limits executive compensation

New York State Governor Andrew Cuomo gives his

New York State Governor Andrew Cuomo gives his State of the Budget speech in the Empire State Plaza Convention Center in Albany, NY. (Jan. 17, 2012) Credit: Newsday/J. Conrad Williams, Jr.

ALBANY -- Many social service and health care providers that receive state funds would have to limit how much they pay their top executives under proposed regulations released Wednesday by Gov. Andrew M. Cuomo.

Under the new rules, providers receiving at least 30 percent of their annual revenue from state funds or state-authorized federal funds -- and get at least $500,000 from the state -- generally would have to cap executive compensation at $199,000.

The regulations also would require the nonprofits and for-profits to use 75 percent of state funds for services rather than administrative costs. That percentage would increase to 85 percent by 2015.

In his January budget address, Cuomo cited an unnamed provider that received 99 percent of its revenue from government contracts and whose chief executive received $3.2 million in compensation. "How do we justify this spending to the taxpayers of this state?" Cuomo said in his budget address.

Secretary to the governor Lawrence Schwartz said at a news conference Wednesday that the new rules are "about fiscal responsibility" and setting standards and procedures to "monitor and hold everyone accountable in terms of where state taxpayer dollars are going."

"When you have a bad apple or an outlier out there, it hurts the entire nonprofit industry," he said.

The proposed rules are the outgrowth of an executive order Cuomo issued in January calling for certain executive agencies to devise proposals that would limit compensation and the amount of state funds that could be used for administrative costs. The rules, which must go through a 45-day public comment period before they are finalized, apply to 13 state agencies, including the state Health Department, which contracts with medical centers where compensation can be on the high end.

Executive compensation can be higher than $199,000 if the governing board reviews comparable salaries in the sector and approves it and if the compensation is lower than the top 25 percent of others in the same field.

Executives also can try to get a waiver from an agency and the state budget director so their compensation would not be covered by the cap. In such cases, the budget director would consider factors such as comparable salaries in the sector and geographic area, the nature, size and complexity of the provider's operations and services, and the provider's efforts to find less expensive executives.

The rules would not apply to education department contracts, to state and local government employers, certain child care providers or capital construction.

Greater New York Hospital Association president Kenneth Raske said in a news release that the association "agrees and supports [Cuomo's] efforts to ensure that best practices and strong governance oversight are used in determining executive compensation."

A spokeswoman for the Healthcare Association of New York State declined to comment Wednesday on the regulations.

State Sen. Carl Marcellino (R-Syosset) last month introduced legislation that would limit compensation for executives at nonprofits. A Marcellino staff member said the senator was reviewing the governor's new rules.

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