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Are some not-for-profit raises getting out of hand?

Friday, Jun 22, 2012

* Comparing CEO pay increases at not-for-profits to average worker pay increases in the private sector might be a fun exercise, but perhaps the Tribune should’ve compared not-for-profit CEO pay hikes to private sector CEO raises. Either way, though, the Tribune found this when it looked at not-for-profit groups which get most of their money from state taxpayers

A Tribune analysis of financial filings of 18 such nonprofits found that their executives received an average of 4.3 percent in pay raises in 2009 and 2010, when the economy was sputtering. That’s double the average compensation boost for private-industry workers, according to federal wage data.

Many of these nonprofit executives already earn far more than the top state officials who dole out tens of millions of dollars to these agencies every year. At one nonprofit that aims to help the working poor, the director had her pay nearly double in eight years, to about $340,000.

* Illinois pays a lot of money to these not-for-profits because it’s cheaper than doing the job itself. But doing so has created a large lobby that works to perpetuate itself

•James Hogan, with Cornerstone Services Inc. The nonprofit serves the physically and mentally disabled in Will and Kankakee counties. He received a 1 percent raise in 2009 and a 25 percent raise in 2010, taking his total pay to in excess of $244,000. Those raises came during a time when Cornerstone publicly lamented the difficult fiscal climate of nonprofits, particularly those receiving government grants. […]

•Mary Hollie, with Lawrence Hall Youth Services. The organization provides residential care and other services to at-risk youths in the Chicago area. Hollie received a 7 percent raise in 2009 and a 9 percent raise in 2010, ending the year with nearly $284,000 in total pay.

* New York seems to have a pretty good idea

But only New York has set caps, after Gov. Andrew Cuomo this spring ordered state agencies to limit pay at nonprofit vendors to $199,000, although nonprofits can raise private money to boost the pay or seek special permission from the state.

This discussion definitely ought to be part of the “budgeting for results” law that Illinois passed.

* Meanwhile, speaking of raises

Illinois House members who engineered cuts in next year’s budget for the Department of Children and Family Services said they were upset DCFS spent money on raises rather than hire more caseworkers to comply with a federal decree.

Consequently, the budget awaiting Gov. Pat Quinn’s signature cuts money for DCFS salaries, which the agency said will lead to eliminating 375 positions.

The cuts will fall most heavily on child-abuse prevention programs and efforts that focus on children still in their family homes, said DCFS spokesman Kendall Marlowe.

“The General Assembly’s budget gives us no choice but to cut entire functions from this agency,” he said.

Members of the House Human Services Appropriations Committee - which put together the budget approved by lawmakers - said DCFS doesn’t need to cut programs for children.

Agencies often threaten to kill off popular programs when faced with budget cuts, but this cut was pretty large.

- Posted by Rich Miller        

22 Comments
  1. - cassandra - Friday, Jun 22, 12 @ 11:20 am:

    I’m still not understanding why DCFS would be criticized for complying with contractually agreed-upon raises for unionized staff (which is most DCFS employees, I presume). Would the agency even have the authority not to give the raises. And hasn’t the legislature known about these raises ever since the current contract was signed, back in the Blago days, I believe. No shock and awe there.

    If they were handing outsized non-union raises in the middle of an austerity drive, I could see the legislators getting annoyed. But there has been no mention of that.

    I’m sure there are contracts and non-direct service positions which could reasonably be cut and hopefully they will be. In fact, I believe the current director has told news outlets he has a plan to shift surplus management jobs to the frontlines, thereby preventing layoffs. But instead we are arguing about raises that negotiated several years ago-like them or not. Are we in the silly season?


  2. - the Other Anonymous - Friday, Jun 22, 12 @ 11:23 am:

    Excellent point about comparing nonprofit CEO raises to general salaries in the private sector instead of CEO raises in the private sector. I’d also add that it’s not quite clear that the 18 nonprofits selected are typical — the criteria the Trib used to pick the 18 are arbitrary.

    The underlying assumption behind the article is also somewhat flawed. As the article points out, the nonprofit salaries are already low by private sector standards. So I guess the idea is that working for the nonprofit sector (or, more broadly, for the state) is supposed to be a low-paying proposition? I mean, we can all agree that one shouldn’t get rich from working for the state. But for the level of experience we want, these CEOs are simply living comfortably, not getting rich.

    Having said that, I also think that nonprofit CEO pay for agencies that receive state money should be a topic of discussion. It’s just that nothing in this article makes me think there’s a big problem. There’s probably a bigger problem with the profit/salaries of private actors who get government contracts.


  3. - dave - Friday, Jun 22, 12 @ 11:23 am:

    While I agree that some of these salaries are pretty absurd, it would be nice to look at for-profit CEO salaries as well, especially those that take money from the State.

    I also notice that some folks seem to be missing - lets see salaries (and profits) of nursing home owners (mostly for-profit) or hospital operators (both non-profit and for-profit), most of which take a LOT more money from the State than any of the non-profits discusses in the article.

    Also missing, of course, are the salaries of the CEOs at places like Sears and CME that the state just gave millions of dollars in free tax breaks to.


  4. - Been There - Friday, Jun 22, 12 @ 11:24 am:

    How much money are we talking about here? If a hundred non-profit CEO’s were making $250,000 and had to cut back to $199,000 that would save a whopping $5 million. That’s not even a half a day of what Quinn says not reforming the pensions is costing us. Like you said in another post, its not even a rounding error. Next story please.


  5. - Vegan Cannibal - Friday, Jun 22, 12 @ 11:34 am:

    Corporate CEO’s get millions a year whether they do a good job or not, roping a pliant Board and shareholders along through force of personality and social connections. Unfortunately, the social theme nowadays is to hobnob with the rich and famous. Talented people leading public or non-profit sector organizations are no longer socially content with earning a good living, they have to at least act like they’re rich so they can rub elbows with the 1% at their country clubs and other high end establishments. Perhaps if we spent less time idolizing Trump and the Kardashians, we wouldn’t have our civic leaders being ashamed of living middle class.


  6. - Anonymous - Friday, Jun 22, 12 @ 11:41 am:

    =Perhaps if we spent less time idolizing Trump and the Kardashians, we wouldn’t have our civic leaders being ashamed of living middle class.=

    That was definitely worth repeating. And I’ll add, they wouldn’t be prone to corruption that allows them to destroy the middle class in their pursuits to be just like Trump and the Kardashians. (Whoever would have thought a few decades ago that these people would become our Country’s role models?)


  7. - Honestly - Friday, Jun 22, 12 @ 11:41 am:

    The DCFS story appears to the latest chapter in Illinois policy makers’ relentless assault on lawful and ethical behavior. The attacks appear to become standard practice by both the legislative and executive branches. The article appears to describe retaliation against the Illinois Department of Children and Family Services (DCFS) for lawfully abiding by a contract.
    This is particularly offensive when both the executive branch and the General Assembly (GA) supported the previous scandal-plagued DCFS director who is accused of plundering agency funds.


  8. - Shore - Friday, Jun 22, 12 @ 12:01 pm:

    “the Tribune should’ve compared not-for-profit CEO pay hikes to private sector CEO raises. ”

    those are for profit companies so they can do what they want.


  9. - steve schnorf - Friday, Jun 22, 12 @ 12:02 pm:

    Too much caffeine this morning?


  10. - Rich Miller - Friday, Jun 22, 12 @ 12:02 pm:

    ===those are for profit companies so they can do what they want. ===

    OK, I can give you that. But then why compare salaries for not-for-profit CEOs to for-profit workers? Doesn’t make sense either way.


  11. - Rich Miller - Friday, Jun 22, 12 @ 12:04 pm:

    Not nearly enough, Steve.


  12. - cant say - Friday, Jun 22, 12 @ 12:13 pm:

    My wife has been on several non profit boards and is a employed to know more agencies. Her dismay at the pay rates has been growing. The boards are unpaid volunteers and typically want to do good work but have little time for big problems. Like CEO issues.
    She reigned from a board because they needed to fire the CEO and wouldn’t. Now 5 years later the board has disintegrated and former board members have witten the AG to takeover. This agency gets 95% of their revenue from the state. She has seen this pattern repeat itself many times over the last 5 years.
    I love Aunt Martha’s group but the CEO makes over $400k a year. Look at his duties and compare # of employees and budget to a corporate position and you would have to say he is way over paid. But the board loves him and pays him. Again most of their revenue is from the state. Is he worth 3 Pat Quinns?


  13. - Irish - Friday, Jun 22, 12 @ 12:16 pm:

    I find it ironic that most agencies cannot even enter into a contract or get a vehicle or computer repaired without having to get CMS involved. Yet when The administration wants it to look like agencies are out of hand in their spending he blasmes the agency for not having enough money to pay contractual raises or in this case blames them for actually following the contract, and not acting illegally or unconstitutionally.

    If you ask the Governor why the contract wasn’t honored he will tell you it is the fault of the GA as they did not appropriate enough money.
    If you ask the GA why the contract wasn’t honored they will say it is because the Governor chose to spend the personnell dollars in places other than where they were supposed to be spent. And now apparently they are blamimg the Director of DCFS for honoring the contract.

    Why is it that they can get away with blatant discrimination? They give raises to some union members and deny them to others even in the same job description. If the unions are unsuccessful in getting the raises and steps reinstated I wonder if an individual could take the Gov to civil court. Isn’t there something about acting beyond the scope of your powers that would make him personally liable and not protected by the state?

    Bottomline they are all playing the old bait and switch shell game. They figure they can keep the issue confusing enough no one will know who to blame. It’s the time honored Springfield Mantra, lie and use smoke and mirrors so we can’t be blamed. If any of them don’t get re-elected they have a bright future on the midway of any second rate carnival.


  14. - Siriusly - Friday, Jun 22, 12 @ 12:52 pm:

    I am okay with the NY cap idea, so long as it is based on how much funding the organization gets from the state. For examples some organizations get one or two small grants that add up to less than 10 percent of their total budget. Should the state be able to tell that organization how to pay its employees? I think not.

    The organizations that are 75-90% state funded are proxy state agencies performing public services on behalf of the state. Limiting salaries in those cases does make sense to me.


  15. - the Other Anonymous - Friday, Jun 22, 12 @ 1:24 pm:

    @Shore: nonprofits are also “private” — they are not entities of the government. So what’s the distinction that you are trying to draw?

    If you think the distinction is that some nonprofits receive state funds, then what about government contractors that are for-profit? I mean, it’s still tax money that pays them, isn’t it?

    And, quite frankly, Rich is right: the apples-to-apples comparison would be CEO pay to CEO pay, because all the statistics show that CEO pay is increasing faster than average worker pay.

    Last, examine the underlying assumption of saying “private companies can do what they want” in terms of pay, but nonprofits and public sector employees must be nickled and dimed rather than be paid market rates. Basically, you are saying that my tax money should be managed by people who are underpaid — they will have lower qualifications and less experience. Quite frankly, it’s my tax money and I would want the best people to manage it.


  16. - RNUG - Friday, Jun 22, 12 @ 1:30 pm:

    The NFP sector of the economy is about the same size as the for profit sector. As such, you will find roughly the same amount of salary abuse going on in both sectors. If you want to know how a NFP is doing, look at their filings. Some will show that 95% of their funds actually go to their mission; others will show that as little as 5% actually goes to fulfill their stated mission. NFP’s are big business these days … and better organized than big business …

    As far as Illinois contracting with NFP’s, the real answer is the bottom line; are the NFP’s providing better service for less money than the State could do it?


  17. - Yellow Dog Democrat - Friday, Jun 22, 12 @ 2:07 pm:

    RNUG hit the nail on the head.

    The question is “Are nonprofits providing better services at a lower price?”

    If state government or a for-profit company can do it better or cheaper, by all means do it differently.

    BUT, if we’re going to lament CEO salaries, lets be even-handed about it.

    Apply the same standard for executive compensation to non-profits and for-profits.

    If your gonna complain about how much money the CEO of a child services agency makes, why not Microsoft? We’re paying a portion of their salary too, you know.


  18. - Endangered Moderate Species - Friday, Jun 22, 12 @ 2:33 pm:

    Most NFP Boards are made up predominantly of private sector executive / management types. This seems to be another case of us chasing our own tail.


  19. - NH Insider - Friday, Jun 22, 12 @ 2:47 pm:

    “dave” is so right about the pay and the profits of nursing home operators, but look at who makes big time PAC contributions and those facts
    seems to disappear.


  20. - Arthur Andersen - Friday, Jun 22, 12 @ 2:49 pm:

    So the proposal at hand would allow Ty Fahner to make only $199k bashing State workers and their pensions?
    Show of hands, please.


  21. - Yellow Dog Democrat - Friday, Jun 22, 12 @ 3:10 pm:

    === those are for profit companies so they can do what they want. ===

    @Shore -

    At issue is whether the state should dictate the executive salaries of state contractors. Whether those tax dollars are being used to support the salaries of a for-profit CEO or non-profit CEO seems moot.

    Actually, given that Board members of for-profit companies are almost always compensated while board members of nonprofits are almost never compensated, I’d say the need to regulate for-profit CEO compensation is even higher.


  22. - Celeste Wroblewski of Donors Forum IIllinois) - Friday, Jun 22, 12 @ 4:32 pm:

    We at Donors Forum, a leader and advocate for Illinois’ diverse philanthropic and nonprofit sector, strongly disagree with the premises of the article. Here’s a link to our letter to the editor of the Tribune –http://bit.ly/DF2Trib612 — as well as an excerpt, “The suggestion that state-funded organizations should be held to a different standard distracts from the cost-effectiveness of nonprofits and the very reason the state partners with our sector to deliver services: nonprofits deliver the work more efficiently and at a lower cost that the state can no longer afford to provide. Our sector provides this work through over a half million professionals across the state – a much larger sample than the 18 nonprofits and 14 executives the article profiled.” Rich, we’d be happy to talk more with you about this.


Sorry, comments for this post are now closed.


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