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June 26, 2012 | By | Posted in Legislature

Fiscal code amendment would require nonprofit providers to disclose pay of top execs

Pennsylvania Capitol in Harrisburg.

Pennsylvania Capitol in Harrisburg.

By Eric Boehm | PA Independent

HARRISBURG — One late addition to the state budget package could make Pennsylvania the latest state to turn a critical eye on the expenses of nonprofit agencies that deliver services with state dollars.

A proposed amendment to the state fiscal code bill — a piece of the overall budget package that sets out tax and regulatory framework — would require the Department of Public Welfare to collect data from nonprofits that deliver services as part of a variety of state programs.

The department would be instructed to track executive pay and the pay of top employees, along with association dues, lobbying expenses, administrative costs and the indirect or direct costs of providing services.  Nonprofits that receive state dollars to cover intellectual disabilities, child welfare, community-based mental health services and drug and alcohol services would be targeted by the new rules, according to a memo obtained by PA Independent.

An annual report would be compiled and provided to the General Assembly.

State Rep. Bill Adolph, R-Delaware, is pushing for the language in closed-door meetings with other legislative Republicans and Gov. Tom Corbett.

“We’re appropriating substantial (a) amount of money for these services, and we want to make sure it’s being used in the most efficient manner possible,” said Mike Stoll, Adolph’s spokesperson.

Other states have taken similar but more drastic measures recently to control the costs of nonprofits that received taxpayer dollars.

State Rep. Bill Adolph, R-Delaware

In May, New York approved rules limiting executive pay in state-funded contractors to $199,000 or less.  The rules affect both for-profit and nonprofit entities. Contractors that refuse to comply with the new rules will lose their entire grant or contract.

New York Gov. Andrew Cuomo, a Democrat, said at the time that the goal was to “stop the few providers that pocket taxpayer dollars rather than use them to serve the public.

In 2010, New Jersey passed similar restrictions by capping the pay for top-earning executives at taxpayer-funded nonprofits at $141,000 for agencies with budgets of at least $20 million.  Smaller nonprofits had lower caps for executive pay.

Florida and Massachusetts have made similar attempts to limit the pay of executives at nonprofits.

The fiscal code language would not set any limitations on pay, but the plan is to use the reporting to help develop best practices for nonprofits, Stoll said.

Bernadette Bianchi, executive director at the Pennsylvania Council of Children, Youth and Family Services, which represents more than 100 nonprofit service providers at the local level, said it was an insult to have such language thrust into the fiscal code at the last minute.

She said limitations like the ones imposed in New York and New Jersey would make it difficult for nonprofits to attract and keep good workers.

“Is it a concern on how public dollars are used? Absolutely,” Bianchi said. “But the costs of nonprofits include basic business expenses, and the process of recruit and retaining the best workers costs money.”

She said information about nonprofits lobbying expenses and top paid employees were already reported annually to the federal government as part of IRS form 990.

“It’s all public information.  This is a very open process,” she said.

Stoll said the intention was not to make life more difficult for nonprofit service providers.

“We want to get the information and see what some are doing.  In cases where as we get that information, hopefully we’ll be able to see where that jumps out,” he said.

The measure also may help to control costs in the department’s budget of more than $10 billion.

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Eric Boehm is a reporter for PA Independent. He can be reached at Eric@PAIndependent.com or at (717) 350-0963.

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