Governor Andrew Cuomo signed an executive order today (1/18/12) designed to limit executive compensation at state-funded service providers (like nonprofits and hospitals) to $199,000. In theory, executive compensation above that amount would be excluded from reimbursable costs for rate-setting purposes.
The Order directs commissioners of each affected state agency to promulgate regulations and take other actions to address the extent and nature of a provider's administrative costs and executive compensation which shall be eligible to be reimbursed with State financial assistance or State-authorized payments for operating expenses.
Two key requirements under the executive order:
a. No less than seventy-five percent of the State financial assistance or State-authorized payments to a provider for operating expenses shall be directed to provide direct care or services rather than to support administrative costs. This percentage shall increase by five percent each year until it shall, no later than April 1, 2015, remain at no less than eighty-five percent thereafter.
b. To the extent practicable, reimbursement with State financial assistance or State-authorized payments shall not be provided for compensation paid to any executive by such provider in an amount greater than $199,000 per annum provided. Although the Order allows for some discretion to adjust this amount, it includes an absolute ceiling based on Level I of the federal government's Rates of Basic Pay for the Executive Schedule promulgated by the United States Office of Personnel Management.
To be clear, the Order does not actually limit how much compensation is paid, or dictate how much of the budget is spent on administration. Instead, it limits how much compensation, and how much administrative expense, can be eligible for reimbursement with State funding.
