What Do New Jersey & Canada Have in Common? – Proposed Nonprofit Pay Caps

Both New Jersey and Canada are seriously considering capping executive compensation at nonprofits.  Starting with New Jersey, according to The Star-Ledger Governor Chris Christie plans to require nonprofit social service agency that receive state funds to cap their compensation at no more than $141,000 annually as of July 1st.  Lower caps would apply to nonprofits with budgets of less than $20 million.  The big caveat is that the limit would apply to the extent the salary is paid by state funds; these nonprofits would still be free to pay higher compensation, but would have to use funds obtained from other sources to do so.  Other limits would apply to state-funded travel, education, severance, and vehicle expenses for employees of these nopnrofits.  The state estimates it will save approximately $5 million annually.  Only nonprofits that contract with the Department of Human Services and the Department of Children and Families will be affected, at least initially.  An article in The Press of Atlantic City notes that whether any hospitals will be covered apparently remains unclear.  The catalyst for the new limits was a 2009 report by the Office of Legislative Services that found executive salaries paid for with state funds provided by these two departments of up to $250,000 (pages 18-19 of the report). 

In Canada, a less certain by broader reaching cap is under consideration.  According to reports from two Canadian law firms that have extensive charity practices – Miller Thomson LLP and Carters Professional Corporation – Bill C-470 would give the Canada Revenue AGency discretion to revoke an organization’s charitable status if it pays a single executive or other employee over $250,000 annually.  If passed, the bill would be effective for 2011 forward.  While introduced as a Private Members’ Bill, which I understand generally means passage is unlikely, this bill has already garnered support from the Liberal Party, the Bloc Québécois, and the New Democratic Party, leaving only the Conservative Party of Canada as not yet supporting the bill among the parties that have representatives in the House of Commons.  The Conservative Party is, however, the minority government, with its head, Stephen Harper, currently serving as Prime Minister.

LHM