Minimum Wage Increase Pinches Nonprofits

Small businesses across upstate are cutting hours, reducing staff and taking other measures to cope with the costs of a higher minimum wage.

Nonprofit administrators, already pinched by tight budgets, are finding the minimum wage increase is adding to the daily turmoil of operating an organization dependent on dwindling government grants, donations and a pushback from clients as they try to raise fees to cover the higher wage expense.

Most community-based nonprofits are locked into federal, state and local contracts that will not honor the increased employee costs that the wage increase brings, meaning that nonprofits would have to use or raise charitable dollars to subsidize the increase, said Doug Sauer, chief executive of the New York Council of Nonprofits. Most don’t have these funds to allocate so they cut back on staffing and services.

“It should be noted that this wage increase is also alongside increases in workers comp and unemployment rates, and raises at the state level of what constitutes an exempt employee,” Sauer said. “There is a triple if not quadruple whammy on mandated employer costs.”

As of now, the state government does not fully compensate nonprofits that they contract with for additional mandated costs of doing business, and most government contracts with nonprofits also do not pay the full cost of nonprofits’ services, Sauer said. There is a significant effort underway to see that the state does compensate the additional cost.

Because of undercompensation, nonprofits either lose money on state contracts or they have to find other sources to subsidize the services the government is contracting for, Sauer said.

►Wage hike may stymie small business

“A vast majority of local nonprofits operate on a shoestring and try to make do with what little they have,” Sauer said. “We may be approaching a time where more and more nonprofits simply refuse to do business with the state because they can’t afford to.”

Some nonprofits may choose to raise fees for their services.

“But not all are fee-based and raising fees means that there will be more people not being able to access their services,” Sauer said. “So, more human needs go unmet, or for arts and cultural organizations, less people benefit from what they offer.”

Ultimately, the increase in minimum wage harms the nonprofit industry, Sauer said.

“From nonprofits being a business that needs to be solvent, it threatens the viability and sustainability of many unless government, philanthropy and donors are willing to invest in the nonprofit workforce,” Sauer said. “Nonprofits already have a problem with recruiting and keeping qualified staff, who easily go to work for government, schools and the private sector to better support themselves and their families.”

Matthew Steecker is Southern Tier regional business reporter for the USA TODAY Network.

Matthew Steecker, @MSteecker Published 6:22 a.m. ET Feb. 16, 2017 

http://www.democratandchronicle.com

Nonprofit Salaries Are Issue for States and Federal Officials

The NY Times reported that State and federal officials are starting to take their knives to the pay of leaders of nonprofit groups they do business with to help share the pain of tighter budgets.

A provision in New Jersey’s recently passed budget, for example, includes a limit on what nonprofit groups can pay their chief executives if they are providing social services under state contracts. The cap, based on a formula that also applies to for-profits providing such services on behalf of the state, is part of a broader effort by Gov. Chris Christie to rein in salaries on state workers.

In New Hampshire, Attorney General Michael A. Delaney is investigating compensation among nonprofit hospital executives. And Vermont legislators are trying various ways of curbing salaries paid by nonprofit groups that have contracts with the state.

On Capitol Hill, four senators this spring refused to approve a $425 million package of federal grants for the Boys & Girls Clubs of America after staff members looked at the organization’s tax forms as part of a routine vetting process and were surprised to learn that the organization paid its chief executive almost $1 million in 2008 — $510,774 in salary and bonus and $477,817 in retirement and other benefits.

“A nearly $1 million salary and benefit package for a nonprofit executive is not only questionable on its face but also raises questions about how the organization manages its finances in other areas,” said Senator Tom Coburn, Republican of Oklahoma.

Another senator, Charles E. Grassley, Republican of Iowa, has told Treasury Secretary Timothy F. Geithner that he is concerned that the Internal Revenue Service is not tough enough in policing pay in the nonprofit sector and that regulations governing compensation are too weak.

“I’ve asked him to review these regulations to see how they can be made effective,” Mr. Grassley said. “What’s there now doesn’t seem to be working.”

Mr. Grassley, who has used his seat on the Finance Committee to scrutinize a wide variety of nonprofit practices, noted that pay had been a “major issue” in his reviews over the last several years of universities, charitable hospitals and the Smithsonian Institution.

Compensation has long been a point of controversy among donors to nonprofits. By far the biggest category of complaints posted on the Web site of Charity Navigator, which offers research and analysis of nonprofit groups, involves complaints about pay. Read more here, especially for the other perspective offered by some nonprofit EDs.

ED Compensation Discussion

BoardSource featured a discussion on their website titled "Chief Executive Compensation: How Should Your Board Determine Compensation?" The article by Brian H. Vogel and Charles W. Quatt, Ph.D. gives some good information to work and consider when you addressing this issue.