Any nonprofit contracted to work with the New Jersey Department of Human Services or Department of Children and Families will now be subject to caps on how much of the contract can be apportioned to CEO salaries and employee benefits. The plan, originally unveiled by Gov. Chris Christie this past April, went into effect July 1.

The move is being watched by social service agencies across the nation as a possible precursor to what might happen in other states that are strapped for cash, as is New Jersey.

The Amendments to Third Party Contract Language document, sent to both departments, include full-time salary compensation limitations applicable to each provider agency. If a provider agency has gross revenue of more than $20 million, the limitation for reimbursement for the salary of CEOs and executive directors would be $141,000. The cap for those with budgets between $10 million and $20 million would be $126,900. The cap for organizations with budgets between $5 million and $10 million would be $119,850 and $105,750 for budgets less than $5 million. This salary limitation excludes physicians and advanced practice nurses.

A compensation limitation for fringe benefits in the original draft was removed, and is “being reserved for future consideration,” according to the document. It is unclear at this point whether similar changes will be made to contracts with other areas of nonprofit service in the state.

Nicole Brossoie, assistant commissioner of Public Affairs for the New Jersey Department of Human Services in Trenton, N.J., explained via email message the calculations involved in the decision.

“Provider agency X employs a CEO for an annual full time salary of $150,000 related to all activities. The Department of Health Services contracts for services from this provider and the contract indicates 50 percent of the CEOs activity is allocable to the contract. Before application of the screen $75,000 of this salary would be allocable to the contract. In this example, the salary screen of $141,000 is allocated between contract and non-contract activity yielding $70,500 as the amount of salary that would be allocable to this contract,” she wrote.

“The difference between the unscreened allocable salary of $75,000 and the screened allocable salary of $70,500 would be reflected as an unallowable cost,” Brossoie stated in the email message.

The state would also contribute less to reimbursement for travel, education, severance and vehicle expenses for all nonprofit employees, trying to save a projected $5 million. According to The NonProfit Times' 2010 Special Report on Salary & Benefits, nonprofit executive chief executives in the Mid-Atlantic region made an average $111,675 annually. The governor's salary is $157,000 and is allowed by state law to reach $175,000, according to the state's Web site.

Furthermore, the document reads that “a decision has been reached to reduce your agency's contract reimbursable ceiling only by an equivalent amount of savings resulting from the salary limitations prescribed in contract amendments no.1 and 2, where applicable. Cost savings resulting from the other amendments may be redirected into other cost components of your agency's operating budgets.”

Peter Goldberg, CEO of the Alliance for Children and Families in Milwaukee , Wisc., and a national leader involved with social service agencies, said the cuts stand to impact the organizations from the bottom up, and at the same time will do little to solve the greater financial crisis in the state.

“This is, in the end, going to amount to a short-sighted and misguided effort to address some serious issues,” Goldberg said. “This action, limited as it is to the nonprofit social service sector, will neither solve New Jersey 's fiscal crisis, nor will it be in the best interest of its most vulnerable children and families.”

The salary caps come at the worst possible time for the sector, he said, because organizations are already being called upon to do more with less.

“At the same time, the expectations in human and social services get greater and greater for more outcomes and consistent quality,” Goldberg said. “The idea of putting in these kinds of demanding salary structures seems in variance with the efforts to say that we want more quality and outcomes. Why single out social services for vulnerable kids and families, as if the services or recipients are second-class citizens? This isn't about salaries, this is about kids and families.”

It is unclear at this point whether similar changes will be made to contracts with other areas of nonprofit service in the state.

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