New Jersey puts the squeeze on nonprofits

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New Jersey has gone about cutting corners in a controversial way in an attempt to save dollars. The state has proposed a limit on how much it is willing to pay towards state contracted CEO salaries, as well as on employee benefits for nonprofit social service agencies. The proposed alteration to the third party contract language would result in New Jersey capping salaries and employee benefits based on the operational budgets of nonprofit organizations.

What this proposal looks like

For nonprofits with a budget of more than $20 Million, salaries would be capped at $141,000. In instances where the budget ranges between $10-$20 Million, the proposed cap would be $126,900. In the case of budgets between $5-$10 Million, the relevant proposed cap would fall at $119,850. Meanwhile, budgets of less than $5 Million would attract a salary cap of $105,750. At this stage is unclear is that number is total compensation or base salary as reported on the federal form 990.

Less funding for other areas also

Beyond placing a cap on salaries, the state would also limit its funding with regard to issues like travel, education, severance and vehicle operating costs relating to all employees in the charitable sector. In proposing these controversial measures, the state of New Jersey is hoping to save an estimated $5 Million. These changes are due to take effect on July 1st 2011. As might be expected, it is a move that has many charitable workers disappointed and enraged.