Tribune analysis: Average raise in 2009-10 for CEOs of 18 nonprofits double that for private-industry workers
State agency working on plan to limit how much of groups' cost, executive pay can be covered by public money
Former Community and Economic Development Association of Cook County CEO Robert Wharton received a 10 percent raise in 2009, followed by a 15 percent raise in 2010, boosting his total compensation to $275,000. (Michael Tercha, Tribune)
The board for the Community and Economic Development Association of Cook County gave CEO Robert Wharton a 10 percent raise in 2009, followed by a 15 percent raise in 2010, boosting his total compensation to $275,000 to run a nonprofit that gets more than 90 percent of its money from taxpayers.
A Tribune analysis of financial filings of 18 such nonprofits found that their executives received an average of 4.3 percent in pay raises in 2009 and 2010, when the economy was sputtering. That's double the average compensation boost for private-industry workers, according to federal wage data.
Many of these nonprofit executives already earn far more than the top state officials who dole out tens of millions of dollars to these agencies every year. At one nonprofit that aims to help the working poor, the director had her pay nearly double in eight years, to about $340,000.
Supporters defend the raises as comparable to for-profit CEOs, who can receive generous salary increases even in bad times if their leadership is deemed extraordinary and in demand.
But Illinois officials have joined a national trend of reconsidering such salaries, with one major state agency saying it's working on a plan to limit how much of an organization's administrative costs and executive pay can be covered by public money.
"The Department of Human Services strongly disagrees with the practice of nonprofit executives receiving such high salaries that are primarily subsidized by tax dollars, especially during the current fiscal crisis," spokeswoman Januari Smith Trader said in a written response to the Tribune's findings.
That concern is raised as other states, including Massachusetts, consider ways to limit compensation.
"I think, ideally, there ought to be very strict federal guidelines, but I think in states with heavy concentrations of nonprofits, like Massachusetts and Illinois, the oversight is grossly inadequate," said Massachusetts state Sen. Mark Montigny, a Democrat pushing a proposal there.
"The public is angry," Montigny said, "and when they see this abuse, they want their pound of flesh."
The top raises
Illinois relies greatly on nonprofits to provide social services, medical care and other assistance to the needy. In most cases, taxpayer dollars, in the form of contracts or grants, cover the services these organizations provide, as well as at least some administrative costs.
Nonprofits engaged in this publicly funded work often base their top executives' compensation on what they say similar nonprofits pay. An executive's salary can stay flat or jump depending on which organizations are used as benchmarks.
The Internal Revenue Service requires nonprofits to disclose whether they base salaries on a review of what other agencies pay. But they don't have to publicly reveal the names of those agencies, or how they reached their decision. Another obstacle to transparency is that it can take up to two years for the public to obtain such basic tax data. The freshest nonprofit data available is from calendar year 2010.
The Tribune took that pay data and analyzed it for executives of nonprofit organizations with budgets greater than $10 million, with at least 75 percent of their funding coming from the state. The newspaper focused on 18 organizations whose top executive remained the same in 2009 through 2010 — enough time to look at two typical cycles of raises during the heart of the recession.
Among the recipients of the most generous raises:
•James Hogan, with Cornerstone Services Inc. The nonprofit serves the physically and mentally disabled in Will and Kankakee counties. He received a 1 percent raise in 2009 and a 25 percent raise in 2010, taking his total pay to in excess of $244,000. Those raises came during a time when Cornerstone publicly lamented the difficult fiscal climate of nonprofits, particularly those receiving government grants.
Hogan, who retired last year, could not be reached for comment. But Cornerstone's board said in a statement that officials set Hogan's salary after reviewing his performance and studying pay for comparable CEOs.