(Cross-posted from the COFAR blog)
Direct-care workers in the state’s contracted human services system have seen their wages stagnate in recent years, but the executives who run the largely nonprofit contractor agencies that employ those workers do not appear to have been feeling that same pain.
We examined compensation to both CEOs and direct-care workers in a sample of 30 service vendors to the Department of Developmental Services, both large and small, from around the state in Fiscal Years 2008 and 2011. This information is available in Uniform Financial Reports, which are submitted to the state Operational Services Division by the vendors and are posted online by the OSD at www.mass.gov/ufr.
The CEO compensation of our sample increased by an average of 16.6 percent during the four year period while the direct-care salaries decreased by an average of 2.17 percent during that time. (See Vendor Compensation Table.)
Among the 30 vendors, the average CEO compensation in FY 08 was $197,068. It increased to an average of $229,872 in FY 11. In FY 08, the average direct care salary for the sample was $33,508. It decreased to $32,780 in FY 11. In FY 11, direct-care workers were earning an average of 14 percent of what the CEOs of those vendors were earning, down from 17 percent in FY 08.
Among the sample, nine CEOs received compensation increases in the four year period reviewed while the direct care workers employed by those same vendors actually saw their wages cut. In two of those cases, the CEOs received increases exceeding 100 percent.
That many CEOs have taken hefty pay increases and the direct-care workers have gotten little or nothing, or in many cases decreases, raises questions about repeated calls from the vendors to add $28 million to a state budget reserve fund to increase those direct care salaries.
If the Association of Developmental Disabilities Providers and its member vendors are really concerned about their direct-care workers’ pay, why have these companies given raises only to their CEOs? Should the state be called upon to bear the entire burden of raising direct-care wages?
“The vendors appear to have it in their own power to give their direct-care workers increases, but they’ve chosen not to,” said Colleen Lutkevich, COFAR executive director. “Instead, they’re looking to the Legislature.”
If the Legislature does step in to fund the direct-care salary reserve account, it will not be at the urging of Governor Patrick. Despite the ADDP’s appeals, the governor’s budget for the coming fiscal year proposes zero for the reserve fund.
Note: We were not able to use data from one of the vendors, Massachusetts Mentor, Inc. Massachusetts Mentor is a subsidiary of NMH Holdings, Inc., a for-profit corporation that provides residential and other services for intellectually disabled persons in 36 states. NMH Holdings was incorported in Delaware, according to its audited financial statements, though it actually appears to be headquartered in Massachusetts. (NMH Holdings appears to be referred to as The Mentor Network on its national website.)
Massachusetts Mentor’s UFR and other reports filed with the state OSD employ what appears to be an unusual method of listing only partial salaries of top executives. The compensation listed is apparently the amounts of the executives’ salaries that are attributed to Massachusetts. For instance, total compensation for Edward Murphy, CEO of both Mass. Mentor and The (national) Mentor Network, was listed as only $14,830 in FY 10, in a filing with OSD). (The company does not appear to have filed a UFR report in Massachusetts for FY 11.) Murphy is a former commissioner of both Mental Health and Youth Services in Massachusetts.
Greg Torres, chairman of the Board of Directors for both Mass. Mentor and The Mentor Network, earned a total of $2,484 in compensation in FY 10, according to the OSD filing. Torres, a former chief of staff of the Massachusetts Senate Ways and Means Committee, is also currently president of MassINC, the nonprofit civic think tank in Massachusetts that publishes CommonWealth magazine. (CommonWealth frequently advocates for more transparency in governmental finances and operations.)
Also working for Mass. Mentor is Gerald Morrissey, a former commissioner of DDS in Massachusetts. Morrissey’s total compensation as a vice president at Mass. Mentor was listed in the FY 10 OSD filing as $5,113. None of these clearly partial compensation listings could be reliably compared with other CEO and direct-care compensation in Massachusetts.
NMH Holdings earned more than $1 billion in revenues in FY 10, according to filings with OSD, while Massachusetts Mentor took in $3.7 million from DDS and $19.4 million from the Department of Social Services in FY 10, according to its UFR report.
Calls and emails to OSD with questions about Mass. Mentor’s and NMH Holdings’ partial compensation listings for their executives were not returned.
If an agency has a CEO maing $400,000, and 800 employess, and the CEO takes a 50% pay cut, this is worth less than $300 a year ti durect care workers, which would help, but doesn’t really change the equation. Even if the sgency had five high salaried executives, and the cumulative pay cut was $800,000, and it was only applied to workers making less than 40,000 per year (the current salary reserve cut-off, if I remember right), and there were, say 400 employees in that boat, the redistribtuion would be only $2000 a year, although this would be a more real difference for those people. In addition, not all the high salaries are easily cut. In most such agencies there is a psychiatrist serving as medical director for 120-180k. These are highly skilled and licensed people with a lot of responsibility.
I would point out that for-profit companies like Mass Mentor/The Mentor Network/NMH Holdings are hard to track. But so are non-profits with ancilary corporations to own group homes or fun day programs. The longtime CEO of South Norfolk County Arc gpt pme ;arge sa;aru tjere. amd amptjer decemt amount as head of Lifeworks, Inc.
So it is a complex business, about which DDS has traditionally thrown up its hands, and said, we contract for services, they provide them — we don’t tell them how to allocate their overhead. But with new interest by the Attrnney General in non-profit agency inurement (the state auditor used to take more interest) some of these deals will get another look: in some cases an agency which was a mom-and-pop store and did wonderful things a generation ago is now supporting the founding couple in a way that can be a misuse of state funds. With DDS (and other human service agencies) now delegating almost all functions to private non-profits (and some for profit companies), they have become “too big to fail.” When a free-spending CEO runs one onto the rocks financially, the state has to step in and bail them out to assure continuity of services. At some point, this becomes a seller’s market, and provider interests begin to diverge from family and client interests, and this can happen to agencies founded by parent groups as voluntary associations almost as easily as a for-profit company.
–Mark
I have spent more than a couple of hours on the internet reading public filings trying to get some understanding of exactly how these providers are organized and funded.
To say the least, it is a “tangled web” of organizations (parent company) with various affiliates with each of affiliates feeding funding in one way or another back to the parent and the upper echelon of management. Those affiliates are established for the purpose of providing just about every service a disabled individual would need once they secure residence in that organizations home. The affiliates function as a vehicle of ownership of particular homes/buildings, an entity to collect subsidized housing rents, the affiliates pay property and management fees back to the parent, and from what I read most are financed in some way with public money with bonds and/or special no interest/no payback loans. The affiliates service others functions such as a company that provides day programs and workshop, personal care assistance, transportation services, various clinical services, and even perform administrative type tasks for those who can’t do them such as filing insurance paperwork and tax returns.
I don’t have a problem with a well-organize support system. These services are critical and the need is more than great and growing. I think what bothers me here is these same providers now expect a “bail-out” for their salary reserve account from those who are already providing their main revenue stream.
Financially, it appears to my untrained eye, that these organizations take little financial risk. I could be wrong (it wouldn’t be the first time) but they decide to get into this business that is by all accounts a growth industry. They build a house or buy a house with a special financing, some with no interest/payback provision (govt connected in some way) which equals a free building. Granted–this is necessary to keep this affordable for those who need it. But unlike the typical “landlord” they have guaranteed occupants-provided by govt. Those occupants receive govt subsidized rents-guaranteed income stream provided by the govt. Now you have the individual living in your home, that person also needs various support services so you establish a couple of affiliates that provide those various services so you now have a built in service to refer your residents back to you and since those services are also paid by the government one way or another the $$$ channels back to the parent.
So the only risk I see is budget cuts. And it appears that the only people suffering from budgetary cuts are the individuals partaking of these critical services and the employees who provide them directly to the individuals, not upper management. While the majority of the business world have foregone raises or in some cases taken pay cut to remain competitive or they are out of business, these CEOs get raises because they don’t have to be competitive because of the criticality of the services they provide.
What is really disturbing that the agency handing out the contracts and responsible for monitoring expenditures and contract performance has a hands off approach. Give me a break!
P.S. Does anyone believe that the former commissioner of DMR is only making $5000 in this business?
to an individual direct-care worker in that company, the issue here isn’t just that the CEOs aren’t taking those cuts. It’s that the CEOs have been getting increases while the direct-care workers have gotten either nothing or sometimes decreases. That sends a message not only to the workers, but to the Legislature and the public as well.
At a time when the human services vendors are asking for tens of millions of taxpayer dollars to increase their direct-care workers’ pay, the executives of those companies shouldn’t be taking double-digit pay hikes for themselves. It’s reminiscent of AIG and other big corporations seeking billions in federal bailouts while handing out executive bonuses.
Year after year i have gone with my son to the state house to fight for budget cuts to be reversed. The funding for is not growing. Yes, ADDP year after year requests COLAs for Direct Care employees. The suggestion seems that there is something wrong in that. The Direct Care employees are underpaid, and i support attempts to increase their salaries.
I am not defending all of these executive salaries, some individual ones seem quite high, but you exaggerate by calling this similar to AIG. Really? There is NO comparison. The dollar difference is staggering.
If this industry got that kind of bailout i would be dancing in the street! Government paying for the care of it citizens!
Seriously, Instead the cost to care for folks goes up and budgets do not.
As a previous poster noted this is a complex issue. The spreadsheet leaves out things like the number of people served and types of services offered. That would be an interesting data point. Or the % of revenue that goes to actual client care. That would seem to me to be a critical piece of data to evaluate the efficiency of an agency – not focusing simply on exec salary.
Instead focus on the clients.
I am in full agreement on the problem of Direct Care employees being woefully underpaid for what is difficult and very important work. They deserve a raise. The folks they care for deserve our support as well.
Thats the core issue.
The executive pay issue, it seems to me, is a distraction from the need to expand and improve care for the disabled, through all the different support mechanisms needed so they can get the right level of support, in the right context at the right time.
And, Dave i applaud you for posting on issues about and related to human services, even if i don’t agree on the focus in this case.
Phil
and for some reason i fell compelled to say, long time lurker first time poster 🙂
I agree in that it probably is not the best descriptions. My intent was “growth” in the sense that more and more people need these critical services, there is a long waiting list for residential placements and unless medical sciene can cure these disabilities, the need will continue to grow. So unlike other industries (and it is an industry) where demand rises and falls or even stops all together, these services will always be in demand.
But I have to agree with the AIG comparison. Seems to me the only people who were impacted by AIGs near collapse were its customers, employees, and the taxpayer–the high level executives still got their bonuses. In this case, budget cuts are directly effecting the customers, and employees on the lower level of the payscale and the upper level (who still got raises) are expecting the taxpayers to bail them out. The $$$$ are different but the scenario is the same with one exception, AIG was taking risks with the clients money, service providers are taking risks with taxpayer dollars.
hit the button too soon. The greatest risk here is to the disabled people they are paid to serve.
AIG was a financial business that took extraordinary risks, gambled and lost, then accepted bailouts to prevent total collapse….and then blithely took enormous bonuses for it executives.
The Human Services industry is not gambling on risky investments and not taking bailouts. Where is the risky bet? Where is the bailout?
Your equating a request for a COLA for folks making less then 40k a year with bonuses for folks making millions at AIG.
I support the request for a COLA. Its not a bailout. Its an attempt to get a raise for Direct Care Workers who deserve it.
We fight budget cuts every year, i long for the day that i can go Thank my rep for something other then restoring some of the cuts to the budget for the disabled. Expenses go up, the demand for services goes up. The budget does not.
I agree the demand is not going to go away, ever. It the human condition. As a society we need to recognize it and support those folks.
I contend underfunding of those supports is the issue.
are on a much smaller order of magnitude than the AIG executives’ salaries. However, in both cases, company executives have decried tight budgets while still taking proportionately large increases in their own pay.
I admit we haven’t done a definitive analysis of the complex issues involved in funding care for the disabled. But I don’t think what we’ve found is entirely symbolic. There is real money involved here given the sheer number of DDS vendors involved and their management structures, which tend to be top-heavy with highly paid executives.
Those executives constitute a new and growing layer of state-funded bureaucracy, which is largely overlooked by the privatization advocates who are always blaming government agencies for having too many bureaucrats. Absent effective oversight and regulation, government contracting can be much more expensive than doing things in house.