Report concludes federal executives earn more than execs at nonprofits

Federal executives earn more money than most nonprofit executives, according to a new study by the Congressional Budget Office.

If nonprofit organizations of all sizes are considered, federal executives on average made about $40,000 more last year than nonprofit executives, the study, "Comparing the Pay of Federal and Nonprofit Executives: An Update" concluded. "The median salary for chief financial officers of large nonprofit organizations was about $98,000 in 2002, far below the federal median of $138,200," the report said.

Despite that finding, the CBO concluded that "the median salary for chief executive officers at nonprofit organizations with annual budgets of $25 million or more was about $176,800 in 2002, whereas the median salary for federal executives was $138,200."

Under federal law, salaries for the Senior Executive Service are capped at the third-highest pay level on the Executive Schedule, which sets salaries for members of Congress and executive branch political appointees. This year, the third-highest level is $142,500 and, according to the Office of Personnel Management, more than 60 percent of the 7,000 Senior Executive Service members are earning that salary this year.

The Senior Executives Association, the professional association for the 7,000 members of the SES, has lobbied Congress and the administration for several years to raise the cap and in January, the 10-member Volcker Commission issued recommendations for overhauling the government that included bringing federal executive salaries more in line with the salaries of executives in nonprofit organizations. Commission members spent a year reviewing the government's organization, personnel systems and outsourcing strategies.

"The commission does not believe that the federal government needs to match salaries of corporate managers in most instances to ensure a quality workforce," the Volcker report said. "The proper marketplace comparisons will more often be with the independent sector: with universities, think tanks, and nonprofits rather than with business corporations."

SEA President Carol Bonosaro questioned whether SES pay should be linked to salaries at nonprofits.

"It makes no sense to equate nonprofit positions with federal positions solely on the basis of an organization's budget or number of employees," Bonosaro said. "And I say that because the level or the importance of the work, the nature of the work, must be a factor."

SES members administer public programs at the top levels of the federal government. Positions are primarily managerial or supervisory and candidates undergo a rigorous selection process.

"Directing a nonprofit legal aid society presents a vastly different set of challenges than does defending tort claims for the federal government, or negotiating for the release of prisoners," Bonosaro explained, also citing statistics from a 1999 OPM study which found that 37 percent of all federal career executives individually manage budgets of $50 million or more. "Why are they even talking about comparing these people to the head of personnel or the chief administrative officer of a nonprofit with a budget of $25 million or more?" Bonosaro asked.

The CBO report noted that its information did not represent a random selection of nonprofit organizations and, as such, may not adequately address compensation issues in the federal executive ranks. "Forming a full picture of how federal pay compares with other pay requires data from a range of nonprofit jobs and firms that is sufficient to mirror the range of jobs and levels of responsibility held by federal executives," the report said.

Bonosaro agreed that head-to-head, job-to-job comparisons must be done to get a clear picture of how federal compensation compares to those of other industries. "Can we please compare apples to apples and oranges to oranges?" she asked.