New York State Agencies Issue Proposed Regulations Regarding The Administration Expenses And Executive Compensation Of State-Supported Entities

Author:Proskauer's Employee Benefits, Executive Compensation & ERISA Litigation Practice Center
Profession:Proskauer Rose LLP

Pursuant to Executive Order 38 issued by Governor Cuomo, thirteen New York State agencies released very similar proposed regulations on May 16, 2012, placing a limit on the funds that can be used for administrative expenses and executive compensation by entities, both for-profit and not-for-profit, that receive state funds or state-authorized payments to provide services. These regulations are generally available for public comment from May 30, 2012 to July 14, 2012, and are scheduled to become effective on January 1, 2013.

What Service Providers Are Affected?

The proposed regulations apply to certain providers of program services. Program services are defined as services that are paid for, in whole or in part, with state funds or state-authorized payments, and which are rendered to and for the benefit of members of the public. Program services exclude services provided for the benefit or on behalf of the state or authorizing agency, assistance to a state agency or local unit of government in its provision of services to the public, and policy development or research.

Generally, a service provider is subject to these regulations if it has an agreement with an agency or governmental entity to receive state funds or state-authorized payments averaging over $500,000 a year for purposes of providing program services. Additionally, state funds or state-authorized payments must constitute at least 30% of a service provider's (including any parent's or subsidiary's) annual in-state revenues. "Annual in-state revenues" is not defined in the regulations.

State funds and state-authorized payments generally include funds allocated in the annual state budget, payments made upon the approval of a New York state agency or governmental unit, and payments made by virtue of the service provider holding a license to provide the services. The proposed regulations do not define the scope of the provision as it relates to holding a license, and further guidance will, hopefully, be coming shortly to limit the broadness of this provision. Certain payments are excluded from the definition, including many state procurement contracts, all capital expenses, most awards made to governmental units, payments or vouchers for specific services made to individual members of the public, subsidies to support hiring or retention, and payments for policy development or research.

What Are the Limitations Regarding Administrative Expenses?

The proposed regulations require a...

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