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Judge Rejects New York’s Salary, Contract Caps

By Patrick Sullivan - April 11, 2014

The New York Department of Health’s regulations on use of funds and executive salary caps, including nonprofits, were struck down this week, with the judge saying Gov. Andrew Cuomo exceeded his authority when he enacted the executive order that launched the regulations.

“The DOH’s rationale that compensation and expense caps will ‘ensure that taxpayers’ dollars are used properly, efficiently, and effectively to improve the lives of New Yorkers’ is unsubstantiated,” Nassau County Supreme Court Judge Thomas Feinman wrote in the decision.

“We believe the decision is wrong and we plan to appeal,” said Melissa Grace, a spokesperson for New York Attorney General Eric Schneiderman. Grace declined to comment further.

“From our point of view, the judge got the facts and the law exactly correct,” said Steven Sanders, executive director for the Agencies for Children’s Therapy Services (ACTS), the plaintiff in the case. “We were gratified by the decision.” ACTS is composed of more than 30 children’s health organizations and is based in Plainview, N.Y. (Sanders’s office is in Albany).

ACTS argued that Cuomo did not have the authority to create the regulations when he issued Executive Order 38, which mandated that at least 75 percent of state funds to DOH partners, such as nonprofits, be used for direct care, and that executives at partners be limited to $199,000 per year in compensation. Sanders said such regulations are the purview of the legislative branch, and noted that when Cuomo attempted to include similar regulations in his 2012 budget, the New York State Legislature rejected them.

“When you read the decision, you see that for the judge this was an easy matter to resolve,” said Sanders. “(Feinman) stated that the Governor not only does not have the power to create this policy, but he also observed the legislature, who does have the power, considered and rejected similar regulations.”

Executive Order 38, issued January 2012, lists eight other state agencies besides DOH for which the regulations would apply, and final regulations, adopted in July 2013, included 13 agencies. “I think the organizations that fall under the Department of Social Services, the Department of Mental Health, all these other organizations that fall under the authority of other state agencies not part of this lawsuit, they should be looking closely at this decision,” said Sanders. “The underlying thesis is the same: that the governor exceeded his authority by creating policy that falls under the purview of the legislative branch. Potentially, this has wide-ranging impacts.”

ACTS also challenged a DOH conflict-of-interest policy regarding its Early Intervention Program for developmentally delayed children. The policy would bar the same worker or agency from evaluating if a child is eligible for the program and providing program services. This, too, was struck down. Feinman determined there is existing legislation for how the Early Intervention Program must be implemented.

“Thus, clearly, the Legislature not only considered the conflict of interest in connection with the provision of Early Intervention services, but it also addressed and resolved the issue within the statute itself,” wrote Feinman in the decision. “(T)here is no basis for the DOH to usurp the right to regulate the choice of a provider under the generalized concern for avoiding a ‘conflict of interest.’”

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