Study: Federal Execs Earn More Than Nonprofit Execs

The gap is pretty sizable if nonprofit organizations of all sizes are considered, with federal executives on average making roughly $40,000 more last year than their nonprofit counterparts. For example, the Congressional Budget Office study found 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.

However, when just the largest nonprofits are considered the trend is reversed. 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.

Possible Upside

Upside for potential salary increase goes to the nonprofit executives though. Under federal law, salaries for the Senior Executive Service (SES) 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% of the 7,000 Senior Executive Service members are earning that salary this year, according to a GovExec.com report.

The Senior Executives Association (SEA), 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.

“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.”

“Directing a nonprofit legal aid society presents a vastly different set of challenges than does defending court claims for the federal government, or negotiating for the release of prisoners,” Bonosaro explained. “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?”

Although, 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.

The report “Comparing the Pay of Federal and Nonprofit Executives: An Update” is available at http://www.cbo.gov/showdoc.cfm?index=4459&sequence=0 .