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Back to Business - An Agenda for New York State / 2003

A year ago, New York State was reeling from the double-punch impact of 9-11, and a national recession. It was a tough time. And the consequences will continue to haunt us this year, as New York's leaders work to recover and rebuild.

But our job in 2003 is to look ahead—not back. The recession is waning, New York is back on its feet, and it's time to get back to work on our long-term effort to build a better future for this state and its people.

One goal should override all others: more jobs. The experience of the last 20 years has demonstrated repeatedly that New York moves ahead when it works to improve its business climate-and that it falls back when it fails to do so. The payoff from the tax cuts and other changes the Governor and the Legislature have made in recent years has been enormous; New York had gained almost 800,000 jobs in the six years leading up to the start of the current recession in March of 2001. That's why it's important to get back to business.

Our agenda for the year focuses on six key priorities:

Tame spending
Strengthen the foundations for growth.
Get a grip on health care.
Cut the cost of providing jobs.
Revive our upstate cities.
And relieve local taxpayers.

Tame spending

The tax cuts and other business-friendly initiatives of recent years helped set off strong economic growth, and that, in turn, yielded a revenue boom that enabled government to increase spending far faster than inflation, year after year.

But that rate of spending growth simply cannot be sustained in a recession-as New York's current fiscal difficulties demonstrate. New York State doesn't have a revenue problem; it has a spending problem. Look at it this way: If overall state-funds spending had been held to the rate of inflation over the last five years, the state would have saved $7.9 billion in the current fiscal year.

Spending is the problem, and spending restraint is the only solution that will genuinely address the problem.

Strengthen the foundations for growth

We believe there are four key steps that New York can undertake to strengthen the bedrock foundations of its economic health:

Site more generating capacity, fast. As the recession ends, the most immediate economic danger facing the state is a shortage of electric generating capacity that would "spike" prices upwards. We need a surplus that will pull prices down.

Enact single-sales-factor reform of corporate taxes. This will stop the practice of increasing a company's corporate taxes when it adds jobs in New York. As our Public Policy Institute demonstrated last year, it's a tax reform that will actually increase state tax revenue. Why wait?

Build our university research base. New York has begun making a commitment to the research that will help grow the industries of the future. In tough times, we need a commitment that sticks.

Target education spending to raise performance and give help where it's most needed. A well-educated population is absolutely essential to our economic future. In tough times, we have to put resources where they're most needed-and most effective.

Get a grip on health care

This out-of-control cost is breaking the budgets of governments and businesses alike-and it's depriving hundreds of thousands of people of proper access to insurance and care. Instead of rationalizing our system and targeting resources where they're most needed, New York's priority has been to prop up the most expensive and least efficient part of the system, the hospital sector.

We need to focus the debate on making health care more affordable-not less. We propose, therefore, that the state set a formal goal of cutting health-care costs overall, and for employers specifically, by 10 percent. The executive branch should be charged with identifying what it would take to cut the overall cost of health care by 10 percent-and, separately, to identify what kind of health insurance policy could be designed to cut employers' costs by 10 percent.

Cut the cost of providing jobs

It's time to cut the cost of workers' comp. The current system in New York is maddening-it offers relatively low maximum weekly benefits for workers, but costs for employers that are unusually high.

We propose an approach that might be called "the Connecticut plan." Our neighboring state has a common-sense approach that provides an appealing combination of higher benefits for the injured, and lower costs for employers. Labor is better off; business is better off. Why not just copy it?

Revive our upstate cities

Our upstate cities, many with depressingly empty downtowns and industrial districts, are at once a symbol of New York's economic problems, and a potential asset-with land and buildings that could be put to work at relatively low cost. What do they need? Two things seem particularly important to us:

Immigrants. Cities like Utica and Schenectady are showing the way, with successful track records of attracting new immigrants. We believe the state could help these and other cities do more, with targeted aid to assist their efforts to attract and place new residents. New York City is a magnet for immigrants-many of whom will inevitably move elsewhere once they get a toehold in their new country. Why not bring them upstate?

Brownfields reform. Upstate cities (and this is true downstate, too) need to be able to put their land to productive use. Currently they are constrained by the liability dangers hovering over anybody who buys and uses an abandoned industrial or commercial site. This problem has been gridlocked for too long.

Relieve local taxpayers

Given our success in cutting state taxes, New York's always high local taxes now stick out like the proverbial sore thumb. The property tax is, in dollar terms, this state's biggest remaining competitive disadvantage.

We have too many local governments with too many employees doing too many things that municipalities in other states manage to do at lower cost. Fixing that is a long-term effort. But we can make an attack on the problem by reducing the mandates the state imposes on local governments.

Two mandate reforms seem to us to be particularly prime at this point:

First, we believe that the state should take over the local share of Medicaid costs, over a three- to five-year period.

In and of itself, this will not directly reduce taxpayers' costs (since the state budget would pick up the roughly 20 percent of the bill now paid by the counties and New York City). But the change would give the state a stronger incentive to reduce the overall cost of the program-instead of increasing the cost, as it has been doing in recent years.

This must be coupled with an ironclad requirement that counties give every dollar of the relief back to their taxpayers.

The state is expecting a revenue windfall through the conversion of one or more not-for-profit health insurers to stock companies. We believe it would be appropriate to use this windfall to generate taxpayer relief via Medicaid mandate reform-rather than to let it slip into Albany's spending machine.

Second, runaway lawsuits cost localities hundreds of millions of dollars a year -over $600 million for New York City, alone, every year. But the state itself has no such problem. Why? Because lawsuits against the state go to the Court of Claims, which uses established precedents and a non-jury process to come up with its awards.

Municipalities should be given access to the same process. After all, whether the entity that is sued is the state government, or the localities, ultimately it's New York taxpayers who foot the bill.

New York needs to get back to business in 2003-continuing to build the foundations for growth and prosperity for all our citizens.

The Business Council of New York State, Inc., Board of Directors