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Legislative Memo

BILL:

A.11682 (Rules/Brodsky)

Support

SUBJECT:

Outsourcing Penalties

 

DATE:

June 21, 2004

 

The Business Council strongly opposes this legislation, which would prohibit a business that has received state financial assistance from moving any "employment, jobs or positions" out-of-state. With limited exceptions, "violators" would be required to repay the state the value of state financial assistance received after the effective date of this bill, and would face a mandatory five year ban on receiving any additional state assistance.

This is an isolationist bill that will do more harm than good to New York's economy, businesses and workers.

More specifically, the proposed legislation is unfair in that it would impose severe economic penalties against businesses that have fully met their obligations to the state under existing economic development programs. A business would be subject to benefit recapture and a prohibition on future incentives if economic conditions force a job reduction in one facility or division, even though the facility or division receiving assistance under a state assistance contract has met all requirements of that agreement.

This bill would have other adverse impacts on state development programs. For example, under the Empire Zone program, a business could have a temporary reduction in in-state employment. Under existing Empire Zone law, that business would be denied benefits for that year, but would remain eligible for benefits in subsequent years in which it meets its employment test. Under this legislation, if that company also had moved even one job out of New York State, it would be forced to repay the value of state incentives, and be banned from any additional state incentives (including Empire Zone benefits) for a five year period.

The bill's prohibition on "outsourcing," and the attached penalties, would also significantly impair the state's ability to retain existing businesses, or attract new business or new investments to New York. Under this proposal, the acceptance of state assistance would come with severe limitations on a firm's ability to move employees or business operations to meet business needs, irrespective of the justification for doing. We question how many businesses would be willing or able to accept such stringent conditions in order to qualify for state assistance. And considering high cost-of-doing-business factors in New York – such as property taxes, workers' comp and electric power – our economic development efforts will be significantly impaired by making these programs less attractive to new investments.

The Business Council does not oppose measures to increase the accountability of major state economic development programs, where needed. For example, we believe the Governor's Empire Zone reform proposal contains appropriate provisions regarding the tracking of, and reporting on, costs and benefits within that program.

However, we strongly oppose measures such as A.11682 that place unreasonable limits on business activity, and impose draconian, retroactive penalties based on unreasonable criteria.

For these reasons, The Business Council urges you to join us in our opposition to A.11682.