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Legislative Memo

BILL:

S.4750 (Spano)
A.1213 (Brodsky)

Support

SUBJECT:

Outsourcing Penalties

 

DATE:

May 15, 2005

 

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 this 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 S.4750/A.1213.


This legislation will be included as one of the scoring measurements of The Business Council's
“Vote for Jobs Index 2005"
. This is The Business Council's annual assessment of legislators'
actions on key issues of concern to the state's business community.