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Government Affairs Albany Update

February 6, 2004

Minimum Wage Pressure Building

Pressure is building in Albany regarding increasing New York State's minimum wage from the current $5.15 per hour to around $7.00 per hour. In addition, The Fiscal Policy Institute, an Albany and New York City based research firm, published a report on January 11, 2004 entitled "Raising the Minimum Wage in New York: Helping Working Families and Improving the State's Economy". The report states that nearly 700,000 workers will directly benefit if the minimum wage is increased to $7.00 per hour and will create wage movement for an additional 500,000 workers (those earning $7.00 to $7.99 per hour) from the "spillover" effect. Human Resource Professionals call this "wage compression" and know how it can distort an organization's salary and wage structure.

There are currently seven minimum wage bills in the Senate and Assembly Labor Committees.

Some of these bills also call for a variety of commissions to study minimum wage issues in New York State as well as requiring an automatic adjustment in the state's minimum wage each year based on a COLA or a change to the state's average weekly wage. Several of these bills also require adjustments to their effective dates.

Anti-Outsourcing Legislation

The first major "anti-outsourcing" bill (S.6040 / A.9567), has been introduced in both houses of the New York State legislature. Senator Spano is the sole sponsor in the upper house. The Assembly version is sponsored by Richard Brodsky, with twenty- two co-sponsors (Benjamin, Bradley, Cahill, M. Cohen, Colton, Christensen, L. Diaz, Glick, Greene, Grodenchik, Heastie, Koon, Magee, Norman, O'Donnell, Pheffer, Robinson, Seminerio, Swweeney, Tocci, Tokasz, Weisenberg.)

The bill defines "outsourcing" as relocating "employment, jobs or positions" to a location outside of New York State. It also includes an extremely broad definition of "development assistance" that encompasses all forms of "public" (not just New York State) assistance, ranging from tax credits to loan, grants, power sales, infrastructure upgrades and others.

The bill goes on to "prohibit" outsourcing by any business (or its corporate parent) that receives development assistance. Any recipient business that outsources one or more jobs is required to "return such development assistance to the state." In addition, such businesses would be barred from receiving any new development assistance for the next five years.

More than twenty states are now considering some form of "anti-outsourcing" legislation. The New York proposal differs from most in that it defines outsourcing as moving jobs out-of-state, rather than out-of-country, and applies to the state's economic development incentives, rather than state procurement policies.

While S.6040/A.9567 is so draconian, it has little chance of passing as is, we expect additional proposals to be introduced, and the issue of "outsourcing" to be given serious consideration this session.

We are looking for your input on this legislation, as well as any insights you have on similar legislation moving forward in other states.

Empire Zones

The proposed Executive Budget included a major revamping of the Empire Zone program (see S.6060/A.9560, Part T). Not only would this proposal affect future zone and "qualified empire zone enterprise," or QEZE, designations, it applies new benefit qualifications and benefit calculations for some existing QEZEs.

The Executive Budget proposes to change the way benefits are calculated for "new companies" (i.e., those with an employment base period of zero) and electric generating facilities that qualified as QEZEs prior April 1, 2004. Specifically, the bill would change the way in which the "employment increase factor" is calculated for QEZE real property tax and tax reduction credits (Tax Law Sections 15 and 16, respectively). In effect, the bill is proposing that one percent of the maximum property tax benefit will be awarded for each "new" job (the excess of current year jobs versus to jobs in the comparison period.) This change would apply to tax years beginning on or after January 1, 2004. However, the proposal allows these "newcos" and utilities to apply to the Commissioner of Economic Development to have their benefits calculated under existing law. (Note that, other that the opportunity to petition for use of pre-existing criteria, these changes would also apply to all QEZEs certified after April 1, 2004.)

The Administration said this proposal is intended to make QEZE benefits more proportional to the actual number of jobs created. The broad flexibility to allow use of current benefit criteria is intended to allow ESD to make case-specific determinations on benefit levels. These, and other changes, are also expected to reduce annual program costs by $25 million per year, roughly ten percent of current year tax expenditures on the Empire Zone program.

This Empire Zone reform package also includes changes to QEZE benefit criteria that are intended to establish a more realistic base period for calculating benefits. Specifically, for the same category of QEZEs affected by the changes discussed above, current year employment levels would be compared to average employment within their base period (which is being redefined as the four tax years immediately preceding the year in which the business was certified), rather than its test year (defined as the tax year immediately preceeding certification.) Using average employment over a four-year period will tend to balance out short-term fluctuations in employment, in establishing the business' base-line for calculating QEZE benefits.

Benefit qualification criteria would also be changed for these three classes of QEZEs. Under current law, to qualify for QEZE benefits in any given year, a business must demonstrate that its employment numbers exceed baseline levels both within Empire Zones, and - if they have non-zone employees - in areas in New York outside of Empire Zones. Under the current proposal, the test would apply to in-zone and statewide employment levels, allowing significant employment growth within Empire Zones to offset possible job loss elsewhere in the state.

The Business Council is continuing to assess the impact of these proposals on member companies. If you are an existing QEZE that would be impacted by these changes, we look forward to receiving your input.

Click here for our PowerPoint overview of the Governor's Empire Zone reform proposal.