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Government Affairs Albany Update

February 15, 2008

Business Council Budget Testimony
Staff Contact: Ken Pokalsky

Controlling state spending and promoting economic growth should be the main objectives in building the state's budget for the coming year, Business Council President and CEO Kenneth Adams told a joint Senate/Assembly budget hearing on taxes and economic development policy this week.

"We need to promote new investment in existing businesses and in the emerging industries of our innovation economy," Adams told lawmakers at a February 11 joint hearing on the budget. "We need to avoid budget actions that add to our cost structure, and further erode our attractiveness and competitiveness as a state." The testimony highlighted concerns The Business Council has with Governor Eliot Spitzer's proposed budget plan for fiscal year 2008-2009.

The Council recommended that the growth in state spending be limited to the projected rate of inflation of 2.8 percent. To bring spending down to that level, New York State needs to impose additional cost-controls in areas such as health care expenses and the size of state government.

The Business Council also argued against a number of the revenue measures included in the Executive Budget, including the proposed changes in corporate and bank income taxes and increased taxes on health insurance and HMOs, as among its most significant concerns.

The Business Council also urged the Legislature to adopt additional tax reforms that promote capital investment and job growth and retention.

Adams' testimony also asked lawmakers to pass significant and real property tax and mandate relief, pointing out that while New York State's Tax Reform (STAR) provides state tax dollars back to lower and middle-income New Yorkers, it imposes no controls on growth of school taxes and has no benefits for the state's business sector.

Need for Property Tax Cap
Staff Contact: Ken Pokalsky

This week the Public Policy Institute (PPI) issued a report showing that the New York State 's Tax Relief (STAR) program, originally intended to reduce property taxes, has had little impact in that area, instead helping to escalate local spending over the past decade. The PPI is the Business Council's research affiliate.

The report, entitled "What's STAR Got To Do With It," was released this week as lawmakers met to discuss the growing problem of property taxes in the state.

The report showed that New York 's local property taxes hit $37 billion in 2005 (the most recent year for which the state Comptroller's office has published complete data). Further, the problem continues to escalate. The report showed that, while property taxes increased an average of 3 percent a year from 1995 to 2000, they grew by an average of 7.1 percent a year from 2000 to 2005-more than double the rate of inflation.

The report said that STAR, implemented in 1998, contributed to that fast growth. Under the cover of STAR, school district property-tax levies rose four times as fast between 2002 and 2007 as they did in the previous five years.

Importantly, the report emphasized that New York 's businesses, which pay 30 percent of school property taxes, get no benefit from STAR. The effective tax burden on business property is about $1 billion higher than it would be if taxed the same as residential property, the report said.

The report concluded that an alternative approach would be to cap both STAR and local property taxes. If STAR were capped at its 2006-07 level, and local property taxes capped at 2.5 percent, the property-tax cap would offset the impact of the STAR cap. The report also argued that the key to a permanent solution is to adopt mandate relief, and downsizing reforms, that will enable local governments to get by on less.

Governor Eliot Spitzer has already appointed one commission to look at local government consolidation and shared services. Another Spitzer appointed commission is charged with studying mandates and property-tax caps.

NYSDOL Issues Task Force Report on Employee Misclassification

New York State Department of Labor (NYSDOL) Commissioner Smith has issued the first results of a multi-agency task force's efforts to improve employer compliance with labor, tax, and workers' compensation law provisions. Initial task force industry "sweeps" focused on the construction, retail and restaurant industries across the State and yielded "significant" employer violations. In addition to employee misclassification violations, industry sweeps yielded various minimum wage, overtime, and record keeping violations.

The task force is seeking to develop several formal proposals to improve employer compliance including a single standard for determining employment status; and clarifying corporate officer responsibility and liability. Task force members will also seek to initiate and increase consultation with stakeholders throughout the year.    The report can be found here. For background on the task force and the executive order creating it see the December 21, 2007 GAC update.

The Business Council and NYSDOL will convene a meeting to discuss the report's findings and proposals, with the date and location still to be determined. 

Assembly Republicans Schedule Statewide Construction Industry Forums

The Assembly Republican Conference has scheduled a series of statewide forums about legislation that they believe would lower construction industry costs and help to create jobs. The next scheduled meeting is hosted by Steering Committee Chairman Bill Reilich and Assemblyman Lou Tobacco on Thursday, March 6th from 1:00 p.m. - 3:00 p.m. at Community Board 3 on Staten Island .

The Business Council is urging the Governor and all Legislators to help the construction industry by reforming New York 's infamous "Scaffold Law."  The "Scaffold Law" imposes absolute liability on employers, general contractors and site owners, regardless of their own culpability.  The Business Council has joined a coalition of professional and business organizations called New Yorkers for Civil Justice Reform, in an effort to rein in burdensome "tort taxes."

Empire Zone's "Emergency" Rulemaking
Staff Contact: Ken Pokalsky

The Department of Economic Development has adopted an "emergency" rulemaking that dramatically changes eligibility standards for Empire Zone benefits.

In part, the rule purports to conforming of the Department's regulations to provisions of Chapter 63 of 2005, which required restructuring of existing Empire Zones and made other program changes.

Among its most significant provisions, the proposed rule would:

The Business Council is concerned with the substance of this regulation and its impact on economic development projects, and the process by which it was imposed, without any public input or discussion. The Business Council will be submitting comments to the Department on this emergency rulemaking, and we welcome your input.

The State Administrative Procedures Act (SAPA) allow agencies to adopt emergency rules, without public notice and comment, if it finds that immediate adoption is necessary to preserve "general welfare" and compliance with the normal SAPA public notice and comment period is "contrary to the public interest." The agency is required to propose a "permanent" rule, with public notice and opportunities for public comment, within 90 days of filing the emergency rule.

The State Register notice and the text of this rulemaking are available on our web site.

21-Day Amendments Impact Healthcare, Health Insurance

Citing a worsening economic climate and a projected decline of $384 million in anticipated revenue, Governor Spitzer has announced amendments to his 2008-09 Executive Budget that would further impact the cost of healthcare and health coverage. The Governor will seek to address this decline in revenue by proposing, among other things, an increase in the Covered Lives Assessment by an additional $50 million, to $1.04 billion for State Fiscal Year (SFY) 2008-09.

The Executive Budget released on January 22 nd had originally proposed increasing the assessment $140 million to $990 million from the assessment's current $850 million level. If approved, the $190 million hike - $850 million to $1.04 billion - would represent a 22 percent increase over current SFY07-08 levels and a 56 percent increase since 1997-98 when the assessment was first applied.

One of two Health Care Reform Act (HCRA) taxes, the Covered Lives Assessment is a regional tax collected from health plans on the basis of individual and family policies issued and used in part to fund Graduate Medical Education (GME). Together, the two taxes - an 8.95 percent "sales" tax on healthcare services and the Covered Lives Assessment - are considered "hidden taxes" generating more than $2 billion that are included in the premiums paid by employers and individuals that purchase health coverage. Before the proposed increase, it has been estimated that the two taxes may impact the cost of health coverage by as much as three percent to seven percent, depending on the region.

The 21-Day Amendments also called for:

Financial Services Panel Seeks Solution to Bond Insurance

Governor Eliot Spitzer testified to the House Financial Services Capital Markets Subcommittee earlier this week, noting that there was no single government agency that took responsibility for regulating bond insurers and further arguing that the current crisis might have been averted had the Office of the Comptroller of the Currency taken more decisive actions against the mushrooming subprime lending industry.  "The federal government hesitated, even refused to act in the bond insurance sector," Spitzer said.  Sptizer warned that it was unlikely any action by Congress would be sufficient to meet the immediate needs of the market, but agreed with Subcommittee Chairman Paul Kanjorski (D-PA) that the federal government could step up to the plate in regulating the bond insurance market, moving forward in conjunction with the states.

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