Business
Council membership priorities for 2008
Time to Get our Economy Back on
Track
The Road Ahead
A message from Business Council President
Kenneth Adams
With the nation’s economy entering a period of uncertainty,
New York State faces huge challenges in 2008. But in 2007
we learned two important lessons that can help us this year:
- First, we saw again that New York needs to make changes—big
changes—if it’s to create a business
climate that will provide jobs for our people, and growth
and prosperity for our communities. We’ve lagged
the nation for years. One new analysis finds that
New York is the most unfriendly place for business
in the continental United States.
- But second, and more important, we learned that we
can make those kinds of changes. Because in 2007
The Business Council worked successfully with the Governor
and the Legislature to produce workers’
compensation reforms that are saving New York employers
$1 billion this year.
Reforming workers’ comp took a clear focus, hard
work, and the impassioned support of our members across
the state.
Our challenge in 2008 is to take that model and use it
to carve out victories on other issues that our members
tell us are critical to making New York stronger, making
New York grow.
So our program for 2008 requires action by the business
community. We must pull together, work together, fight together,
to set a new direction for New York State.
To change. For the better.
Kenneth Adams
President and CEO
The Business Council of New York State, Inc.
Indexing Our Economic Growth
New York State’s economic troubles go well beyond
whatever glitches might emerge in the national economy.
That means 2008 is an especially critical year for this
state.
New York has lagged behind the nation’s growth
rate for years. In bad years we fall faster; in
good years we’re slower to catch up.
The long-term loss
We’d have about 330,000 more
jobs than we do today, if we’d managed to
keep pace with the nation’s growth rate for the last
10 years. No wonder we’re struggling with
massive out-migration of the state’s young people.
In 2007 the Public Policy Institute examined 10-year growth
rates for the nation, the 50 states, and New York’s
counties on five key indicators of performance: jobs; average
wage per job; total personal income; personal income per
capita; and population.
The findings were alarming. Fully half of the 62 counties
and boroughs in the state—including 27 of the 52 Upstate
counties—failed to match the nation’s growth
rate on even a single one of those indicators.
Upstate impact
Upstate suffers from New York’s high
overall cost of doing business, yet misses out on the booms
on Wall Street. In 2007 Upstate grew private-sector employment
at less than a third the national average—and less
than half the growth rate of Pennsylvania and Massachusetts,
which have economies structured much like Upstate’s.
The competition
Overall, our job growth rate doesn’t
remotely compare to a high-growth powerhouse like, say,
Texas—which is growing more than twice as fast as
New York State overall, and almost six times as fast as
Upstate.
We’ve come to take that for granted. But we shouldn’t.
New York has a better-educated workforce than Texas, and
our constellation of innovative companies and world-class
research universities is second to none. We should
be leading the race—not bringing up the rear.
The problem: our business climate
New York’s lagging economic growth
isn’t the fault of our workers, or our businesses.
It has one basic cause: a cost of doing business
that is far higher than the competition’s:
- The Tax Foundation ranked our tax burden 48th—third
highest in the nation.
- The American Legislative Exchange Council’s Laffer
State Economic Competitiveness Index ranked New York 49th—behind
every state except Vermont.
- The Beacon Hill Institute’s 2007 State Competitiveness
Index—which gives more weight to high-tech areas
in which New York has strengths—nonetheless rated
New York 38th overall.
It’s time for New York to change. Our future
depends on it.
Building on the top priorities identified by more than
1,000 members in a survey a year ago, the Council's Board
and membership committees have identified these key issues,
among others, for 2008:
Taxes
When the economy slows, government revenues feel the pinch—and
a chorus of voices immediately rises in New York to call
for tax increases.
That’s the exact opposite of the right approach.
New York’s problem isn’t that our taxes are
too low. It’s that they’re too high.
And whatever the rhetoric around the budget problems, New
York State tax receipts are not down—they’re
up:
- New York’s state taxes are 11th in the nation,
19% above the national average.
- Add in local taxes (which are driven in substantial
part by policies and mandates set in Albany) and we’re
highest in the nation—56% above the national average
on a per-capita basis.
- Total state tax collections are up about $2.5 billion
in the outgoing fiscal year.
Taxes aren’t down—they’re
up.
We don’t need to raise taxes—whether
by taxing individuals more, or by adding industry-specific
taxes (sometimes called “loophole closings”).
Instead, we need to:
- Reform business taxes to encourage investment that
will create jobs and provide income and revenue growth.
For example, we should let businesses realize the full
value of investment tax credits that are nearing expiration
by using them to offset new capital investment in the
state; create a “new jobs” incentive, with
state grants to employers based on a percentage of increased
personal income taxes generated through new hires; and
expand the R&D credit by increasing it to 40 percent
credit for tangible property investments, increasing the
credit cap to $500,000, and expanding eligibility.
- Reduce Albany mandates and create real caps that will
restrain the growth in local property taxes—for
both businesses and homeowners.
The Cost of Government
New York has high taxes because state and local government
spending is out of line—and getting worse. State and
local spending per capita is already 47% above the
national average. Do we get what we pay for?
- Medicaid spending is more than double the national average—yet
key health-care indicators like pre-natal care and low
birth-weight babies are worse than the national average.
- We’re tops in education spending, 62%
above the national average. Yet we’re 33rd
in the nation on eighth-grade math tests. Our pupil-to-teacher
ratio is well below the national average—yet average
class size is worse than the national average.
- We have about 220,000 more state and local government
workers than we would have, if we matched the
national ratio of tax-paying jobs to tax-spending jobs.
That costs our taxpayers at least an extra $10
billion a year. With the coming retirement of
the baby-boom generation, we have a chance to reduce this
overhead through attrition rather than layoffs.
- And the need to restrain unnecessary spending is especially
urgent if the state wants to pursue higher priorities—such
as upgrading our higher education system.
Now we hear warnings about a state budget “gap.”
But that’s based on a new budget that would be $14.5
billion higher than only three years ago—an
increase of 20%.
Officially the state wants to change its ways, restraining
growth in the new budget to a bit more than 5%. That’s
not a very tight standard. But suppose New York had done
even that in just the last three years? There would be no
budget gap—in fact the state would be rolling
along with an accumulated surplus of almost $5 billion.
Enough already. The solution to our budget
problems isn’t more taxes. It’s less spending.
The High Cost of Health Care
The Business Council’s members overwhelmingly cite
the rising cost of health care for their employees as their
most important concern. And no wonder. The premiums
for family coverage have risen more than four times as fast
as wages since 2001.
The problem is especially acute for small businesses—the
ones having the hardest time finding and paying for coverage
for their workers.
There isn’t one big fix. For example, New York State
cannot, and should not, rush head-long into universal coverage.
The best approach is an incremental one that focuses both
on the health insurance system itself, and on the underlying
high cost of health care. And we need to remember that one
size doesn’t fit all; needs and challenges often differ
by region and by community.
Small businesses want and need affordable, market-based
options for health insurance plans that aren’t
now available. Modifications to the Healthy New York program
that would increase small business participation should
be considered.
Beyond reforming programs like that, the core issue in
health policy is high costs. To address those we need, among
other things:
- Health information technology, such as electronic prescribing
and medical records, and “interoperability”—ensuring
that different institutions and practitioners can access
health records, to avoid lost time and the expensive duplication
of care, and to improve health care quality and
value.
- Continued health planning: All stakeholders in a community
should help shape decisions about investments in health-care
technologies and institutions.
- Relief from health-care taxes that
add to the cost of coverage and shift costs to the private
sector.
The Energy We Need to Grow
The Business Council believes that the continued operation
of existing, economically viable generating facilities,
including nuclear and coal, is vital to ensure stable and
competitive prices and supply diversity. Furthermore, additional
generating capacity, investments in transmission systems,
and a more sensible regulatory climate are crucial to assuring
sufficient, affordable and reliable energy for economic
growth.
- Article X—The Business Council
supports adoption of a new siting law that provides comprehensive,
streamlined, “fuel neutral” review of proposed
generating projects.
- Transmission and distribution infrastructure—New
York State has one of the most reliable transmission grids
in the country; to keep it that way, continued investment
should be encouraged at the state and local levels. Infrastructure
investment requires regulatory certainty, efficient permitting
processes, and commitment to a long-term integrated infrastructure
plan.
- Power programs—The state should
extend Western New York industrial hydropower contracts
and adopt a permanent extension and “repowering”
of the state’s major economic development power
programs in 2008, including Power for Jobs. This will
include re-deployment of rural and domestic hydropower
from NYPA’s Niagara hydro plants for economic development.
- Sustainability and efficiency—Encouraging
the diversification of the energy portfolio, including
renewable resources, continues to be a major priority
for the state; this can and should be pursued without
imposing additional burdens on business.
- Other cost issues—We support
the most cost-effective approaches in implementing the
proposed Regional Greenhouse Gas Initiative (RGGI) cap
and trade program, and the High Electric Demand Day Initiative.
The Innovation Economy
New York needs to reform its non-competitive costs of doing
business—but that, alone, will not ensure our success
in the innovation economy of the 21st Century.
The other piece of the puzzle is to pursue the aggressive
strategies needed to position our research universities,
our workforce and our companies for success in this new
world.
To that end, The Business Council recommends:
- Determined state efforts to upgrade the quality and
impact of our universities, pushing our
State University into the top tier of research systems:
- We support a strong focus on the SUNY research
centers, with a solid endowment and a new
Innovation Fund to jumpstart this process.
- Priority in funding should go to research projects
that involve collaboration among public and independent
universities, and commercialization
with business.
- Tax policy that delivers new incentives for innovation
and research—for example, a higher R&D credit,
and a policy that plows unused tax credits back into investments
in New York.
- Stronger teaching of math and science at all grade levels.
- And a broad state policy that encourages, rather than
undermines, our New York companies’ need to earn
a solid return on the enormous investments
they make in research and development. This means, among
other things, a policy on intellectual property that makes
sense for all—and resisting new burdens and strictures
on telecommunications, the pharmaceutical industry,
biotech, information technology and other crown jewels
of New York’s innovation economy.
Economic Development
Targeted incentive programs are crucial components of the
state’s economic development efforts. With regard
to specific development incentives and programs, The Business
Council recommends that the state:
- Maintain Empire Zone benefits for
businesses that continue to meet QEZE criteria.
- Adopt reasonable Industrial Development Agency reforms,
including increased public reporting on IDA projects;
uniform project applications and review criteria; and
annual project reviews and certifications.
- Support effective regional strategic planning, and
give regions a greater role in developing state economic
development resources. Broaden criteria
for state economic development assistance programs, and
project-specific incentives, to include key factors such
as: level of capital investments; job creation and retention;
job “quality” (including wages and benefits);
and regional significance of a facility or project.
- Adopt targeted incentives for strategic and
emerging industries (e.g., financial services,
technology industries) and priority development needs,
especially in Upstate New York.
- Streamline the state’s “brownfield”
program to assure reasonable, use-based site remediation
requirements; timely state approval of
cleanup and redevelopment projects; and to limit future
environmental liability.
- Expand criteria for workforce investment funds to provide
greater support for incumbent worker training,
and training programs that target employer needs.
- Support full funding of key Empire State Development
Corporation programs, including but not limited to “Jobs
Now,” Empire State Economic Redevelopment Fund,
Regional Technology Development Centers, and business
marketing programs.
Strengthening Our Workforce
For two centuries, New York’s greatest economic
advantage has been its workers—better educated
and more productive than counterparts in competing states,
year after year.
Yet we are now in danger of losing that edge. The rapid
changes forced by the global economy are demanding new and
higher skills every year. Here’s what we need to do:
- Build a coordinated training system that addresses
the needs of the entire spectrum of the state’s
businesses, large and small.
- Designate a single lead agency within
state government responsible for coordinating the entire
panoply of taxpayer-backed training and workforce development
programs.
- Base the system on data that match
real training needs with the resources available regionally.
- Ensure that the key implementation decisions come from
employers who actually have jobs to offer—not
from the bureaucracy.
- Give Chambers of Commerce a central
role in delivering training to small businesses.
- Make more effective use of our educational institutions—including
BOCES and community colleges—and promote school-to-career
partnerships.
- Develop service science education as a way to skill
the existing and future workforce.
- And use training grants targeted at low-income adults
to help them start on a career ladder that closely
matches employer needs.
Liability and Lawsuits
New York’s tort system—all those lawsuits over
everything from auto accidents to slips and falls—imposes
a cost on the state’s economy that’s now estimated
at $18 billion to $19 billion a year. The problem touches
every aspect of living and doing business in New York. But
it’s particularly acute for two key sectors of our
economy: construction, and health care.
- Section 240-241—the notorious “Scaffold
Law”—imposes absolute liability
on employers for accidents involving scaffolds or ladders
at construction sites. Employers sued under this provision
cannot even introduce evidence that they weren’t
at fault. We’re the only state in the nation with
this bizarre provision.
- A tide of lawsuits against doctors and hospitals is
driving up costs—and jeopardizing care—for
everyone. The medical liability insurance
system is near financial collapse, threatening ruinous
rate increases for doctors and medical centers, especially
for key services like baby deliveries and neurosurgery.
It is urgent to address both these problems in 2008, with
bold reforms that restore reason and balance to
the system.
More broadly, The Business Council favors comprehensive
reform of the overall tort system, to include:
- No more expansions in the cost and
types of lawsuits the Legislature will permit trial lawyers
to bring—such as bereavement losses and pre-judgment
interest.
- Caps on non-economic damages.
- Reform of joint-and-several liability, so defendants
can be punished only to the extent they were actually
responsible for damages.
- Reform of absolute liability for professional engineers
and architects.
- A reasonable process for lawsuits against municipalities,
to protect taxpayers from runaway verdicts.
