2001 Small Business Day Recap

 


Small Business Day Review

I would like to begin by first thanking everyone who attended Small Business Day this year. It was another successful day, with over 400 participants.

The responses we've been receiving from the legislature are very positive. Your voices were definitely heard!

For those of you who were unable to make it, a summary of the key priorities that were discussed are below:

Health Care
Expand the Healthy New York Program to more Small Businesses

When Governor George Pataki signed the Health Care Reform Act of 2000 (HCRA) into law, small businesses won a decades-long effort to gain access to a quality, basic, low-cost health plan. The Health Care Reform Act of 2000 established a new program entitled Healthy New York, designed to help provide health insurance coverage for small-business employees and individuals. The program is open to small businesses with 50 or fewer employees that have not provided group health insurance during the 12-month period preceding application. In addition, at least 30 % of the employer's work force must have annual wages at or below $30,000 and at least 50 percent of eligible employees, including one employee earning $30,000 or less, must participate. Employers must contribute at least half the premium cost, while the premium contribution of each employee must be the same. Sole proprietors and individuals whose employers have not offered health insurance for the past 12 months and whose household income meets certain requirements are also eligible. As of January 1, 2001, HMO's have made this product available to eligible small businesses. Recommendation:
Expand the Healthy New York Program in some form to qualifying small businesses with 50 or fewer employees, who have been offering insurance in the prior 12-month period.
Assemblyman Joseph Morelle has recently introduced legislation A.2132 which would
amend the Health Care Reform Act (HCRA) of 2000 to include more small businesses within the definition of a qualifying small employer by removing the requirement that a small business must not have offered health insurance for a 12 month period prior to application to the group health insurance program.Assemblyman Robert Sweeney and Senator William Larkin have introduced legislation (A.6866/S.2188) which would permit sole proprietors and small businesses to purchase the Healthy New York product.

Health Insurance Access and Affordability

There is a rapidly escalating crisis in health-insurance coverage in New York State. Small businesses—and especially sole proprietors - are losing access to health insurance, for two reasons:

Cost: In recent months small business people in New York have faced sudden premium increases of as much as 30 percent (and even more). This is threatening the solvency of their businesses, and will drive many into the ranks of the uninsured.

Availability: More and more health insurance providers are eliminating sole proprietors' longstanding access to group-rated insurance coverage—or have abandoned, or threatened to abandon, service to these sole proprietors altogether.

Recommendation: With support from the state Insurance Department, the small business community is currently encouraging a voluntary response from the health insurance providers—urging them to work with us to place new products in the marketplace and to continue sole proprietor access to group-rated coverage. Unless this voluntary approach produces a quick solution, however, we believe the Legislature and the Governor should enact legislation requiring all health insurance providers to offer sole proprietors access to group-rated health insurance through general-purpose chambers of commerce and other business alliances approved by the Insurance Department.We believe such a response is essential if we are to eliminate discriminatory practices, avoid a further swelling of the ranks of the uninsured, and support small business health and economic growth throughout New York State.

Senator James Seward and Assemblyman Joseph Morelle have introduced legislation (S.3795/A.7413) addressing the health insurance crisis faced by sole-proprietors in New York State. The bill includes three major components:

  1. Defining "general purpose chambers of commerce" in the law for the purposes of selling health insurance. This section of the bill will address the issue of "shell" chambers forming for no other purpose than to sell health insurance; Regular certification of sole-proprietors by the chambers of commerce that they are, in fact, an actual business; and
  2. Amending the Insurance Law to include sole-proprietors in the definition of "small groups" which currently only covers groups of 2-50 employees.

The goal of the legislation is to allow chambers of commerce and other business associations to continue to sell affordable health insurance to the sole proprietor members.Other legislation similar in nature includes Assemblyman Robert Sweeney and Senator William Larkin's proposal (A.6962/S.2187) which helps to encourage and facilitate the operation health insurance purchasing cooperatives. Allowing employees of small businesses to have the same ability to select among different health plans as is the case with larger employers.

Health Insurance Tax Credit

Increasingly, it is becoming prohibitively expensive for small businesses to offer their employees health care coverage. This high cost is cited by small business owners as the reason why they cannot afford to provide coverage, or must shift an ever-larger portion of the costs to employees. Recommendation:
New York State should allow small businesses a tax credit equal to a portion of the health insurance premium paid by employers. Such a credit would reduce the burden on small businesses which already provide coverage as well as allow other small businesses to begin participating.Senator James Seward and Assemblyman Joseph Morelle have introduced legislation (S.1532) which would provide a credit for small businesses equal to twenty percent of the health insurance premium paid by an employer.Assemblyman Robin Schimminger has also introduced legislation (A.918) which would provide for a credit for small businesses equal to ten dollars per covered employee per month.

Conduct Cost/Benefit Analysis of all Health Mandates Before They Apply to Small Businesses

Mandating that health plans offer coverage for a wide variety of treatments - ranging from infertility treatments, to increased access to clinical trials of new treatments and mental health coverage, to requirements that allow patients to see philosopher practitioners, may sound like good ideas, but the sweet coating of these good intentions covers up a pill that is hard to swallow... prohibitive costs. Cumulatively, these type mandates add thousands of dollars to the cost of every state-regulated health care policy in the state.The question then becomes, "When does health care cost too much?" When do we say "no" to a mandate that sounds good, but results in fewer people receiving coverage?Every time the legislature mandates a specific benefit, other important benefit choices are taken away from employers and employees. For example, money spent providing an infertility mandate could have been better spent on vision or dental care for employees. Government mandates take away these type of employee choices.These added benefits are well intentioned but they make health insurance less affordable, particularly for small business because large employers have the financial wherewithal to self-insure under federal law and are, thereby not required to add state mandates to their benefit packages. The truth is, mandating health care services is equivalent to directly increasing taxes on small business.Recommendation:
Support legislation requiring the state to test the costs and benefits of health insurance mandates on the State employee's health plans before imposing them on private sector plans. Senator James Seward and Assemblyman Alexander Grannis are continuing to work to enact mandate review reform.

TAXES

Increase the Sales Tax Vendor CreditThe Sales Tax Vendor Credit provides a 3.5 percent tax credit – up to $150 per calendar quarter ($600 per year) – that may be claimed by businesses that collect sales taxes, as an offset to their administrative expenses. To gain the maximum credit of $600, a business must have $428,572 in annual sales.A 1999 Tax Department administrative reform allows those with under $75,000 in annual receipts (under $3,000 of state sales taxes collected) to file and remit their sales tax receipts annually. While helpful to both the Department and the business, this change means that a small "annual filer" can now never qualify for the maximum of even one-quarter's Vendor Credit. Such businesses instead receive a maximum credit worth only $105 ($3,000 state sales taxes x 3.5 percent = $105).Recommendation:First, increase the vendor credit to ten percent; Second, raise the maximum quarterly cap for "annual filers," so that they can qualify for a larger credit worth up to $300, to offset their relatively larger administrative burden.

With this solution, a small "annual filer" with under $3,000 in state sales tax to remit annually would receive a $300 credit. Businesses with as little as $250,000 in annual sales would qualify for the new quarterly maximum credit of $250 – more commensurate with their actual costs. Finally, other very small businesses with more than $75,000, but less than $250,000 of annual sales would receive a larger credit, based upon the new ten percent rate.Senator Jim Alesi has introduced legislation S.291 which increases the credit for the sales tax vendors allowance from 3.5 percent to ten percent and also raises the $150 calendar quarter cap to $250.00.

Accelerate Effective Date of the Small Business Corporate Tax Cut

Corporate tax rates for small businesses are coming down, but unfortunately, not fast enough. Prior to 1999, the corporate tax rate for large corporations was nine percent. If you had a small corporation with between $200,000 and $290,000 of entire net income (ENI) you were taxed on a sliding scale, between eight and nine percent. And very small corporations, those below $200,000 of income, paid at an eight percent rate – a full one-percent difference in the rate between big and small business.The 1998-99 budget enacted a phase-down and flattening of the rates to 7.5 percent, for all corporations, no matter how small, effective on July 1, 2001. In view of the fact that larger companies had seen a greater tax cut, on a percentage basis, with their rate going from nine to 7.5 percent, small business won a lower rate.We won that lower rate in 2000, and there will be a small business tax rate of 6.85 percent (S-Corporations will get a 45 percent cut in the differential tax). The problem is that the new small business tax rate does not become effective until the tax year beginning July, 2003 while the new large corporate tax rate becomes effective in July, 2001 – a full two years earlier.Recommendation:
Amend the effective date for the new small business tax rate of 6.85 percent to July, 2001.

Expand the STAR Program to Small Businesses

Governor Pataki's successful STAR Program was designed to help lower the cost of living in New York State by lowering the cost of school taxes paid on residential property. This program has given some property-tax relief to home-owners. Recommendation:
We are asking that the STAR Program be expanded to include small business, and to also cap school tax increases. Senator Jim Alesi has introduced S.2189 which would extend the availability of the STAR exemption to certain business property provided such property is owned by the owner of an unincorporated business having no more than 100 employees or by other non-corporate owners employing a similar number of employees.Senator James Seward has also introduced legislation S.2891 extending the provisions of the STAR exemption to include property owned by a small business which employs 20 or fewer employees.

WORKERS' COMPENSATION

Section 240/241: This historically has been known as the "Scaffolding Law," originating early in the last century to protect workers building bridges and skyscrapers. This law is now applied in cases involving any height and most often uses a strict liability standard. The result? Insurance carriers cannot predict liability in the construction industry and many firms are facing increases of 50 to 300 percent - if they can get coverage at all. As it stands, this law prevents an owner from proving that adequate safety devices were in place and did not contribute to an employee's injury. This is the case even if the worker failed to use such devices properly, or was under the influence of alcohol or illegal drugs. New York State is the only state in the nation with this law. It puts us at a competitive disadvantage, and raises construction costs for public and private entities doing business here. Recommendation: Support legislation Senator Dale Volker and Assemblyman Joseph Robach have introduced (S.203/A.571) which would repeal section 241-a of the Labor Law and clarify the duties and obligations of owners, contractors and employees.Illegal Acts: In 1986, the Court of Appeals held that the Workers' Compensation Law does not preclude benefits for employees injured while engaged in an illegal activity. Senator Jim Alesi and Assemblyman Robin Schimminger have introduced legislation (S.293/A.1375) which exempts from workers' compensation coverage any injury or occupational disease sustained by an employee in the perpetration of an illegal act. In addition, the legislation requires employers contesting a workers' comp claim to prove that intoxication was the "predominant" cause of injury to an employee injured while on duty. The current standard requires employers to show that it was the "sole" cause of injury – a standard that is virtually impossible to meet.Cap Benefits In Permanent Partial Cases:
New York is one of the only states that do not have a limit on length of time an employee who is not totally disabled can collect workers' compensation. Currently, benefits can be paid out to those who truly do not need it. A cap would allow a more efficient use of limited resources, while reducing overall workers' compensation costs.Recommendation: Limit the payment of benefits in permanent partial disability cases to a period no greater than 7 years.Implement Objective Medical Guidelines: New York is one of the few states that does not use objective medical guidelines to determine the extent of disability in workers' compensation cases. Instead, individual doctors make this determination, subjectively and separately. Implementation of objective medical guidelines removes the guesswork, and will instead provide fair and consistent treatment and benefits for people with similar injuries. Recommendation: Implement reasonable, objective medical guidelines.

Governor, Bruno and Sweeney Speaks Out During Small Business Day

New York businesses should urge lawmakers to restrain spending in the 2001-02 state budget, Governor George Pataki said at The Business Council's annual Small Business Day March 27."We cannot go back to the failed policies of the past," the Governor said during a luncheon address. "We have to have a budget that reflects the economic circumstances of the year 2001.


Senate Majority Leader Joseph Bruno and Assemblyman Robert
Sweeney, chair of the Assembly Small Business Committee, also spoke during the luncheon. Before the state began enacting policy changes in 1995, "New York was actively hostile to small businesses and taxpayers," the Governor said. New York ranked 47th in the country in creating jobs, endured the nation's highest tax burden and lowest credit rating, and faced a $5 billion budget gap, the Governor said.Since then, tax cuts that will total more than $100 billion when fully effective, as well as workers' compensation reform, regulatory reform, and other changes, have moved New York from 47th to 11th in job creation, he added.This year, lawmakers must heed signs of a national economic downturn and restrain spending in the state budget, he said. He recalled the state's experience in 1990, when lawmakers adopted a "spending-binge" budget and then had to make painful adjustments when revenues fell short. "We're not going to have that happen. We're not going to provide support that is unsustainable," he said. In particular, he said, he would not permit spending to imperil tax reductions that are slated to reduce the tax rate for small businesses from 8 to 6.85 percent.The Governor's Executive Budget calls for an All-Funds budget of $83.68 billion. The Senate has said that its budget resolution would increase that to $84.1 billion. And the Assembly has said its proposal would add $2.29 billion to the Governor's proposal. The leaders have said they are not near agreement on a budget. Budget negotiations are expected to continue well beyond the state's April 1 deadline for passing a budget, and possibly into the summer. President George W. Bush's proposed tax cut: Governor Pataki also urged business leaders to support the president's proposed tax-cut plan, which the Governor said would be especially beneficial to New York State. Task force on small business: The Governor also announced that he has asked Lieutenant Governor Mary Donohue to chair a new task force on small business that would consult with small business leaders to see what additional policy changes in New York State could further improve the business climate for small businesses. Senate initiatives for business: In his remarks, Senate Majority Leader Joseph Bruno said the business climate improvement of the last six years is partly a result of strategic state investments in job creation. He cited, for example, "Jobs 2000" (J2K), a Senate-driven 1999 law that increased the state's investment in research universities, created a state venture capital program, supported new employer- focused job-training programs, and invested in developing water supplies for businesses and residents.This year, he said, the Senate wants to continue investing in jobs through GEN*NY*SIS," a Senate proposal that calls for $500 million in combined public and private investments in biotechnology R&D at universities, corporate R&D labs, and other research institutions, with the goal of fostering economic development in this emerging sector.Senator Bruno also noted that the Senate's budget resolution includes proposals for expanding the state's "Empire Zone" economic development program, creation of a $235 million tax credit to help businesses afford health insurance for their workers, and $1.8 billion in new tax cuts. Assembly initiatives for business: Assemblyman Sweeney also spoke during the luncheon, briefly outlining Assembly initiatives that have been designed to help New York State small businesses and pledging to sustain that commitment. The Assembly has passed a package of bills that it says would help small businesses in New York by making it easier for them to raise venture capital, pursue new opportunities, do business with the state, and comply with environmental and other regulations. For details, visit www.bcnys/org/whatsnew/2001/0328asyb.htm.


Small Business Advocate of the Year

Dennis Ross, president of Mitchell Ross Associates Architects of Voorheesville, has been named Small Business Advocate of the Year. Governor George Pataki presented the award during Small Business Day. The Small Business Advocate of the Year Award is a statewide award given by The Business Council of New York State and the National Federation of Independent Business (NFIB) to someone who has shown extraordinary commitment to advocacy on behalf of the small business community.Candidates for the award are nominated by The Business Council and/or the NFIB and their members; Ross was nominated by the Small Business Committee of The Business Council. Ross was recognized for his strong leadership role and commitment to helping improve the general climate for small business. A Michigan native, Ross came to New York to study at Rensselaer Polytechnic Institute, where he earned bachelor's degrees in architecture and building sciences. Founded in 1992, Mitchell Ross Associates Architects, P.C. is a 10-employee firm that focuses on designing public-safety buildings and recreation architecture. Through both his business and volunteer work, Ross has long been an active advocate for small business in the Capital Region and New York. He has been a member of The Business Council's Small Business Committee for six years, the last three as chairman. In this role, he brings to The Business Council the needs of the small business community and then helps formulate small business-friendly policies that his committee and The Business Council then advocate in Albany.

Small Business Legislation of Interest

I have also posted on our web site for your review under the heading Small Business, a list of legislation that has been introduced on behalf of the business community. If you have any questions or comments on these bills, please do not hesitate to call me.