Governor George E. Pataki opened the 2001 legislative session today with a call for new tax relief for manufacturers and other businesses, new incentives for investments in upstate communities, and new initiatives to bolster the state's high technology capabilities.

In his annual State of the State message, the Governor said that because of the tax cuts and other reforms of the last six years, "for the first time in 20 years, New York's rate of job growth has outpaced the national average for two years in a row." But he said New York must "continue to make the changes that are encouraging investment, sparking growth, and creating jobs."

He proposed phasing in a single sales factor for corporate income taxes on manufacturers, repealing the alternative minimum tax on corporate income, providing state-funded relief from county property taxes for farmers and senior citizens, and leveraging up to $1 billion for as many as six new high-technology research centers.

Business Council President Daniel B. Walsh hailed the Governor's proposals, saying that "this agenda strengthens the economy we have today—while laying the groundwork for the high-performance, high-tech industries of the future."

Both the tax and high-tech initiatives closely matched The Business Council's top priorities for the year.

The Governor gave particular emphasis to the needs of the upstate economy, which he said was recovering, "but not nearly as good as it's going to be."

Single sales factor taxation, which is The Business Council's key tax reform priority for 2001, would allocate a corporation's income to New York for tax purposes solely on the basis of the percentage of its worldwide sales that occurs in the state. The current formula weighs not only sales, but also property and employment in the state—a tax system that in effect penalizes companies for investing more and providing more jobs in the state.

Over five years, the Governor's proposal would phase in a single-sales factor for manufacturers—who are, he said, particularly vital to the upstate economy.

He also proposed:

• Phasing out the state's alternative minimum corporate tax, now 2.5 percent. The AMT in effect undercuts the value of the state's investment tax credit, which is of particular benefit to manufacturers.
• More than doubling the Upstate territory eligible for the tax relief and other incentives available under the state's Empire Zones program.
• Increasing funding of worker retraining for manufacturers.
• Encouraging redevelopment of brownfields through tax credits. Empire Zone property tax benefits would extend to Upstate brownfields of 10 or more acres, and those of 100 acres or larger would receive enhanced benefits if they are not already in an Empire Zone. In addition, businesses and individuals statewide would be eligible for a new tax credit equal to a portion of costs incurred in cleaning up a brownfield site.

The Governor's agenda also included these other key items:

HIGH TECHNOLOGY. The Governor said that to "support the high-tech trends that are the surging wave of the future," the state should provide seed money for new research centers that can "bring together the ingenuity of the private sector with the world-class research capabilities of our universities."

He cited nanoelectronics research in the Albany area, photonics research in the Rochester area, and bioinformatics in the Buffalo area as examples of the university-industry collaboration the state needs.

Leveraging federal and private funding, he said, this "billion-dollar high-tech initiative" would be "the largest high-tech economic development initiative in our state's history."

EDUCATION REFORM. The Governor proposed consolidating 11 different programs for aid to school districts into a single funding stream, to enhance "the ability of schools to direct resources where they're needed the most." To deal with concerns about pending teacher shortages, he proposed programs to encourage teacher's aides and retired public employees to become certified teachers. And he called again for caps on school spending, arguing that too many districts have used the state's STAR program of school tax relief "to make unnecessary tax increases."

ENVIRONMENT. The Governor proposed extensive new incentives for the redevelopment of brownfields, especially in Upstate urban areas. He said the Legislature this year "must reauthorize and reform" the Superfund program. And he said his budget would "propose a record level of funding for the Environmental Protection Fund."