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April 24, 2006

Business leaders say workers' comp damaging to state's economy

Representatives from The Business Council of New York State and other business groups have been touring New York over the past few weeks, reminding lawmakers and the media about the harmful effect of the state’s workers’ compensation system on employers and the economy.

“The workers’ compensation system in New York is at a critical point,” Elliott Shaw, director of government affairs for The Business Council, said at a April 19 event in Utica. “The comp crisis is real and getting worse. It’s fundamentally undermining our competitiveness.”

“New York’s workers’ compensation costs for employers are second highest in the nation,” Larry Gilroy, chairman of the New York Workers’ Compensation Action Network (NYCAN), said at the Utica event. “The cost of workers’ compensation is one of the leading causes that businesses point to when they are forced to eliminate jobs or create new jobs in other states.”

“There may be no concern that unites our members more than the extraordinary workers’ compensation costs in New York State,” said Andrew Rudnick, president and CEO of the Buffalo Niagara Partnership at an April 18 event in Buffalo. “Every dollar our members spend on the nation’s second-most-costly workers’ comp system, is a dollar they aren’t spending to expand, hire more local people and positively impact the local economy.”

The events in Utica and Buffalo also featured area business owners who spoke about workers’ compensation and the program's effect on their companies.

“Harden’s workers’ compensation costs were nearly $1 million in 2004. That represents 2.5 percent of our company’s revenues and almost $2,000 per employee,” said Greg Harden, CEO of Harden Furniture. “At a time when we are struggling to adjust to the pressures of a global economy, we need relief from costs that do not add value to our products."

“We pay two dollars per labor hour for workers’ compensation and every dollar we spend on that is a dollar we can’t invest in the growth of our business,” said John Hoskins, Jr., Government Affairs Liaison for Curtis Screw Company LLC. Hoskins said the company pays $1 million annually for workers comp in Buffalo, NY and only $150,000 annually in North Carolina for the same number of employees.

“The $1 million we pay here goes right into the cost of the components we make. The less competitive we are, the less people we employ. We want to expand, we want to employ more people, but New York State’s making that much more difficult to do than North Carolina,” Hoskins said.

Several newspapers and periodicals from across the state have also written editorials pointing to workers’ compensation costs as an obstacle to a successful economy and calling for reform of the system.

“Workers' compensation is a century-old, nationally mandated program that was designed to protect employees and employers alike,” Newsday wrote in a March 21 editorial. “But in New York it is serving neither nearly as well as it should.”

“Another union-driven business cost is workers' compensation, and in New York the average cost per claim is second highest in the nation (after Louisiana) and 72 percent higher than the national average,” the Wall Street Journal said in an April 8 editorial. “Governor George Pataki has proposed a reform that would lower costs while actually raising the average payout for the truly disabled, but he's run up against a French-like union roadblock in the legislature.”

A March 16 editorial from the Rochester Democrat & Chronicle pointed to lifetime benefits paid out under workers’ compensation as one of the system’s largest problems.

“The problem of lifetime awards has been around for a long time, a testament to the ability of labor to sway state lawmakers,” the editorial said. “What's new are the dimensions of Upstate's problems and their impact on companies and workers. Delphi Corp., which has filed for bankruptcy, has cited New York's workers' comp system as one of the causes of its troubles.”

A Crain’s New York Business editorial from March 6 highlighted recent reforms in California.

“In California, Gov. Arnold Schwarzenegger pushed through changes in 2004, after years of inaction on the part of the Legislature,” the editorial said. “Premiums that businesses pay have already gone down by 38%. The Los Angeles Business Journal reported recently that regulators and insurers say it's only a matter of time before businesses enjoy further declines.”

Editorials emphasizing the need to reform the costly system also appeared in the Albany Times Union, the Utica Observer-Dispatch, the Binghamton Press and Sun-Bulletin, Business Insurance, and the Syracuse Post-Standard.

The Business Council has outlined the case for reform in its series Comp Watch '06. The seven installments of the series area available at www.bcnys.org/inside/wc/compwatch06.htm.