Message from the President of The Business Council of New York State,
is on the right economic track.
ago, you couldnt say that. For many years before the middle of the
1990s, New York had been in a downward spiral. We were hemorrhaging jobs.
In 1991 alone, New York State lost more than 300,000 jobs.
shortsighted public policy was driving those jobs away, to states where
it was easier for businesses to grow and prosper. High taxes, burdensome
regulations, high costs of employee benefits, and declining schools had
turned the Empire State into a fallen empire.
New Yorks economy is recovering. Because Albany reduced taxes, reformed
regulations, cut the cost of workers compensation and unemployment
insurance, and generally made this state friendlier to business.
face a choice.
embrace more of the same kinds of policies and gain more of the
same benefits. Or we can forget both our past mistakes and how we corrected
them. We can revert to the anti-growth policies of the past. If we do
that, we will undermine or even reverse our growth.
agenda for 2001 outlines ideas for preserving and expanding New Yorks
growth and prosperity. It offers more good ideas New York can embrace
to promote growth. And it urges Albany to avoid some missteps that could
return the state to the dark days of previous decades.
the choice is clear. For todays workers and employers, and for our
children who will inherit the fruits of todays decisions, we urge
New York to choose growth.
Councils action agenda for 2001 addresses key issues that affect
the states ability to grow.
should cut state taxes for an eighth consecutive year. We recommend a
single-sales factor to calculate corporate taxes, and a STAR
for business program, among other strategic tax cuts.
To rein in
costs and meet demand, the state should site new power plants, accelerate
the repeal of the energy gross receipts tax, and reject higher taxes.
We need a
sound strategy to clean and re-use previously developed properties that
were contaminated decades ago. Cleanup standards should reflect the intended
use of the site. Liability reforms should protect parties that clean contaminated
sites, or that are blameless in creating the contamination. And general
state revenues, not special fees imposed only on business, should be used
to refinance the states environmental Superfund.
Higher standards and stricter accountability for schools, teachers, and
kids have begun to improve New Yorks public schools. New York must
stand firm by these standards we must not back down from the progress
On the higher
educational level, we recommend that New York State support a multi-year,
multi-hundred million dollar commitment to fund investments in technology
areas with universities in fields that have the greatest potential for
societal and economic benefit to the state and educational benefit to
other institutions, educators and students.
of creating jobs: The
best way to get new jobs is to reduce the cost of providing them. Specifically,
the state should reform workers compensation, help all small businesses
afford the cost of employees health insurance, and enact tort reforms.
our progress: With
our economy stronger than it has been in years, theres a temptation
to stop working on the business climate and start looking for expensive
new government programs. But we should reject these ideas proposals
to impose new health-care mandates on employers, to re-regulate energy
markets, to encourage more lawsuits, or to create new state-government
mechanisms for limiting growth. New York must not revert to the business-hostile
policies that stifled growth in earlier decades.
Yorks taxes are lower but not yet competitive
Yorks long history of high taxes chased jobs out of the state
by the hundreds of thousands. But the state has cut taxes by more
than $8 billion since 1995, and now our economy is growing. In fact,
the tax cuts produced so much economic growth that government revenues
have grown faster, rather than slower, since the tax cuts.
this does not mean our taxes are low enough. Our state and local
tax burden per capita is still more than 50 percent higher than
the national average still higher than any other states.
Our state taxes per capita are still the nations 10th highest.
Tax cuts may have reduced the gap between New York and the nations
mainstream. But the burden here remains, undeniably, a heavy one.
property taxes are especially high.
Even as we enacted historic cuts in state taxes, property taxes
statewide have continued to climb. Today, these taxes are 62 percent
above the national average and are among the nations highest
local property taxes. This raises the cost of living here, and hurts
our efforts to compete with other states for new plants and jobs.
Patakis STAR program has given some property-tax relief to
homeowners. But the burden on business has been increasing.
can cut taxes more especially property taxes
cuts have enhanced the prosperity of all New Yorkers. Lets
cut taxes more and produce even more economic benefits.
of the states next big tax-cut targets should be local property
York has already given some relief to homeowners through the STAR
program. The Business Council thinks business should get the same
kind of help. One idea is to earmark $500 million (a fraction of
the projected surplus) for credits against corporate taxes to offset
local property taxes. In addition, the state should reform its mandates
that drive up the cost of local government including prevailing
wage laws and the Wicks law.
state should also enact more cuts in state taxes. For example,
if New York adopts the single-sales factor to calculate
corporate taxes, it can enact a modest tax decrease while rewarding
the location of jobs here.
New York effectively penalizes companies that put plants and jobs
here. Thats because it bases corporate taxes on three factors:
in-state payroll, instate property value, and instate sales to instate
destinations. If a company sells its products here and has a plant
here, it pays more than it would if that plant were in another state.
A more far-sighted tax policy would allocate corporate income taxes
solely on the basis of instate sales, and thus encourage companies
to put their plants and jobs within the state.
suggest that states that make this change are likely to gain jobs
while states that do not are likely to lose them.
should also consider:
Updating state taxes on the telecommunications industry.
Accelerating repeal of the gross receipts tax.
Modifying the investment tax credit to include a deduction
for leased equipment.
Providing tax credits to encourage small businesses to buy health
insurance for workers. ? And reforming taxes on railroad property.
progress in reducing our tax burden must not obscure the opportunity
and the need to do more.
costs, tight supply
York has worked hard to reduce its energy costs. It has deregulated
energy utilities, which will reduce prices in the long run as free
energy markets gradually phase in. And the state has approved a
phased-in repeal of the gross receipts tax on energy for businesses.
are important steps, but energy costs in New York remain high. Both
industrial and commercial users pay electricity costs that are far
above the national average; only about half a dozen states have
higher costs. Despite positive steps that may help narrow this gap
over time, New Yorks energy costs will remain a significant
competitive disadvantage in the competition for jobs and growth.
its important to remember that economic growth depends more
than ever on energy. Upstate still depends heavily on energy-intensive
manufacturing. And increasing reliance on computers and other new
technologies in all sectors means that even a publishing house or
a brokerage firm is now an energy-intensive enterprise.
the economy grows, satisfying energy demand will become even more
challenging. New Yorks maximum electricity capacity is
35,636 megawatts a day. On high-demand days, the state comes perilously
close to that maximum, some days taxing the system for more than
90 percent of its capacity. Despite this growing demand, the last
power plant sited in New York (by the New York Power Authority)
was in 1994, and the last plant sited by a utility in New York was
energy taxes, site more generating capacity
of the gross receipts tax (GRT) will help in the long run, but other
energy taxes still inflate energy costs. One hidden energy tax,
the systems benefit charge, was supposed to expire in
June, but many in government want to extend and increase it. The
state should reconsider this charge.
should also consider accelerating the repeal of the GRT. For
commercial businesses, it wont fully expire until 2005. The
faster the tax goes away, the faster the benefits for job growth
will kick in.
state also needs to make it faster and easier to site new power
plants. The current siting process is complicated, including
a pre-application phase, the application process, and
hearings, all before a final decision.
original goal of this process was to get a decision no more than
14 months after the application is filed. But the siting board that
manages this process consists of the heads of five different state
agencies. Because these agencies have different processes and priorities,
the process tends to slow down, and there are applications that
have been pending for more than two years.
is considerable interest in building new power plants; in fact,
there are 20 proposals for new plants already in the siting process.
The state should streamline this process so that plant-siting decisions
are made more quickly. Imposing tight timelines on each step in
the process, and on the whole process, would be an important first
state has already proven it can accelerate permitting processes
through its efforts
to pre-permit sites for possible chip fabrication plants.
The same commitment to a speedy process can ensure that New York
has enough energy to power its future growth.
and encouraging cleanups
Yorkers want a safe environment which means, in part, that
we must invest in cleaning previously developed properties that
were contaminated decades ago. Since redeveloping these sites will
foster growth in urban areas, New Yorkers should be concerned about
cost and liability issues associated with these brownfields.
policies affect both public and private cleanups of these contaminated
sites. The state itself must finance the cleaning of some contaminated
sites, including municipal landfills and abandoned industries properties.
At other places, its policies could encourage private investments
to clean and redevelop brownfields.
2001, the states environmental Superfund, which funds public
cleanups, will likely spend the last of $1.2 billion in cleanup
funds from the 1986 Environmental Quality Bond Act. The state must
find a fair and appropriate way to refinance it. Moreover, it should
reconsider policies that discourage private cleanups a major
reason why most New York brownfields remain ignored for new industry
or other economic development.
brownfields have advantages over undeveloped sites. They often offer
an existing plant with water and other utilities in place, and they
are near roads and rail. But redevelopers reject them because they
must pay the full costs of removing contamination which they had
no role in creating. Moreover, cleanup requirements are often unclear,
and redevelopers may be required to restore sites to near-pristine
conditions. Even then, there is little protection from liability
if any party sues in connection with any hazardous wastes found
at redeveloped sites.
financing, more cleanup incentives
Business Council believes that Superfund refinancing and brownfield
reform should be addressed in one comprehensive reform package.
states Superfund should be permanently refinanced by all taxpayers,
including business, through the states general fund. Because
cleaning environmental contamination is a benefit to all of society,
all of society should share the costs. That means no new taxes or
fees should be imposed solely on business to provide the funds for
Superfund. If parties responsible for the contamination cannot be
identified, are no longer in business, or cannot bear cleanup costs,
there is no basis for charging business alone for the cleanup.
reform package should also modify cleanup standards so they reflect
actual risks posed at a site. For brownfields and Superfund sites,
cleanup standards should reflect the intended use of the site. If
a site is to be refurbished solely for industry, it is needlessly
and often prohibitively expensive to restore it to
a level of purity appropriate for, say, housing.
should be protection from litigation for parties that choose to
clean and redevelop sites that have contamination these parties
did not cause. And parties that complete approved cleanups should
then receive releases from liability associated with the original
contamination, with strict limitations on when and how such cases
can be reopened.
20 states have enacted similar reforms, and they have seen a renewed
interest in investing in old industrial sites. With similar reforms,
New York can ensure a safe environment for New Yorkers in a manner
that will foster economic growth.
at all levels is critical to New Yorks future
Yorks growth has always been driven by people and ideas.
Today as always, New York finds this fuel for growth in the same
places: our elementary and secondary schools, and our colleges and
schools educate todays students to become tomorrows
business leaders, teachers, workers, doctors, managers, and entrepreneurs.
Our unsurpassed universities and colleges provide advanced instruction
for our best and brightest. They also generate innovations and insights,
as well as the entrepreneurial spirit, which ignite wealth creation.
many years, however, New Yorks public schools have faltered.
Recent generations of high-school graduates have included too many
students with weak communication and math skills. Surveys of employers
have shown widespread dissatisfaction with these students
preparedness for the challenges and rigors of work. This decline
came even though New York has been pumping tax money into our school
systems in historic amounts.
although our states public and independent universities and
colleges remain among the nations best, New York may be missing
an opportunity to tap them for new ideas that could drive tomorrows
states are systematically investing hundreds of millions of dollars
in their universities efforts in areas of science and technology
that have the potential for the greatest societal and economic benefit.
New York has not made such a concerted commitment of resources to
these fields, which clearly will drive growth in jobs and prosperity
in the decades ahead. Since companies in all high-tech fields often
locate their plants and jobs near top research institutions in their
discipline, New Yorks future growth is clearly at stake.
to excellence in all schools
thankfully, New York has begun to accelerate the improvement of
its public schools. It has done this by demanding performance and
accountability from schools, teachers, and students.
annual school report cards tell administrators, teachers, parents,
kids, and the public how their schools stack up. They let schools
measure their performance against similar schools and against their
own achievement the previous year. In addition, tough new academic
standards, and tests based on them, are finally making teachers
and students accountable for what is actually learned.
these standards are new and not fully phased in. It will be years
before they are fully rooted in our culture. Until then, there will
be strong, misguided pressure to relax them, or to slow their implementation.
Already some advocates have tried to turn back the clock on accountability,
despite surveys that show that parents, businesses, and teachers
alike strongly support standards. This well-intentioned but misguided
pressure is likely to continue.
ensure its future growth, New York must sustain and expand its new
commitment to excellence in schools. Specifically, that means
resisting pressure to ease academic standards. It means expecting
all schools to show an unwavering commitment to educating all students.
It means promoting our successful schools as exemplars. And it means
holding failing schools accountable. New York must also compete
vigorously with other states for the coming growth in industries
that will build their prosperity on university research. A recent
survey of New York employers showed strong support for keeping New
Yorks universities and research institutions among the global
leaders in technology. New York must invest in the source of ideas
and people who will create tomorrows growth.
Costs of creating jobs
a business locates a new plant in New York, it studies how its costs
will go up or down if it creates that new site elsewhere. In recent
decades, that comparison all too often resulted in new plants
and the jobs they represented going to states other than
New York. Thats at least partly because some hidden costs
of growth have been historically high in New York.
recent years, we have succeeded in reducing some of these costs
but, overall, they remain higher in New York than in other states.
In addition to taxes, energy and other costs already discussed in
this presentation, we are concerned about:
compensation costs: For many years, New Yorks workers
compensation costs were far above the national average. Workers
comp reforms in 1996 reduced premiums and brought New Yorks
costs closer to the national average. But as premiums have declined
in recent years, assessments (a surcharge on premiums
that all employers pay) have increased.
costs: Health-care costs in New York are far above the national
This drives up the cost employers must incur to give workers a health
insurance benefit. Most employers are forced to pass on a greater
fraction of these costs to workers, and an increasing number of
employers, especially small businesses, are unable to offer any
health insurance benefit at all.
costs: All businesses and individuals in New York pay a hidden
tort tax the costs of litigation for which New
Yorkers pay an estimated $14 billion each year, almost $800 per
person. The tort tax also adds hundreds of millions
of dollars a year to property taxes, because municipalities must
pay higher liability costs.
key reforms can fuel growth
policies play a key role in driving these costs and policy
changes can help bring them under control and spur new growth.
compensation reform: The increase in workers compensation
assessments is driven largely by growing use of the second-injury
fund. After World War II, this fund was designed to encourage
employers to hire veterans injured in the war. It has outlived that
purpose, and some employers, frustrated by New Yorks high
costs of permanent partial disability cases, shift some of their
costs in these cases to this fund. This has the effect of forcing
employers with good safety records to pay benefits for other employers
York should eliminate this fund, as other states have. And two other
key reforms already adopted by most other states cap on payments
in cases of partial disability, and use of objective medical guidelines
to determine the degree of disability in those cases should
also be enacted.
parity: The Health Care Reform Act (HCRA) of 2000, which increased
health-care costs for all businesses, gave some businesses access
to reduced-rate health insurance programs. Unfortunately, that benefit
was provided only to small businesses that werent previously
offering health insurance. The retail store owner who has struggled
for years to provide health insurance for her workers suddenly finds
the state of New York subsidizing health insurance for a competitor
who has never provided it. To add insult to injury, the employer
who already provides health coverage isnt eligible for the
subsidy, yet must help pay for the subsidy to her competitor through
a surcharge on her companys insurance bill.
parity would give all small businesses access to the same
reduced-rate insurance programs that the state now gives some businesses
under HCRA. This would not ease the full burden of New Yorks
far-above-average health-care costs.
But it would eliminate an unintended competitive disadvantage given
to businesses that provide health insurance to their employees through
local and regional chambers of commerce or other employer groups.
reform: Several key reforms designed to give juries clear, common-sense
guidelines in tort cases would restore the focus of the system on
victims as opposed to their attorneys. These reforms include: fundamental
product liability reforms; repeal of joint and several liability;
and a cap on contingency fees.
land claims: The state should resolve Indian land claims in
a manner that understands the full economic, political, and regulatory
consequences those resolutions will have for large areas of the
Preserving our progress
temptation to revert
York has made great progress generating economic growth since the
It has done so by reducing taxes, creating a better regulatory environment,
reducing the cost of employee benefits, and other steps to improve
New Yorks business climate.
didnt happen overnight. It took years to convince Albany that
many of its policies were driving jobs and prosperity out of the
state. The turnaround began after The Business Councils research
affiliate, The Public Policy Institute, published its landmark book,
The Comeback State, in 1994. Governor Pataki took office
the next year, and he and the legislative leaders listened to business.
Comeback State made the case for restoring growth by focusing
New Yorks agenda on jobs and kids. Specifically, it urged
Albany to consider policies that reduced taxes, cut costs of employee
benefit programs (such as unemployment insurance and workers
compensation), improved schools and made them more accountable,
and encouraged a government that was friendlier to its business
York did change and it has begun to make its comeback. But
the relatively good economic times that New York has enjoyed in
recent years have led some to think that this state can relax its
guard, and revert to the kind of short-sighted, big-government policies
that got us in trouble in the first place.
advocates, for example, urge government to mandate more kinds of
coverage under employers health insurance policies without
realizing that such mandates would make health insurance less accessible
for all. Others want the state to ease or relax its new education
standards. Proposals to re-regulate energy markets also emerge regularly,
as do a variety of ill-advised proposals designed to create even
more opportunities for litigation.
mess with success!
York has begun to reverse its job losses, slowly but surely, by
repudiating growth-stifling policies and replacing them with sensible
alternatives that meet societys needs without undermining
approach has worked. Lets not mess with success by undoing
the decisions that made our recent growth possible, or by embracing
new policies that would effectively restore the growth-deterring
business climate New York endured until the mid-1990s.
are a few specific examples of the kinds of temptations we think
must be resisted.
mandates: It would be a mistake to add new requirements forcing
employers health-insurance policies to include coverage for
visits to specific types of practitioners or treatments for specific
conditions such as infertility. Such health-care mandates drive
up the cost of health benefits and make it less likely that
employers will be able to provide any health-insurance benefit.
One alternative is to test all proposed health-care mandates by
imposing them first on the states own workforce to see what
the actual effect on costs will be.
standards: We oppose any and all efforts to ease or relax New
Yorks tough new education standards.
New York should not reverse ground on energy policy by re-regulating
energy markets. The current deregulation has not fully unfolded
and there is every evidence that it will ultimately reduce prices.
There is no need to enact strong new state restrictions on commercial,
residential, or industrial growth nor to usurp the authority
of local governments to manage growth. The oft-heard spin is that
such proposals will yield smart growth.
But New York is just getting a taste of growth again, after years
of decline. It would not be smart to jeopardize that, nor to second-guess
local governments ability to deal with it.
reform: And it is important to resist the annual flood of trial
lawyer-driven proposals to permit new lawsuits and new bonanzas
in legal fees. There is no evidence, for example, that interjecting
lawyers into the determination of health-insurance policies will
improve health care.
get a copy of the formatted printed agenda in PDF format click here.
Business Council of New York State, Inc. Board of Directors