Improving the Business Climate

Improving the Business Climate

New York State Business Council, Bolton's Landing, NY

[As Prepared for Delivery]

Thank you, Peter, for that kind introduction, and thank you all for inviting me here today. I want to recognize Dan Walsh and thank him for his leadership over the past 18 years as President and CEO of the Business Council. Dan, you have been an outstanding advocate for New York's private-sector business community, and you will be missed. I also want to welcome Ken Adams as the Business Council's new President. Ken, I look forward to working with you to make New York the best place to do business in the world.

Revitalizing our state's economy -- especially the Upstate economy -- demands a major effort. Over the past six months, I have been laying out a comprehensive plan for economic revitalization.

At the Rochester Institute of Technology, I offered a specific plan to foster innovation and cultivate the growth of strategic industries.

In Syracuse, I described how we would revitalize our cities and downtowns to make them more economically vibrant places to live and work.

In New York City, I laid out my transportation priorities to sustain growth in the downstate region, and in Binghamton, I discussed our plan to develop a transportation, energy and broadband Internet infrastructure that will create and support economic expansion.
I have also talked about the need to strengthen small and emerging businesses, and just this Tuesday, my running mate, David Paterson, laid out a plan for how we can strengthen minority- and women- owned businesses.
But today, I want to speak about what I believe should be our first priority, and that is making New York companies more competitive by improving our business climate.

If I am elected governor, I will think about New York State's business climate as though I were the chairman of a site selection committee. I will ask myself, if I were deciding to locate or expand my business, would I choose New York State? I want to make sure the answer to that question is "yes." Too many companies today would say that they would not locate in New York because we are just not competitive.

Our state has the highest combined state and local tax burden in the nation. So let me be clear: I have been guarded in my spending proposals because I know that we simply cannot raise taxes and keep New York competitive. We will not raise taxes. The spending proposals I've made are covered by budget savings I've already identified.

Even beyond these identified savings, I'm going to make the hard decisions that are necessary to get New York's fiscal house in order so that we can free up the money to make the investments we need in education and infrastructure. And let's face it: these investments in our future workers and our infrastructure are necessary. The failure to make these investments in the past is one of the reasons Upstate New York in particular is in the mess that it's in.

Now let me just cite some of the other areas in which New York State needs to become more competitive. The employer contribution for family health coverage in New York averages $8,300 a year in New York, which is fourth-highest in the nation. Our state's energy costs overall are second only to Hawaii, and despite being next door to a large supply of cheap hydropower, electricity costs in our state are nearly 63 percent above the national average. Workers' compensation premiums in our state are the eighth highest in the nation, even as the maximum benefit to workers ranks 49th nationally as a percentage of average weekly income. And in too many other respects, our government bureaucracy hinders rather than assists businesses.

Well, I have a message for you: If I am elected Governor, on Day One of next year we are going to begin to implement an aggressive strategy to reduce the cost of doing business in New York and make New York the best place to do business in the world.

We will reform our workers' compensation system to reduce the burden of high premiums while increasing benefits for most workers. We will reduce property taxes and reform mandates such as the Wicks Law. We will lower the cost of energy by implementing a focused energy strategy. We will restructure our health care system to make it more affordable. And we will streamline regulations to make them friendly to business.

But today, I want to talk about more than my plan for what we're going to do. I want to talk about how we're going to get it done.

State government has done little to alleviate and, in many ways, has contributed to the political gridlock that has prevented us from making the reforms necessary to compete in the 21st century economy. This gridlock is like the trench warfare of World War I.

Both labor and business have dug deep trenches and have fought bloody battles over the years. Sometimes the line moves a few feet forward, and one side declares victory. Later, another bloody battle is fought and the line moves a few feet back, negating any progress that may have been made.

In the end, nothing is accomplished. No one wins. Not labor, not business and surely not New York. But there has been plenty of carnage, represented by lost jobs and lost opportunities.

The only way to restore New York's competitiveness is to end the trench warfare in Albany. A Governor who does the right thing on the merits and sticks to his guns will achieve the reforms that all sides will come to see as benefiting New York. I believe that when these reforms are in place, and when we have begun to put the other four pillars of our economic development strategy into action, New York will be on its way to becoming the best place to do business in America.

Reduce Taxes and Reform Wicks Law

First, we must reduce taxes. I will implement a property tax relief program that provides $6 billion in total relief over three years. My tax relief plan will provide those middle class taxpayers who need it most with a first-year increase of 80 percent in the state's current STAR program and more relief in the following years. All homeowners, except the wealthiest 2 percent earning $235,000 per year or more, will receive at least a 30 percent increase in their STAR relief.

It's critical that any proposed tax cuts be fully funded. That's why my property tax relief plan includes $11 billion in budget savings over the next three years.
I'm starting with property tax relief for homeowners, because I think this is the most pressing tax problem facing the state. But even though it is directed at homeowners, this plan is very important to business, because if your employees can't afford to live here, you can't afford to hire them. And as we repair the state's fiscal condition and address other pressing needs, I hope to be able to offer other tax relief measures that will directly benefit businesses.

Businesses as well as homeowners will benefit directly from steps we will take to address the underlying causes of high property taxes. Among these causes are unfunded state mandates that push costs down from the state level to the local level, resulting in increased taxes for individuals and businesses.

There are many such mandates we need to address. Today, I want to present my proposal for how we will reform the Wicks Law, which is an issue that has truly come to symbolize Albany gridlock.

The Wicks Law requires multiple contracts for municipal construction projects greater than $50,000. It was initially enacted to reduce the cost of public projects by preventing general contractors from exploiting subcontractors and passing the costs on to the public.

The studies that have been done about Wicks show that while it significantly increases the cost of small- to mid-size projects -- sometimes as much as 30 percent -- it has a minimal effect on the cost of large projects. The problem is that the Wicks threshold -- the intent of which was to exempt small and mid-size projects -- has not been raised since 1964.

We will raise the Wicks threshold to $1 million for projects outside of New York City and $2 million for projects within New York City. This will exclude about 80 percent of all construction projects now covered by Wicks.

And we will achieve the original objectives of Wicks Law by implementing measures that protect subcontractors from unfair business practices, without adding to the cost of projects.

This is a real solution that will relieve the burden of Wicks on school districts and municipalities, and ease the pressure on property taxes, while preserving needed protections for subcontractors.

Reduce Workers' Compensation Premiums

Second, we must break the political gridlock that is preventing reform of our broken and dysfunctional workers' compensation system. What was meant to be an insurance system that provided medical care and simple compensation to injured workers has become a morass that is seen by many workers as putting up unfair obstacles to receiving fair compensation for lost wages, and by many businesses as an increasingly burdensome cost that is forcing employers to leave the state.

The maximum benefit under workers' comp has not been increased since 1994. Both because it is the right thing to do and because it is necessary to build the coalition to achieve real reform, we will increase benefits to most injured workers. But I want to be clear that the end result of our workers comp reforms must be to meaningfully reduce premiums. In order to increase benefits for most injured workers while reducing premiums, our workers' comp reforms must be bold and far reaching.

To really bring our workers' comp costs in line with other states, we must confront the challenge of reforming our system of Permanent Partial Disability payments. These payments make up less than 12 percent of claims, but they account for almost 75 percent of all costs. All ideas, including caps on benefits for all but the most serious injuries, must be on the table as we bring our program into line with other states. These changes should be accompanied by aggressive rehabilitation and retraining programs, so that workers can get back in the work force.

But restructuring Permanent Partial Disability is not the only action we must take to reform workers comp. There are at least three other actions we must take.

First, we must reduce the prevalence of fraud in the system. Just as we can do a better job combating Medicaid fraud through a dedicated Inspector General, we should have an Inspector General for Workers' Comp Fraud who will ensure that everyone in the workers' comp system plays by the rules. This will reduce premiums for everyone.

Second, we must address the unfunded liability of the Second Injury Fund. This program was put in place after World War II to encourage employers to hire workers who had previously suffered some kind of injury. However, over time, the Second Injury Fund has become a bureaucratic morass that is especially unfair to small and medium sized companies. Unlike the regular workers comp system in which claims are fully reserved for at the time of the injury by the injured worker's employer or insurance carrier, the Second Injury Fund assesses a charge against all employers on a pay-as-you-go basis as claims are paid out. This is what's called an "unfunded liability," and it is avoidance behavior of the kind we have too much of in New York.

Assessments for the Second Injury Fund now account for about 15 percent of all workers' comp premiums. So one reason New York's workers comp costs are so much higher than other states is that we're paying today for claims of the past, while employers in other states are only paying for current claims. Any comprehensive reform of the workers' comp system must begin to transition us away from this costly and unfair system.

Third, we must overhaul the health care system under workers' comp, which is both inefficient and keeps injured workers from receiving the care they need to get well and return to work. In an era of managed care and preferred provider networks, the workers' comp system provides almost entirely old-fashioned fee-for-service medicine. In an era where every private insurance plan reduces prescription drug costs through a Preferred Drug List, the workers comp' system has no preferred formulary. We must approach reforming the workers comp' medical care system with the same rigor that we apply to restructuring the rest of the health care system. We can and will wring significant cost savings from improving the way we deliver medical care in the workers comp system, and at the same time get injured better care so they can return to work.

Taken together, these four reform and others I will propose will enable us to finally achieve the elusive goal of meaningfully reducing premiums while increasing benefits for most workers. As Governor, I will immediately go to work to build the coalition we need to get this problem solved so that we can once and for all fix this enormous drag on the competitiveness of New York's businesses.

Reduce Energy Costs

Third, we must reduce energy costs. The goal should be to ensure that businesses can obtain electricity at a price that allows them to compete with rivals in other parts of the United States and abroad.

During this campaign, both David Paterson and I have spoken in great detail about our comprehensive plan to make electricity affordable for businesses and consumers. Our strategy includes adding generation capacity by passing a new Article X power plant siting law, by encouraging the PSC to approve the long-term contracts that are needed to secure financing for new power plants and by supporting new technologies such as clean coal.

But we also need a specific energy strategy that is specifically targeted at business competitiveness. New York has long had low-cost power programs to help businesses with their energy costs. But these low-cost power programs have been badly mismanaged by the state, with the result that many companies today who have relied on this power face a real risk of sharply increasing energy costs. To cite one example, since January, upstate companies in the Power for Jobs program have actually been paying more for electricity than they would have to pay on the open market.

Cheap hydropower produced in the Niagara and St. Lawrence projects is an enormously valuable asset across Upstate New York and it must be used strategically as part of our economic development policy. In the past, we have wasted some of this power by giving it to companies for whom low cost energy is not a key to their competitive position. As Governor, I will enact a new Economic Development Power program in New York that streamlines our low cost energy programs and ensures that this valuable resource is dedicated to those companies for whom low cost power is a critical component of their ability to compete.

Reduce Health Care Costs

The fourth thing we need to do to improve business competitiveness is to make health care more affordable. High health care costs impact businesses directly through higher health insurance premiums and indirectly through the higher taxes needed to support Medicaid spending.

Earlier this year, I described a comprehensive approach that New York State must take to reduce the cost of health care for families, companies and taxpayers. And throughout this campaign, I have talked repeatedly about the hard steps we must take to reform health care.

My approach calls for redesigning the health care system to address the fundamental drivers of health care costs. This includes better management of the chronic diseases that account for more than two-thirds of all health care costs, reducing excess capacity in our hospital and nursing home systems, and reducing the cost of long-term care by making community-based care available as an alternative to institutionalized nursing home care.

We also need to recognize that changes to insurance regulations can play an important role in making health insurance more affordable. And we have to examine the place of insurance mandates, balancing our desire to offer a wide range of benefits with the need to ensure that businesses can afford to provide health insurance to their employees.

Streamline the Regulatory System

Fifth and finally, New York State can also improve the business climate by making its government offices, regulations and programs much easier to deal with. We can streamline the regulatory system while maintaining the core protections for workers, consumers, and the environment. By reducing the time and expense of securing regulatory permits by creating a coordinated system that simplifies and speeds up permitting, and expands the licensing program, we can further save businesses time and money.

As Governor, I will ensure that the Governor's Office of Regulatory Reform places renewed focus on breaking the regulatory logjam in the State's permitting process for new development.

I will also develop clearer standards for meeting permitting requirements and establish a new permit tracking system that will improve the efficiency of the permitting system.

I will also expand the state's electronic government programs by further developing government-to-business systems such as online professional licensing, online competitive bid processing, e-procurement expansion to benefit small business and access to departments involved in procurement, environmental regulation of business; and interactive employer/employee job posting and recruitment.

And we will re-write regulations to make them simpler. Regulations in New York in some areas are just too complex and confusing.

Conclusion

Finally, I would like to conclude with a word about Unshackle Upstate. This is a coalition that was formed last year out of frustration with the gridlock and trench warfare in Albany. We may not agree on every particular, but I couldn't agree more with the underlying objectives of Unshackle Upstate to reform regulations that make businesses uncompetitive and to have a strong focus on upstate in our economic development policies. And I'm proud that many of the primary drivers of Unshackle Upstate, such as the Buffalo Niagara Partnership, have endorsed me.

But I would go further and say that not only should we unshackle Upstate, we should unshackle all of New York State. The political reality is that we're more likely to see these reforms if the entire state stands to benefit. And the fact that Upstate New York is facing an economic crisis means that we must approach these reforms with a sense of urgency.

That is why, if I am elected Governor, we are going to begin immediately to implement an aggressive strategy to reduce the cost of doing business in New York and make New York the best place to do business in the world.

We have much more to accomplish than what I discussed today if we are to restore our State to its historic position of economic strength. But the starting point of any economic development strategy is creating a climate that is friendly to business instead of hostile to it. It's time that our State government becomes part of the solution, not part of the problem.

Thank you.

http://www.spitzerpaterson.com/main.cfm?actionId=globalShowStaticContent&screenKey=cmpSpeeches&htmlId=7116&s=spitzer3