Kenneth Adams is out to convince the business community that New York is becoming a better place to do business.
Despite the state’s reputation for high taxes and crushing regulations, Adams, the president of Empire State Development, says that’s changing for the better. Reform proposals in Gov. Andrew Cuomo’s budget would reduce unemployment insurance costs and trim worker’s compensation expenses, while also raising the state’s minimum wage from $7.25 an hour to $8.75 an hour.
Adams discussed those proposals during a stop in Depew last week.
Q: The Cuomo administration is pushing for a higher minimum wage. Why?
A: It has not been raised since 2009. If you consider expenses like housing and child care and gasoline and groceries, even in a modest inflation environment, we’ve had rising prices of these necessities. I see it as a cost-of-living allowance for low-wage workers.
New York State has never had its own minimum wage. $7.25 is the federal minimum wage set by Washington. But New York State is not average in terms of cost of living. As long as we have stayed at the national minimum wage of $7.25, we’re not adjusting for the high cost of living in New York State.
Will it put us out of sync with other states? Absolutely not. We would be joining 29 other states that already have raised their minimum wage. Vermont’s at $8.40.
Q: What do you say to a small-business owner who says a higher minimum wage will really hurt his business?
A: On balance, the degree to which increased wages get spent by low-wage workers in other small businesses mitigates against some of that. That’s important to recognize. They’re not going to put it into their pocket. The wage increase goes right back into the economy.
We recognize that, for a small-business owner facing that today, that can still be a concern. But it’s balanced against fairness and the fact that there hasn’t been any kind of cost-of-living allowance for low-wage workers since 2009, while all the basic costs of daily life have gone up.
For Chamber of Commerce members who are concerned about it, it is to some degree, the price of fairness, but it should be offset by the stimulative effect of more money circulating in the communities where low-wage workers work and tend to spend their money. It’s overdue. As a dollar amount, it’s not even inflation-adjusted. It would be over $10 an hour if it were fully inflation adjusted.
Q: The state is proposing to extend the historic tax credit for five years, while continuing to cap it at $5 million. Some developers wanted it raised to $12 million. What impact will the governor’s proposal have?
A: There’s a $1.3 billion deficit, so there’s not enough money to make it more than $5 million. But when people make a commitment to develop a historic commercial property, they need the security of knowing that the credit is going to be there, not just for one year. It’s giving that message of continuity and stability that will allow investors to do more projects.
Q: The governor’s budget proposal includes $1.25 million for innovation “hot spots” that will offer property tax breaks and other incentives for high-tech companies that locate in certain areas in a competitive awards process. It also includes $50 million for a venture capital fund aimed at start-ups. That’s not a lot of funding when you spread it across the state. How much of an impact can these initiatives have?
A: The idea is it’s going to leverage private capital. The Innovate New York program that we currently have requires a two-to-one match. With the governor’s focus on technology transfer, I think it’s likely that a good portion of this $50 million will be invested in these small start-ups that are setting up to be eligible for venture capital investors. The venture capital investors are more cautious.
But the details still need to be worked out. They’ll be competitive programs so you really get to choose the best ideas and we’ll rely on the regional councils to guide the allocation of these resources.
It’s limited resources, but the pledge of no new taxes is really important for the fiscal integrity of the state and the business climate. I’m sure everybody would like bigger numbers for the historic tax credit and other programs, but it’s a balance.
Q: Unemployment insurance has been a growing cost. How does the governor’s proposal address that?
A: New York State, for some number of years now, especially in this tough economy, has been paying out to people claiming unemployment more in weekly benefits than it has been billing employers and governments in unemployment insurance taxes.
When your unemployment insurance system is paying out more in claims – even at a $430 a week benefit rate that is one of the lowest in this part of the country – at a greater rate than it’s bringing in revenue, you have an insolvent system. When a state’s system is insolvent, the federal government gladly steps in and lends you money at a significant interest rate.
For some years now, New York State has been building up this deficit with the federal Department of Labor, to the tune of $3.5 billion. It’s time to pay off the federal government and get rid of that interest charge and provide a much more stable and predictable rate to employers. The legislation will enact serious reforms to put stiffer penalties and prevention on employee fraud.
That’s about a $400 million savings. The legislation also includes an increase in benefits to workers who legitimately, because of a layoff or circumstances beyond their control, need to get unemployment. The benefit will increase over time, through a very slow ramp-up, to 50 percent of average weekly wages.
The states surrounding New York all have much higher benefit levels than New York does, so that will not affect our competitive position. Q: How would the governor’s proposal to reform worker’s compensation affect businesses?
A: In 2007, the Spitzer administration initiated a series of administrative reforms that never got done. So legislative reforms were made that imposed some caps and a benefit increase that labor wanted. We’re going to complete the worker’s compensation reform.
We’ll shut down some funds. There will be a streamlining of the worker’s comp assessments. This solution will streamline all of that and reduce those assessments by closing down those funds and actually have a bonding solution that will pay down the unfunded liabilities of self-insured group trusts.