The October 24, 2011 Issue of The Capitol by The Capitol

Hydrofracking may pit Andrew Cuomo and Eric Schneiderman against each other.

County executive races across the state heat up. Page 6

Page 4

VOL. 4, NO. 16

James Featherstonhaugh doubles down on gambling. Page 27

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OCTOBER 24, 2011

How unhealthy relationships between Albanyâ&#x20AC;&#x2122;s lawmakers and the health-care industry hurt New York pg.8 iStockphoto/Andrew Schwartz/Joey Carolino

UPFRONT

Faith In Millionaires W friends and enjoy a glittering lifestyle in New York. And outside the realm of corporate titans targeted in protests by the so-called “99 percent,” the ranks of millionaires are roiled every year by normal economic activity, making one year’s tax bill not the only factor in deciding where to live. Academic studies have consistently shown that few rich people escape high income taxes by moving to other states. Yes, the number of New York tax filers earning more than $1 million dropped

22 percent from 2008 to 2009, but that coincided with a stock market crash and a recession—which hardly proves anything. The steadfast opposition among some of New York’s leaders to the millionaires’ tax is immensely frustrating to the forces marching through the streets in support of it. In calling for the rich to pay their “fair share,” though, they are also marshaling their forces on the basis of a belief. As Gov. Mario Cuomo saw with the death penalty, arguing state policy on the

By The Numbers

1380

1310

1250

1,400 1270

1250

1,300

1250

1,200

Apple Harvest Time in New York

1,100

This year’s alternating high heat and heavy rains took a toll on agriculture across New York

990

1,000 900 800

In billion pounds

hen Gov. Andrew Cuomo insisted last week he would not extend an income tax surcharge on millionaires no matter how many New Yorkers support it, he compared it to his father’s unpopular but successful stand against the death penalty. In other words, the governor has made up his mind. He will not be swayed. For Cuomo, Adam Lisberg as for Mayor Michael Bloomberg, opposing the millionaires’ tax is no longer up for debate. It has left the world of argument and become a matter of belief. Which is an interesting development, because the jury is still out on the evidence. For the governor and many others who want to keep the scheduled income tax reductions for New York’s highest earners, it’s a matter of common sense: The more a state taxes its wealthy, the more likely they are to move to other, lower-taxed states. Yet it’s not the only factor. Fifth Avenue billionaires who subsidize many city and state government services could cut their taxes by moving to Florida, but they stay to run their headquarters, hobnob with

basis of belief is a tense battle. There’s no middle ground when fundamental principles are at stake, and there’s no easy way to negotiate once your mind is already made up. For the Cuomo now in charge of New York, ending the millionaires’ tax is his equivalent article of faith. He knows it is the right thing to do, even if the evidence can’t prove it. Even so, he believes. It’s part of a leadership style that made his father a liberal icon and a presidential contender. But will governing by faith do the same for the son? —Adam Lisberg, Editor

700 600

2005

2006

2007

2008

2009

2010

500

2011

Source: United States Department of Agriculture All 2011 ﬁgures are forecasts

The Month Ahead (Oct. 24–Nov. 14) Albany lobbyist James Featherstonhaugh’s birthday

Sen. Chuck Schumer and Rep. Kathy Hochul attend Eleanor’s Legacy fall luncheon at Grand Hyatt Rep. Maurice Hinchey’s birthday

DEC public hearing on hydrofracking, Dansville

State Sen. Tony Avella’s birthday

Oct. 16

Rep. José Serrano’s birthday Westchester County Executive Rob Astorino headlines the New York State Conservative Party’s 2011 National Affairs Conference

U.S. Attorney William J. Hochul Jr. delivers a lecture at the Robert H. Jackson Center in Jamestown

Assemblyman William Boyland Jr.’s trial begins

Mental Health Association of New York State awards dinner, featuring Peter, Paul and Mary

OCTOBER 24, 2011

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THE CAPITOL

The Capitol, After Dark Gothic architecture and an undead night watchman make New York’s Capitol a popular Halloween destination BY LAURA NAHMIAS

lobbyists.) Last year and this year, the tour has completely sold out, said Stuart lbany’s legislators may be Lehman, head of the OGS Education at an all-time low in statewide Department and de facto tour captain. “There’s really been a resurgence, a approval ratings, but the state government’s seasonal “Haunted Capitol” great interest in things that are haunted,” Lehman said, likening the Capitol tour tours have never been more popular. For about a decade, the Office of to a ghost walk in cities like Boston, General Services has led twice-daily tours Savannah or New Orleans. The Capitol, with its Gothic Revival of the Capitol building’s spookiest sites. (Insert your own joke here about the architecture, gargoyles, heavy metals and frightening specter of fiscal collapse—or history as a place built amid the filthy lucre of graft and corruption, is a very haunted-seeming place. On his hour-long tours, Lehman explains the story of the undead night watchman Samuel Abbott, who is seen wandering the fourth floor in his dark waistcoat with brass buttons. His ghost doesn’t realize he died in the famous Capitol fire of 1911, Lehman says. The tour winds around to the “million-dollar stairA ghost is said to haunt the fourth ﬂoor of the Capitol

ever since perishing in the 1911 ﬁre.

case,” where visitors are invited to take photographs of the “devil’s print,” a tiny devil sketch said to, well, bedevil the place since a craftsman working on the stairwell etched it into place in the late 19th century. Lehman said that it has become sort of a tradition for state lawmakers’ aides to come on the tour, although he couldn’t recall ever having seen any high-level executives. “No, I don’t believe Governor Cuomo has come on the tour,” he said.

Despite Lehman’s contention that a ghost continues to haunt the fourth floor, Albany’s professional ghostbusters have yet to verify the existence of any political poltergeists in the halls of New York State government. “Our group has not investigated the Capitol building in Albany,” said M.J. Henion, cofounder of the Albany Paranormal Society, “and do not have knowledge of any official investigations taking place there.” lnahmias@nycapitolnews.com

Costume Party

hat’s Gov. Andrew Cuomo going to be for Halloween? Who cares, when his girlfriend Sandra Lee puts together over-the-top costumes like these? The Food Network is hosting a contest to pick the favorite from among her outfits as Cher, Madonna, Cleopatra and Marilyn Monroe. There’s no word on whether these were put together with help from Food Network’s costume department, or whether they’re semihomemade. (There’s no word what she has up her sleeve for the governor, either.)

Courtesy The Food Network

www.nycapitolnews.com Publisher/Executive Director: Darren Bloch

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OCTOBER 24, 2011

FrACk OFF

Cuomo and Schneiderman pushing in different directions on gas drilling By Jon Lentz

ov. Andrew Cuomo and Attorney General Eric Schneiderman both say they want the strongest possible safety precautions in place before hydrofracking gets the green light in New York. But so far the two men have not exactly been on the same page on the controversial form of gas drilling. The Cuomo administration, which has made job creation a big part of its agenda, is putting together stringent regulations while also emphasizing the economic benefits of gas drilling as it speeds up the state’s drawnout review process. Schneiderman, who ran for attorney general with the strong backing of the environmental community,

“He’s got to be very careful, as the attorney general, about what and where he expresses his view that fracking isn’t safe,” Adams said. “Because ultimately he’s going to have to defend the regulations from lawsuits from us.” Some of the differences in approach between the two Democrats can be chalked up to the distinctive roles of each office. The governor and the attorney general are acting more in line with their respective duties than for any political motives, said John Holko, a board member and secretary of the Independent Oil and Gas Association. The governor’s job is to promote the state’s economy while ensuring that drilling is safe, Holko said. Schneiderman, who as attorney general doesn’t have to weigh things like budget shortfalls, can focus on limiting any adverse effects of drilling.

could leave out valuable input in shaping the rules. They’ve also argued that the state is focused too much on the economic benefits while doing too little to study the impacts on health and the environment. But DEC spokeswoman Emily DeSantis disputed the idea that the state was rushing ahead on hydrofracking. “Nothing has been rushed in this three-year process,” said DeSantis. “New York has taken a cautious and deliberate approach to propose the strictest standards in the nation that are based on sound science and engineering principles.” Still, whether hydrofracking becomes a point of contention between the governor and the attorney general is an open question. Claire Sandberg, the executive director of Frack

“He’s got to be very careful, as the attorney general, about what and where he expresses his view that fracking isn’t safe— because ultimately he’s going to have to defend the regulations from lawsuits from us.”

Thomas James

has raised red flags on drilling, from suing the federal government over regional drilling regulations to subpoenaing companies over the accuracy of their natural gas estimates. And depending on how things play out, the two powerful Democrats may find that the issue becomes a point of contention between their respective offices, which have had political friction in recent years. Environmental groups in particular may prod Schneiderman to push back if drilling is allowed. “I do believe that Schneiderman and other elected officials and political people who are opposed to fracking are going to come to heads with Cuomo,” said Ramsay Adams, the executive director of the environmental group Catskill Mountainkeeper. “I believe Cuomo is deeply misreading the pulse of the state.” One irony is that Schneiderman, who as a candidate pledged to sue to stop hydrofracking if it’s not done safely, will likely have to defend the Department of Environmental Conservation’s drilling regulations if environmentalists challenge them in court, which several groups have promised to do.

OCTOBER 24, 2011

“If you put those two together, I think you get a clearer view of where the governor wants to open up and do things and the attorney general wants to make sure they’re done right,” Holko said. “I don’t think they’re fighting each other; I just think they’re coming from two different perspectives. It’s like the glass is half-full or half-empty.” DEC’s environmental review process could also eliminate any potential tension between the two Democrats if the final regulations somehow satisfy everyone involved. At a recent environmental event, Schneiderman dismissed the notion that hydrofracking could cause a rift between Cuomo and himself. “They are in their comment period, so we’re encouraging everyone to get in and comment, and get the best set of regs you can possibly get,” he said. “And we’re raising some other issues that could affect the way hydrofracking could go forward in New York. But no, there’s not any tension [with the governor].” Environmental groups have criticized the state for issuing preliminary regulations before the end of the ongoing comment period in December, which they say

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Action, said that she would expect some friction between Schneiderman and Cuomo if gas companies start hydrofracking. “If the governor decides to move forward with this in blatant disregard for the overwhelming scientific evidence and the clear and incontrovertible indications that if this moves forward we’ll have catastrophic accidents, we’ll have water contamination, we’ll have disastrous public health impacts—we have an attorney general who’s not going to compromise in protecting the public, and I imagine that would create some tension,” said Sandberg, whose organization backed Schneiderman’s run for attorney general. Schneiderman said he will continue to closely monitor the industry if drilling is allowed but that he doesn’t expect that to put him at odds with the governor. “To the extent there’s any hydrofracking here, we have to make sure it is scrutinized and monitored and as safe as possible, and I think that’s what we’re going to do,” Schneiderman added. “I don’t feel a lot of space between us and the governor on this.” jlentz@nycapitolnews.com

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Incumbent Protection Program Like Senate Republicans, Assembly Democrats aren’t pushing independent redistricting By Jon Lentz

n the looming showdown over redistricting, Senate Republicans have struggled to keep the upper hand. The GOP conference has delayed an independent commission by a decade, challenged a law banning prison gerrymandering and made other moves designed to preserve their narrow majority. But under the radar, Assembly Democrats are pushing to keep control over the process too. Assemblyman John McEneny, Democratic co-chair of the legislative redistricting task force known as LATFOR, has openly quarreled with Gov. Andrew Cuomo over the governor’s pledge to throw out the group’s eventual redistricting plan sight unseen. Democratic Assembly Speaker Sheldon Silver never signed on to former Mayor Ed Koch’s pledge to vote for an independent redistricting commission. And while many Assembly Democrats did sign Koch’s pledge, they have been less aggressive in pushing for a nonpartisan panel than their Senate counterparts. Assembly Minority Leader Brian Kolb said that if his Democratic colleagues wanted to push for an independent commission, they would have done so “a lot earlier than right now.” “Their strategy has been, let the Senate take the heat,” Kolb said. “They haven’t really done anything to publicly or actively pursue a nonpartisan commission earlier this year. It’s one thing to say you’re for it, but it’s another to actually, physically do something.” A spokesman for the Assembly Democrats did not respond to a request for comment. It’s not much of a surprise Assembly Democrats have not pushed for an independent process, several redistricting experts said. Even though they already have a sizable majority, they still have strong incentives to maintain control of the redistricting process and keep it out of the courts or, much less likely, an independent commission. “If you go and draw it clean, you don’t have incumbency protection,” said Andrew Beveridge, a Queens College professor and redistricting expert. “Whereas if you started from scratch, which a commission would do, a lot of people would be at risk.” The uncertainty of the process is probably what concerns Assembly Democrats the most, he added. “That’s probably why they’re scared of it,” Beveridge said. “You wouldn’t know which one would be at risk.” Still, Assembly Democrats may have less to fear under an independent plan, given their large majority and the fact that many of their districts could end up relatively unchanged, said Bill Mahoney, a research coordinator for the New York Public Interest Research Group.

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“Right now, each legislator plays a significant role in deciding how their own district is going to look,” Mahoney said. “That’s not a power that they’re willing to give up.” Assembly Democrats have used redistricting to their advantage in the past by putting fewer voters into New York City districts, Mahoney added, which creates

more Democratic districts and a larger majority for the party in the Legislature. “In upstate and in all of those regions, there’s more people in each of those districts, so therefore there are probably a couple less Assembly districts upstate than there should be, thereby shifting the balance of power to New York City,” Mahoney said. Beveridge said those disparities were the result of a nonaggression pact between Senate Republicans and Assembly Demo-

crats in the last redistricting cycle a decade ago, a process Kolb remembers well. “I was here for the redistricting process,” Kolb said. “The Assembly Democrats did a very good job of stealing districts by the stroke of a pen versus at the ballot box.” Still, Kolb agreed with McEneny’s stance that Cuomo ought to at least see the Legislature’s redistricting plan before tossing it out. At the same time, he’s skeptical his Democratic colleagues will be any more fair this time around. “The past does not make the future,” he said. “But usually history does repeat itself.” jlentz@nycapitolnews.com

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OCTOBER 24, 2011 5 10/4/11 1:10 PM

CounTy Lines Local races begin to heat up, even as impact on 2012 election is downplayed

Mark Poloncarz

Courtsey of Poloncarz for Erie County

By RoBeRt HaRding

his year may be a political snoozefest in most parts of New York, but not in Erie, Onondaga, Monroe and Suffolk counties. The most hard-fought, and potentially significant, race is going on in Erie County, where Democrats hope to take back the county executive’s office, a post they haven’t held since 1999. The personal rivalry between Republican County Executive Chris Collins and Democratic County Comptroller Mark Poloncarz has spilled over into the campaign. Collins and Poloncarz faced off in their only televised debate Oct. 13 and exchanged barbs over their respective records. Collins portrayed Poloncarz as too beholden to unions, while Poloncarz said Collins only doles out county contracts to his supporters. The results of the race could reverberate to next year and beyond. Collins’ name was discussed as a possible 2010 gubernatorial candidate for Republicans, but after several gaffes—one in which he compared Assembly Speaker Shelly Silver, an Orthodox Jew, to Hitler—he passed. Still, the Cuomo administration is sure to be watching the race closely for signs that Collins will seek to challenge the governor in 2014. A recently released Siena poll of the race found Collins leading 49 percent to Poloncarz’s 46 percent. Neither campaign would comment. Siena pollster Steven Greenberg said the economy looms as a major issue, but also suggested this race may be a referendum on the incumbent. “Certainly in Erie County voters will make a decision based on who they think will be better for them leading Erie County, whether it’s Collins or Poloncarz,” Greenberg said. “But at the same time, a piece of that is, Do we want to keep the guy we currently have? Are we ready for change or do we want to give this guy another term?” Alan Bedenko, a liberal blogger for WNYMedia, believes Poloncarz can succeed if prominent Democrats come to his aid. “If [Gov. Andrew Cuomo] steps in to campaign with him, and Cuomo and [Attorney General Eric Schneiderman] step in to help him raise some money in

Executive Decision

Levy leaving, but could still influence race for successor The Suffolk County executive’s race was upended in March, when heavily favored two-term incumbent Steve Levy announced he wouldn’t run amid a burgeoning investigation into his questionable campaign fund-raising. So instead of being a bare-knuckle referendum on a Democrat-turned-Republican with a controversial statewide profile, the race between Democrat Steve Bellone and Republican Angie Carpenter has become a far more civil affair. Bellone, the Babylon town supervisor who was running even before Levy dropped out of the race,

OCTOBER 24, 2011

Chris Collins

Courtsey of Collins for Our Future

the next few weeks, he will win,” Bedenko said. Whether they or other Democrats will step in and campaign for Poloncarz is another story. Erie County Democratic Chairman Len Lenihan believes prominent New York Democrats like Cuomo will help Poloncarz, as Poloncarz has helped unite the fractured local party against Collins. “[Poloncarz] is doing very well. He did an amazing job as the tightfisted comptroller, and he is going to win this race despite being outspent by six or seven to one,” Lenihan said. Other counties face executive contests, though not as hard-fought as in Erie. In Onondaga, County Executive Joanne Mahoney, a Republican, is running unopposed. She was first elected to the post in 2007, when she defeated Assemblyman Bill Magnarelli in an open race. Despite the hard fight she endured then, including a close GOP primary (the Onondaga County Republican Party did not endorse her in ’07), Mahoney did not face a primary challenge this time around, and Democrats aren’t fielding a candidate. Monroe County is a different story. Republican County Executive Maggie Brooks is facing a challenge from Brighton Town Supervisor Sandra Frankel, who was the Democratic Party nominee for lieutenant governor in 1998. For Brooks, it’s the first time since she was elected to the seat in 2003 that she has faced a Democratic challenger. In 2007, Democrats stayed out of the race, and a Working Families Party candidate ran against her. Despite the challenge, Brooks is widely favored to win. Her popularity in the county has led some state Republicans to begin courting her to run for high office, either for Congress or against junior Sen. Kirsten Gillibrand. This year’s local elections will have some significance for 2012, when the presidential, congressional and state legislative races are on the ballot. But Greenberg said he believed they will provide few hints as to what happens next year. “I’m not sure what you can make out of this year’s local elections in terms of whether there is a pattern across the state,” he said. “I still don’t think it sends a very strong signal as to what’s going to happen next year.” editor@nycapitolnews.com

has highlighted several groundbreaking green energy programs he helped implement in his district, and has the strong backing of the League of Conservation Voters. Carpenter, the county treasurer, has highlighted her fiscal stewardship of Suffolk County, which has avoided raising property taxes the past seven years even as neighboring Nassau County was taken over by a statecontrolled fiscal board. Bellone has a huge money advantage, with $833,000 on hand—a sum raised with the help of Gov. Andrew Cuomo, who has also endorsed the Democrat. Carpenter, the county treasurer, has about a third of that amount, $290,000. Both would be expected to have a more congenial relationship with the Legislature than Levy, who sparred with legislators from both parties, while gaining the

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loyalty of voters who respected his fiscal stewardship. Still, less than two years removed from having a real shot at being the Republican Party’s standard barrier for governor, Levy is being ignored by Carpenter and other Republicans, who have not sought his endorsement. While the Republican voters had far more energy in recent elections, Suffolk County Democratic Majority Leader Jon Cooper said the race could turn into a referendum on Levy and the Republican Party—even though Levy was a Democrat for much of his tenure. “All politics is local,” Cooper said, “and I imagine there will be continued fallout among the Republican voter base from ‘Levygate.’ ” —Chris Bragg cbragg@nycapitolnews.com

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PERSPECTIVES

Standing On The Sidelines Of The Frontline BY RICHARD BRODSKY

ccupy Wall Street is a phenomenon so new, so unlike any previous social uprising, so successful, so impervious to conventional forces that it defies description and understanding. I’ve spent a number of days there, trying to listen and be helpful. That has largely meant doing a bunch of TV shows, including two appearances on Fox Business, introducing some participants to outside forces, getting the laundry done (more on that later) and explaining what’s going on to a largely befuddled press and political class. A discredited 19th-century nostrum, “ontogeny recapitulates phylogeny,” posited that the human fetus develops (ontogeny) by going through stages that resemble the evolution of the species (phylogeny) from a single cell to fish to mammal. It’s the closest thing to a description of OWS that I’ve seen. OWS isn’t an organization; it’s an organism without a real structure, and it’s developing in a unique way. It’s a network of nerve endings and communications that link people all over the world who know, to a moral certainty, that modern society doesn’t work in the interest of most people. It’s growing hourly, making new nerve connections,

arguing and dancing through the tiny Visit the nightly general assembly that space of Zuccotti Park, and replicating governs OWS through a series of audiin thousands of communities across the ence repetitions of each speaker’s words, world. It’s going through the same stages hand gestures, good-humored patience, of development of the last 150 years of and its own kind of consensus building, mass politics: Ontogeny recapitulates and you’ll begin to understand how OWS is developing its own methods and values. phylogeny. Things were progressing along these Forty years ago lots of folks, myself included, were part of an effective, hierar- lines when Mayor Michael Bloomberg chical set of movements that changed the gave the movement new momentum. He decided to move OWS out of world. The worst thing we can Zuccotti Park, ostensibly to do now is compare what’s going clean it up, but really to crush on now to what went on then. the nerve center. The mayor Old people look for leaders, said he was responding to a spokespeople, agendas and request from Brookfield Propdemands. They don’t exist. erties, the owner of the park, The contradictions are but City Hall was calling the obvious. Zuccotti Park palpishots. tates and pulses with drums Richard Brodsky Real pressure came down and music as people move sinuously through the crowded aisles and from pols and some of the brighter lights trees of a single city block. It is clean; it is among the city’s elite. But the threat messy. It is rude; it is conscientiously polite. coalesced OWS, and brought 1,000 It is astoundingly low-tech and astound- people to a general assembly meeting ingly high-tech. It uses the services of the who decided to resist any attempts by the police to remove them. The mayor backed same large corporations it condemns. There’s no hierarchy, no group that down, and OWS had a real and easily shapes or leads. Old people on the left understood political victory. Nobody knows what happens next. cluck at the lack of a central committee or a list of things OWS wants to get done. Demonstrations will continue; the general Old people on the right describe them as assembly will begin to grope toward a freaks and hippies, or simply lie about it. governing structure; Brookfield and the

Occupy Wall Street Is A Boon For Republicans Fringe behind movement will hurt Obama among mainstream BY JOHN FASO

he so-called “Occupy Wall Street” movement has captured wide attention and has been embraced by the Democratic Party at all levels, prompting comparisons to huge demonstrations of the 1960s that encapsulated a growing discontent in the country. But it’s instructive to remember how those public protests proved no match for the practical challenges of making political change—and that makes Occupy Wall Street largely good news for Republicans and their chances to recapture the White House. The Democrats have the most to worry about, since their party occupies the White House. Presidential races are largely determined—and 2012 will likely be consistent with this rule—by 10 to 12 swing states. The wave of enthusiasm that swept President Barack Obama into office almost four years ago is unlikely to repeat itself next year. The Democrat base is naturally

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unsettled by the state of the economy fighter against the rich and the privileged. The risk of this strategy is that Demoand persistently weak employment prospects for millions of Americans. History crats risk alienating independent centrist shows—whether it be Martin Van Buren, voters in the critical swing states. AstonHerbert Hoover or Jimmy Carter—that ishingly, Obama and the Democrats have incumbent presidents are unlikely to embraced the OWS movement despite clear win with the economic numbers so indications that many involved are part of the lunatic-left fringe who dismal. History also indicates aren’t even willing to particithat the party occupying the pate in the electoral process. White House will also suffer Pollster Doug Schoen, losses at the congressional writing in The Wall Street and local levels. Journal, revealed shocking In order for Obama to have details about the political a chance to win, he needs ideology of participants in the to have an overwhelming movement. For instance, onefinancial advantage and an John Faso third of respondents said they energized base. He has far exceeded his prospective GOP chal- support violence to advance their agenda. lengers in the money race for now, They are virtually unanimous in their but once the Republicans decide upon “opposition to free-market capitalism an opponent—almost sure to be Mitt and support for radical redistribution of Romney—the financial disparity will wealth, intense regulation of the private sector, and protectionist policies to keep narrow. But what about the enthusiasm gap American jobs from going overseas.” This philosophy may be fashionable in among the base? Obama is trying to energize his base by playing the class- various academic lounges and low-rent warfare card. His constant talk of taxing coffee houses, but it does not represent “millionaires and billionaires,” oil and a prospective governing majority in the insurance-company demagoguery, and United States. We are not yet Argentina or economically irrelevant calls to change Greece, nor are we likely to become so. None of this is meant to discount the tax treatment for leased private aircraft, represent an effort to prove that he is a genuine fear felt by many on both the left

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mayor will look for someone to cut a deal with; all over the world people will watch and listen and nod their approval; and eventually the new consciousness will penetrate the political classes, which will turn it into a series of fights about policies and laws. It is by no means sure that this generational use of technology and an inchoate sense that the 99 percent are being screwed by the 1 percent will turn the world on its head. But the toothpaste will never be put back in the tube, and all will be different. I mentioned above that I was part of getting the laundry done. Here’s the story. After days of talking with the worker bees at Zuccotti Park, Pete Dutro of the finance committee called me for help: 1,000 pounds of clothes had been rained on and were mildewing and needed to be washed ASAP. I did what I could. And so after years in the movements of the ’60s, and years in the state Legislature, my contribution to the world revolution was getting the laundry done. It was a very productive week. Richard Brodsky is a Senior Fellow at Demos, a NYC-based think tank, and at NYU’s Wagner School of Public Administration. He served in the state Assembly from 1983 to 2010 and chaired the corporations and environmental protection committees. He appears regularly as a contributing editor on WRNN-TV.

and the right. The reality is we are faced with an untenable and growing national debt, which will soon overcome us economically if we don’t reverse course. Our tax system is inefficient and riddled with loopholes, exemptions and preferences that hurt investment and discourage our major companies from competing around the globe. Demographic trends mean we live longer, but will require us to reform costly entitlement spending, particularly Medicare. We’ve allowed the federal government to become too big, too intrusive and too complicated. The Obama approach would expand the reach and control of the federal government. His frantic dash about the nation urging the Congress to pass his latest stimulus has been ignored by even the Democrat-led Senate and tuned out by most people. His call for substantially higher taxes on the successful will appeal to OWS and may succeed in motivating his disheartened base. But as Democrats learned in 1968, it will likely repel the broad middle of American politics and greatly lessen his chances for reelection. John Faso is a former minority leader of the state Assembly and was the Republican candidate for governor in 2006. He is a partner in the Albany office of the national law firm Manatt, Phelps & Phillips, LLP. OCTOBER 24, 2011

BAD MEDICINE How unhealthy relationships between Albanyâ&#x20AC;&#x2122;s lawmakers and the health-care industry hurt New York BY LAURA NAHMIAS

Andrew Schwartz

OCTOBER 24, 2011

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n 2007, Brian McLaughlin met with his former Assembly colleague Anthony Seminerio at the Atlantic Diner in Richmond Hill, Queens, a remodeled Greek-owned establishment that serves a flounder special and the usual 24-hour breakfast fare. It is not known whether Seminerio had bacon and eggs during his conversations with McLaughlin, but invariably, the discussion turned to pork. Seminerio, a 14-term assemblyman who earned $79,500 annually, had long since grown tired of seeing health-care providers grow rich off legislation he’d helped pass. He was itching for a larger piece of the spoils. What was the harm, he wondered, if

225,000

number of health-care jobs added in New York between 1990 and 2009*

word former United Hospital Fund President Bruce Vladeck used to describe a potential bed shortage in New York as the state faced a growing crack epidemic and the AIDS crisis. Amid outcry over the bed shortage, a nurse shortage and a home-health-aide shortage, jobs in the health sector grew 14 percent from 1999 to 2009, while employment in every other sector in the state decreased. The only question was

“We’re going to have to rethink and redo almost everything. It’s going to be brutally painful.”

1 percent

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Courtesy of Queens Tribune

everyone else was feasting on a seemingly inexhaustible supply of federal health funding and Medicaid cash? “What the [expletive] does it mean [to be an] elected official?” he asked roulette, as hospital administrators McLaughlin. “It doesn’t mean [expletive].” pleaded for the continued existence of What Seminerio didn’t realize was that their facilities, arguing that the negative McLaughlin, facing indictment on a series effects of a shuttered hospital would of corruption charges, was wearing a ripple out into their respective communities. wire. The Boyland trial and the hospital Over the past two decades, as health care grew in the state and legislators tribunal are not unrelated. Lesser hospitals courted favor in deregulated parts of the industry, the calculus shifted to a free-market free- Albany to better their chances at survival. for-all, where some big hospitals were Boyland, for example, stands accused guaranteed funding and others fought for money in a desperate scramble, in some cases skirting or breaking the law to lock down cash. “It was just a madhouse in the Legislature,” said Assemblyman Dick Gottfried, who has chaired the Health Committee for 24 years. “There were often adamant and sometimes bitter divisions within the of accepting a no-show job for $40,000 hospital community about where money a year in exchange for his help securing funding for MediSys hospitals. He lobbied was going to go.” In 2008 and 2009, Seminerio was Assembly Speaker Sheldon Silver to spare indicted and imprisoned on charges of Jamaica Hospital’s Medicaid funding honest-services theft for his role in a from cuts. He petitioned for discretionary scam that aided a series of Brooklyn and funds to help the hospital, which served a Queens hospitals in exchange for annual poor community, avoid the Legislature’s payments. He died in prison last year, annual budget dance—what one hospital executive referred but the fallout from his to as a “frenetic trial and McLaughlin’s game of musical turn as a star witness chairs.” continues. increase in New York State jobs in all And in the end, Former MediSys other sectors between 1990 and 2009* like Seminerio, he CEO David Rosen was convicted on charges related to a bribery may end up in jail for his alleged crimes. scheme this September. Assemblyman William Boyland Jr.’s trial begins on he health sector in New York November 1, followed by State Sen. Carl has done exceedingly well over Kruger’s trial in January. the past two decades. It was the On the same day Boyland’s trial begins, fastest- and largest-growing sector of the a work group for Gov. Andrew Cuomo’s state’s economy from 1990 to 2009—not Medicaid Redesign Task Force will recom- that you would know it from reading news mend how to restructure ailing Brooklyn coverage of the industry, where reporting hospitals. Some worry more funding will was often molded to fit industry experts’ be cut or more hospitals may be closed. dire predictions of collapse should cuts The first work group, held in July, befall them. had all the tension of a game of Russian In 1988, for instance, “scary” was the

Anthony Seminerio, a Queens Assemblyman who died in prison last year after being convicted of corruption, pushed for legislation that beneﬁted the health-care industry.

how to pay for it. New York State’s health-sector growth outpaced the nation’s. The state has the payers to hospitals. Surcharges were second-highest hospitalization costs per added that funded pools for indigent care patient in the entire country but ranks and to pay teaching hospitals for physi31st in preventable hospitalizations. It cian training. The program set a floor ranks eighth in public health funding and under prices to protect smaller hospitals, 25th in overall health, according to statis- and limited the market bargaining clout of larger, wealthier hospitals and payers. tics from the United Health Foundation. For years, the Over the past two legislation, called decades, the LegislaNew York Prospecture has made several tive Hospital Reimhalf hearted attempts to increase in New York State healthcare jobs between 1990 and 2009* bursement Methodright-size the Medicaid ology, was subject to system. Recent governors Eliot Spitzer and David Paterson contentious budget arguments, but when were attacked politically for attempts Pataki came into office, he decided he to cut the system. When Gov. George would not sign the bill again. “Some of the hospital community felt Pataki took office in 1995, for instance, the state’s Medicaid spending had hit $22 that in a free-market world, they could billion, which seemed outrageous. Last do better,” Gottfried said. “They felt they year it had risen to $52 billion, more than were big enough and famous enough or well-regarded enough that health plans a third of the state’s overall budget. would have to come to them and pay Lawmakers point to several missteps. Shortly after Pataki took office in 1995, them what they wanted.” Pataki’s decision to kill the program was he pledged to end a program, in existence since the early ’80s, that regulated guided in part by ideology, but also by his payments for inpatient care by third-party close relationships with some of the people

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29 percent

OCTOBER 24, 2011

who would benefit from its disappearance, including Dennis Rivera, then president of 1199 SEIU, the state’s largest health-care union—and, curiously, Seminerio, who had become a close ally to the healthcare industry when he passed legislation allowing hospitals to expand their physical plants with state aid in the late 1980s. Seminerio, a Democrat and former corrections officer who crossed party lines to endorse Pataki for governor, also supported Pataki’s stance on the death penalty, which was reinstated in 1995. The two were close. Seminerio stood next to the governor in photographs taken during the death penalty bill signing. Once, Pataki delayed a press conference to take a call from Seminerio on

27 percent

increase in health-care jobs outside New York City between 1990 and 2009*

a piece of legislation, pushing back his address a half hour before reemerging with a different position on Seminerio’s bill than he’d had prior to the call. “Seminerio was an unusual case in that way,” said former Brooklyn Assemblyman Daniel Feldman. By 1996 Seminerio had begun outside work as a consultant to the Neighborhood At a recent meeting of the Medicaid Health Providers, run by a woman named Arlene Pedone. Pedone served as Semi- Redesign Task Force, Commisnerio’s campaign treasurer a year earlier. sion on the Public’s Health System Their relationship soured by 1998, and a director Judy Wessler spoke about the year later Seminerio officially registered continued influence of those interests, a sham consulting firm, Marc Consul- in the form of the Healthcare Educatants, that he set up to receive payments tion Project, a joint coalition of the in the broad-based bribery scheme he Greater New York Hospital Association and 1199 SEIU. was indicted for in 2008. “They pool resources. They have an He may have been found guilty by the court, but there are many indications extraordinary amount of money,” she he was playing by the Albany rules. A said. “It short-circuits the appropriate recorded phone conversation between public channels.” The Healthcare Education Project Seminerio and Rosen, the former MediSys CEO, features the assemblyman bragging took out ads supporting the Medicaid that he had convinced Assembly Speaker Redesign Task Force’s cuts because the Sheldon Silver not to cut MediSys hospi- organizations fared well in the cutting process, Wessler added. tals’ Medicaid in the state budget. A spokeswoman Seminerio boasted for 1199 SEIU about his relationship did not respond with former Senate decrease in all other jobs outside Majority Leader Joe New York City between 1990 and 2009* to a request for comment. For its Bruno, a Republican part, the Greater who was also close New York Hospital Association said the with 1199’s Dennis Rivera. “Let me tell you something, you know, organization has no effect on what the and I can tell it to you,” he told Rosen. “I Legislature chooses to do or not do. “We have no control over legislative walk into Bruno’s office like I walk into your office…and I talk to Bruno like I talk decisions,” wrote GNYHA spokesman to you.… That kind of relationship you Brian Conway. “We simply present our case in the court of public opinion.” can’t buy for a million dollars.” The easy interplay between health interests and lawmakers was so rampant, he coda to 10 years of explosive with billions of dollars in circulation, that growth in the health sector under Seminerio used Albany’s lobbying culture the Pataki administration was the as part of his defense in his criminal trial. Commission on Healthcare Facilities He was not aware that receiving money in the 21st Century, also known as the for his efforts on behalf of the hospitals Berger Commission, which addressed was a crime, his lawyer argued. The court New York State’s glut of hospital beds. disagreed. Chairman Stephen Berger said the

“[Some hospitals] felt they were big enough and famous enough or well-regarded enough that health plans would have to come to them and pay them what they wanted.”

7 percent

OCTOBER 24, 2011

excess was partially responsible for was it. Everyone assumed we were done, the state’s enormous health costs. The and nobody read what we said or wanted commission’s final report in 2006 led to deal with what we said.” Berger said hospitals built and spent to the mergers or closures of dozens of hospitals throughout the state, too much in past decades, though including Cabrini Medical Center and state grant funds abetted much of their St. Vincent’s Hospital in Manhattan. unchecked physical plant expansion over “Part of the rationale was that it would the past 20 years. “Everything has been built up on a be better to make thoughtful decisions rather than letting the dog-eat-dog jungle silo system,” Berger said. “You have large marketplace kill the weaker hospitals,” embedded costs sunk into physical plant, and you have not said Gottfried. “The made that into a only problem I have with that rationale increase in New York State home-health- flexible, intelligent system.” is that…I think the care jobs between 1990 and 2009* The growth results from the Berger Commission were largely the didn’t happen overnight, and in the short closing of hospitals that probably would term it was beneficial to many in governhave been the ones eaten alive by a ment who were supposed to regulate the health system. market process.” Pataki’s first health commissioner, After a recent health-care forum, Berger conceded the commission’s plans Barbara DeBuono, may have had an had not gone as well as he had hoped. incentive to benefit hospitals’ bottom He said his commission was focused on lines. In 1998, DeBuono, now the CEO at distributing funding more evenly across global health organization Orbis Internathe health-care system in order to give tional, signed off on a merger between those distressed institutions a better Columbia Presbyterian and New York Hospital just months before taking a job chance of survival. “I think that was correct, but it was at the newly merged hospital, where she only meant to be the first step of a major earned a reported $300,000 salary. In 1997 Pataki moved to transition the overhaul,” he said. “Once the commission was done and some of its recommenda- state’s entire health industry to managed tions were implemented, it stopped. That care, a change that was supposed to cut

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30 percent

THE CAPITOL

costs at the state and federal level. But New York Things that are not politically possible in certain was the only state to negotiate an additional $1.8 times become politically possible when the [expletive] hits the fan—which is a billion federal-aid package to high-level description of We’re in smooth the transition. big trouble. We’re going to have “Unlike a lot of states, we had to think about the conse- proportion of New York State acute- to rethink and redo almost everything.” quences on the hospital industry,” care hospitals that closed between Then he added, “It’s going to DeBuono told The New York 1995 and 2010* be brutally painful.” Times in 1997. “We’re all just sort of feeding on each other—it’s a big, big business.” Neither DeBuono nor Pataki could be reached for ediSys’ Rosen seemed to believe that comment. hospitals survived by struggling upward. He The deregulation encouraged hospitals to merge. pushed for Seminerio’s help, and eventually The hospitals that no big institution would absorb Kruger’s as well, in his ultimate goal of acquiring two were closed. In spite of research suggesting health struggling Queens hospitals. According to the judge’s care should move toward a system of smaller order read in his conviction, Rosen had “correctly providers, hospitals sought and received grant funding understood that MediSys was fundamentally for expansions, new laboratories and specialty wings, dependent on the vicissitudes of the New York State which they believed would help their institutions budgeting process.” remain competitive in the new market. Rosen wanted his dog to eat the smaller ones, in The entire system, although largely funded by order to avoid getting eaten himself.

19 percent

The best-funded interests may survive, even as smaller hospitals plunge further into fiscal problems. government money, was very lightly regulated. In In the health industry, feelings about Rosen range 1999, after 1199 SEIU launched a campaign warning from revulsion to something almost like sympathy. of widespread hospital closures if the state cut He had broken the law, but had done it in the name funding, Pataki, again backed by Seminerio, pushed a of staying alive. Even the judge who convicted Rosen bill that would funnel all of the state’s tobacco settle- seemed to feel sympathy. ment money back to Medicaid, which reimburses the “This is a sad, even tragic case, as it reveals how bigger hospitals at a higher rate than the smaller ones, a widely admired hospital administrator who dilimany of which serve poorer communities. gently sought to better the health care of impoverGNYHA balked at the notion the organization had ished communities nonetheless chose to entangle made any decisions that benefited larger hospitals at himself in the bribing of state legislators,” Manhattan the expense of smaller ones. Federal Court Judge Jed Rakoff wrote. “The suggestion is beyond absurd and demonThe choice to become a criminal was wrong, but strably false,” said GNYHA’s Conway. “GNYHA is the state had all but encouraged it. as committed to the financial health of safety-net Hospital executives now express optimism that hospitals in vulnerable communities as any person future budget battles will be less rancorous than in or organization in existence.” the past, because the recession has dimmed expecThe top three industries that contribute to New tations of growth. Some argue that Cuomo has York electeds’ campaign coffers are real estate masterfully worked the system by involving the big interests, financial services and health care. Within health-care organizations in spending cuts. Albany’s nexus of health-care lobbyists and legislaBut the governor still bent to the state’s most tors, many privately acknowlpowerful health interests in edge that, in exchange for the this year’s budget. Several funds they need to be reelected, recent stories in The Wall Street lawmakers have relaxed stanJournal suggest Medicaid amount given by donors identified as dards that paid hospitals for being in the “health and mental hygiene” cuts were made only after sector in 2010 state elections* performance, and have proven Cuomo promised 1199 SEIU a unequal to the task of actually $50 million bailout of homecutting growth in health spending. health-worker insurance funds in exchange for the At the federal level, audits were few and far union’s imprimatur on the bill. A spokesman for between. Of the more than 7,000 hospitals listed as the governor dismissed those claims as ludicrous, nonprofit by the IRS, the Times reported that only and suggested the reporter’s story was on par with 375 were audited between 1996 and 2006. a “conspiracy theory.” Still, the best-funded interBerger is chairing a new commission to look at ests may survive, even as smaller hospitals plunge continuing problems in the Brooklyn health-care further into fiscal problems. system. At a recent meeting, Berger sat glumly Former Lt. Gov. Richard Ravitch marveled at the listening to a stream of health workers desperately tangle of it all. begging for the preservation of “financially distressed “We have evolved a kind of Rube Goldberg hospitals” in their borough, including Interfaith system to finance our institutions,” he said. Medical Center and Wyckoff Heights Medical Center. “You sometimes get very perverse methods Berger, who wore two sets of glasses on lanyards to ensure the survival of these hospitals.” around his neck, fielded testimony from doctors, home-health workers and patients, as each suggested —With additional reporting solutions to the health industry’s problems. by Michael Mandelkern He said he didn’t know whether politicians could *Sources: New York Public Interest Research Group, make the changes necessary to save the system. Center for Health Workforce Studies, “I don’t know what’s politically possible,” he said. University of Albany School of Public Health “I can’t see around the corner, but I’ll tell you this: lnahmias@nycapitolnews.com

$8,037,850.67:

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Extraordinary Measures As the date nears for recommending potential Brooklyn hospital closings, health-care workers plead their case

“T

hese are nightmarish scenarios,” said Dr. Caitlin Dwyer, a representative of 1199 SEIU’s Committee of Interns and Residents, during the final meeting of the Medicaid Redesign Task Force’s Brooklyn work group. Like many others, Dwyer was there to make the case against closing several Brooklyn hospitals. Her argument: The closures of Wyckoff Heights and Interfaith Medical Centers would have a disastrous effect on the surrounding communities, sending an estimated 9,936 patients to the already overtaxed Woodhull hospital. “A scenario with multiple hospital closures will have a compound effect on the distribution of patients across Northern and Central Brooklyn,” Dwyer said, reading from a white paper. “That would push the hospital’s average occupancy to 130 percent.” Dwyer was referring to potential ripple effects on surrounding hospitals in poor neighborhoods, were any of the borough’s five most insolvent institutions to close. She predicted double-digit-percentage increases in emergency room admissions, patient overcrowding and forced detours to the nearest trauma centers, potentially dooming some of them on life-or-death ambulance rides. The hospitals considered vulnerable to restructuring are Brookdale University Hospital and Medical Center, the Brooklyn Hospital Center, Interfaith Medical Center and Wyckoff Heights Medical Center. Their net revenues have bottomed out as Medicaid reimbursement rates dropped and the state became less willing to bail out health institutions—a practice it had engaged in for several decades when it was more fiscally feasible. The work group is chaired by Stephen Berger, who also headed a commission that recommended dozens of hospital closures in 2006. He has not said the panel will recommend closing hospitals, although its mandate suggests closure recommendations are not unlikely. The panel will make its decisions by Nov. 1, a state Department of Health spokesman said. Some argued for cuts but suggested the state recalibrate how it funds hospitals. Brad Kleinfelter, the chief financial officer at Lutheran Medical Center, argued for the greater concentration of state funds in institutions that provide the most free services to those without insurance—a proposal that has been advanced in the Legislature for years to no avail. “While the frailty of some facilities may be extreme, you must break this cycle of physical and programmatic deterioration that threatens Brooklyn safety-net providers,” Kleinfelter said emphatically. “To squander these ever-shrinking dollars on facilities that have alternative funding mechanisms will doom the reconfigured Brooklyn delivery system to fail miserably.” Kleinfelter’s suggestions were met with wild applause from the audience. Among those in attendance was New York City’s former commissioner for the Department for the Aging, Edwin Méndez-Santiago, who worried the panel’s choices would be easy cuts instead of long-term solutions. Berger, who authored the recommendations that led to the closure of hospitals such as St. Vincent’s and Cabrini Medical Center in Manhattan, made hospital staff and administrators fearful of a second round of closures, Méndez-Santiago said. Hospital closures would remove the only major medical facilities within reasonable distance of poor communities, he said. “If you just cut something now,” Méndez-Santiago asked, “are you going to create a bigger problem and a bigger expense for the state further on in the future?” —Laura Nahmias OCTOBER 24, 2011

BEYOND THE CAPITOL

The Golden Rule For rural school districts in dire straits, budget cuts lead to unorthodox fund-raising ideas BY SUSAN ARBETTER

an additional state aid benefit if it is “poorer” than 0.65. This deprives these uperintendent Casey Barduhn districts of the additional aid they need seems uncomfortable. There because they are so “poor.” “In effect, the state has placed a baseis some throat clearing. After a moment he rallies, saying he doesn’t want ment on how poor you can be,” Barduhn to discuss the so-called “gold parties” that said. His district’s ratio is at about 0.4, have occasionally transformed his school district’s high school cafeteria into a swap which is not uncommon in rural areas across the state. In this way, meet. But he will, to make a Barduhn argues, the Founpoint. dation Aid formula moves Last year, a sports booster toward greater inequity as club in his Mount Markham state aid is either “saved” or district asked permission to redistributed to those “less throw a few of those parties poor.” on school grounds. He had Recently the New no idea what a gold party York State Council of was at the time. School Superintendents “We had to have quite a (NYSCOSS) sent a survey few conversations about to school districts asking: this,” he recalled. Casey Barduhn “Which is of greater concern Barduhn learned the concept is simple. The public is invited to you, the new tax cap, or school aid to bring unwanted gold chains and cuts?” Most school districts are about split mismatched earrings to sell to on-site gold representatives. At the end of the down the middle. But looking exclusively evening, members of the public leave with a check. As party host, the school district gets a cut of every transaction. Every dollar counts for Barduhn and many other rural school superintendents. After absorbing massive budget cuts, school officials across the state have been forced to reevaluate their check- at rural superintendents, the results are books, sometimes resorting to unorth- telling: 90 percent of superintendents in odox methods to raise the necessary rural communities say the loss of state funds to pay for basic services. And with aid is of far greater concern than the tax budget shortfalls predicted to get worse, cap. The reason, says Barduhn, is that rural school districts are complaining about the state’s education funding formula, districts are far more reliant on state aid. “We lost $1.2 million in state aid over while bracing for additional cuts. The gold parties are perfectly legal, the past few years,” he says. “If we raised but Barduhn is aware of how unseemly taxes by 2 percent this year, we’d see $110,000.” they sound. These districts are so poor they won’t “The parties are a symptom of a much bigger problem,” he said. “Upstate rural take the legal exemptions allowed under districts are in a bind. They’re suffering the new cap. Dr. Rick Timbs, executive from years of funding inequities and state director of the Statewide School Finance Consortium, calls this “being capped by aid reductions.” Mount Markham encompasses 11 circumstance.” Residents expect no more than a townships, over a 200 mile region of the Mohawk Valley, straddling four of 2 percent increase, so superintendents the state’s poorest counties: Madison, know in advance that asking for more Oneida, Otsego and Herkimer. It’s a than that will be a tough sell. And selling district with a 60 percent free- and your budget under the new cap is a must reduced-lunch population, which is one for superintendents. “Remember,” says Timbs, “If the way the state measures poverty. Another measure is the income- budget fails twice, the levy is not allowed wealth ratio, which is created by a to increase at all.” Neil O’Brien, superintendent of the combination of income and property values. In a portion of the Foundation Port Byron Central School District, charAid formula, no district can receive acterizes this provision as punitive. Like

“You know, Fire Island, down in Long Barduhn, O’Brien is trying some nontraIsland, can spend $96,000 per student, ditional ways to keep his district afloat. “I have a class right now taking AP and they do,” he said. “That’s fine. I don’t American History online because it’s want to take their money away. But it no longer being taught by one of our really gets down to: Does the state want teachers. That’s positive. But eventually to meet its constitutional obligation we just keep cutting, and the cuts become to provide a sound basic education for more devastating as you go further into every child in the state?” “At this point, we don’t know whether the process.” in the next few years our A majority of the superschools will exist,” he intendents surveyed by added. “And if they do, if we NYSCOSS reported that will be able to provide the “their district’s budget this basics to get our students year had a negative impact a diploma,” he said. “And on instruction in core we’re not talking about subjects.” ‘Can we have an orchestra In response, a spokesprogram?’ ” person for Gov. Andrew After last year’s state Cuomo issued the following budget cuts, Mount statement: “The schools Markham’s Barduhn knew and school districts chose Mark Vivacqua he would have to eliminate to make these reductions in the classroom rather than dip into their the $40,000 junior varsity sports program; reserves, cut back on the bureaucracy, or it included football, field hockey and reduce the growing number of adminis- soccer for 9th and 10th graders. But before he could implement the cuts, trators.” he was approached by members of the district’s All Sports Booster Club about hosting the gold parties. Thanks to record gold prices, Barduhn reports that the club met its goal. JV sports are back on the schedule. But Barduhn resents the outcome. Barduhn fired back: “The governor “These are all wonderful people and they said, ‘Use your fund balance.’ We did. do great work, but the reality is that for And we still had to lay off teachers. We the most part we are tapping into the used our fund balance and we still had a same community that is already paying tax increase of over 5 percent. Eventually school taxes.” Mount Markham’s budget troubles you have to ask, ‘What do you do when will start all over again next year. you’re out of money?’ ” “So this is what we’ve come to?” asks It’s a question Bob Lowry is forced to think about a lot lately. As head Barduhn, no longer hesitant, just frusof NYSCOSS, he responds by telling trated. “To keep programs alive in rural districts there is no legal mechanism for schools, we sell gold?” them to declare bankruptcy. “But I realize now, I need an answer,” Lowry said. “Well, what does happen? What are your options? What does happen if you can’t pay your bills?” When it comes to finding answers, District Superintendent Mark Vivacqua Susan Arbetter of the Herkimer-Fulton-Hamilton-Otsego reports from the BOCES says that the Cuomo administra- Capitol in Albany tion hasn’t been helpful. for Central New “One of the things that is not helping York’s PBS station, us right now is the intellectual dishon- WCNY in Syraesty going on,” Vivacqua said. “You know, cuse. She hosts a where they take these esoteric data and daily live radio misapply them and then get the public show, “The Capitol angry about schools wasting money.” Pressroom,” and produces The Capitol Vivacqua brings up the elephant in the Report, broadcast daily on television room. across New York.

“Well, what does happen? What are your options? What does happen if you can’t pay your bills?”

OCTOBER 24, 2011

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THE CAPITOL

Buttler associates ad_3.5x12.87 9/12/11 1:18 PM Page 1

Perspectives: New York Between A Rock And A Hard Place On Race BY MICHAEL BENJAMIN

police work, false confessions and at those who mar that veneer with incompetent counsel. a racial indiscretion. The media’s Years of effort failed to change inability to say or print the infahis month’s frenzy over the racially offensive name those laws until New York elected a mous “N-word” is absurd: Our of Texas Gov. Rick Perry’s black governor and a minority-led, discomfort with this word has Democrat-controlled even led to a sanitized version of hunting camp amused State Senate. They Mark Twain’s The Adventures of me. No, we can’t be a finally achieved those Huckleberry Finn, a mighty work postracial society if we reforms, as well as a that was meant to prick our racial avoid honest discussions redistricting law that sensibilities. of race, race relations counts incarcerated Long before today’s rap music and historic slurs. But black and other minority and culture, Huck Finn liberated other racial discussions prisoners in their home me from the oppression signified are more important— and we have avoided Michael Benjamin districts instead of by the term. Nigger Jim was a good predominantly white man who would not and could not them for too long. be defined by a name. And neither Our willingness to sweep the word rural upstate communities. Contrast that with how quickly should black Americans today. “nigger” away in polite conversation, Like Mark Twain, we should even as young black men shout it at the Department of Environmental each other on every corner, greatly Conservation moved this summer prick our racial sensibilities and contrasts with the ways race still to change the little-known names perceptions. We should engage each of two roads, a stream and a lake other in a frank discussion of race makes a difference in New York. Those same black men are when researchers discovered state relations that goes beyond the shortmore likely to be stopped and regulations included the word lived ire at outdated place names and shibboleths. Unless we honestly frisked, more likely to be arrested “Nigger” in their names. Too many of us accept white- confront the enduring significance for possessing small amounts of marijuana, more likely to end up wash as a solution, instead of of race and the role played by with criminal records, and more confronting the unresolved issues our different perceptions, we will likely to find themselves shut out of race and racism that lie beneath bequeath this unresolved burden to of opportunity, in part because of our postracial veneer. The racial our grandchildren. behind too-high the disparate impact of New York components rates of black male incarceration Michael Benjamin retired from State laws. When I served in the Legisla- and unemployment, for example, the Assembly last year after eight years representing a Bronx ture, my colleagues largely viewed remain unaddressed. Yet it is easier to point fingers district. that disparate impact through the prism that was the color of their own skin. From my perspective, reforming the Rockefeller drug laws and police enforcement tactics was often hindered by misunderstandings of how race and identity play out in the criminal justice system. ...Track Confidently! Despite data showing that seemingly raceneutral statutes are applied differently when black defendants are brought before a predominantly white bar of justice, it was not easily accepted by my white colleagues. Hundreds of thousands of young black men have been stopped and frisked by the NYPD, and only a tiny fraction arrested for major felonies, poisoning police-community relations in the process. Under the Rockefeller drug laws, minority group LRS Subscribers know the confidence of unlimited use drug dealers and users of the LRS Helpine...that’s the LRS Advantage! were imprisoned in higher numbers and given longer sentences than similarly Free two week TRIAL-ID! situated white offenders. (800) 356-6566 or (518) 455-7677 And too often, black http://nyslrs.state.ny.us defendants were wrongly 1450 Western Ave., Suite 310, Albany, NY 12203 convicted based on sloppy

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ISSUESPOTLIGHT

New York Manufacturing

Manufacturing Dissent For manufacturers in New York, a complex and expensive climate By Andrew J. HAwkins

THE CAPITOL

Courtesy of American Aerogel

arlier this year, Jay McHarg, president of the Rochesterbased company American Aerogel, received a letter from the Department of Environmental Conservation that made his head spin. The agency was asking McHarg to pay thousands of dollars in fees on hazardous wastewater disposal, a by-product of his company’s production of custom-made packing material. But the fees were not from this year, or even the year before—but from three years ago. It was a classic New York “reach back,” McHarg recalled—the state dipping into the pockets of small business owners and demanding taxes for past actions, like wastewater removal. “It was a new tax that was imposed, and it was retroactive for three years,” McHarg said. “And I was like, ‘Are you guys serious? We’re a start-up company and we count our pennies here. We have to budget everything we do. And then you throw this at us?’” American Aerogel, which manufactures a Styrofoam-like packing substance used to ship specialty products like pharmaceuticals, is not alone in this sentiment. The complaints from across the state about overregulation and overtaxation have become a familiar refrain. And as the Cuomo administration ramps up its “Open for Business” effort aimed at keeping and growing businesses in New York, sensitivity to the state’s many taxes and rules is at an all-time high. DEC was charging manufacturers $130 per ton of wastewater for any amount under 4,000 tons. Over that amount, the fee jumped to a flat rate of $400,000. For McHarg, who employs 50 workers at American Aerogel and is looking to expand, the retroactive DEC tax may just be enough to convince him to move to greener pastures. “Our argument is that if you had this tax three years ago, maybe we wouldn’t be here,” he said. New York’s manufacturing sector is in a particularly perilous position. The state was once a manufac-

American Aerogel cofounder Robert Mendenhall, seen here with Sen. Chuck Schumer earlier this year, says New York’s high taxes are forcing him to consider relocating.

turing giant, but jobs have fallen by half since the early 1990s, with only 456,800 workers employed in the sector today, according to the state Labor Department. The industry once dominated by names like Kodak,

erty taxes. But many want his administration to do more to help struggling businesses. “We have to reduce taxes,” said Todd Tranum, president and CEO of the Chautauqua County Chamber of

“Our argument is that if you had this tax three years ago, maybe we wouldn’t be here.” Xerox and Carrier have been replaced by small, specialized manufacturers like American Aerogel—firms that require a more specialized workforce than in years past. Despite an unemployment rate in New York that hovers around 8 percent, manufacturing businesses are scrambling to fill available jobs. And many are finding that on top of paying what they call exorbitant taxes and fees imposed by the state, they also have to fund training programs to help meet that demand. Gov. Andrew Cuomo gets high marks from manufacturers for holding the line on taxes, refusing to reinstate a surcharge on high-income earners and capping the state’s prop-

Commerce and executive director of the Manufacturers Association of the Southern Tier. “We have the highest fuel taxes, the highest per capita income taxes, and we rank at the top of the list in terms of real property taxes in business. These costs are undermining the global competitiveness of New York’s manufacturers.” Others are more pessimistic about the possibility that the state would roll back regulations and fees for manufacturers. Mike Haugh, director of the Manufacturing Assistance Center for the Finger Lakes Region, said that the state could take concrete steps to improve the business climate for manufacturing but is unlikely to do so. “I think that there are a number

www.nycapitolnews.com

of things that can be done, many of which I don’t even know about, to reduce regulatory burden, reduce some taxes on the margin, that would improve the situation, but probably not by orders of magnitude,” he said. “Just because New York is what New York is—a large and complex state.” Many lament the replacement of the lauded Empire Zone program with the less trusted Excelsior Jobs Program. State Sen. Tom O’Mara, a Republican who represents a manufacturing-rich district in the Southern Tier, said that without Empire Zones, which provides tax incentives to businesses, companies like Vulcraft Steel, Corning Incorporated and Sikorsky would not be located in New York, employing workers and enriching communities. “We haven’t seen a significant project come through my area under the new Excelsior program,” O’Mara said. Lawmakers and manufacturers are hopeful that the new regional economic development councils established by Cuomo earlier this year to help coordinate business-growth efforts in each of the state’s 10 regions will help jump-start manufacturing, as well as help identify those costs of doing business that prove overly burdensome. Training programs and loan programs that got cut during the economic downturn should be refunded when the climate improves, they say. But for now, New York manufacturers are in limbo, stuck between a sense of optimism about Cuomo’s leadership and the high taxes and fees that make the state one of the leastcompetitive business climates in the nation. Robert Mendenhall, an inventor who cofounded American Aerogel in 1999, says the retroactive fees and high capital costs for expansion have convinced him that the state is practically useless in the realm of economic development. “Level the playing field for us,” Mendenhall said. “Simplify, simplify, simplify. Then get the ‘eff’ out of our way.” ahawkins@nycapitolnews.com

OCTOBER 24, 2011

EXPERT ROUNDTABLE New York Manufacturing Kenneth AdAms

Those are $60,000-, $80,000-, $100,000-a-year manufacturing jobs.

step toward state competitiveness. When you get into manufacturing, they experience much higher rates.

Q: What is the state’s manufacturing future?

Q: And that’s different from some people’s perceptions of manufacturing as an industry full of tall smokestacks.

Q: Do you think the manufacturing sector can hope to increase the number of jobs it has already, or should the focus be put on retaining current manufacturing jobs?

President and CEO, Empire State Development Corporation

Kenneth

Adams:

There’s a great history of manufacturing in the state. What you see today are manufacturers whose competitive advantage is in being a technologyoriented sector. So they get more specialized, but they aren’t necessarily household names. Now, my role is so much broader. I see all types of manufacturing companies. The strength of so many of these manufacturers—in many cases they are taking advantage of a highly skilled workforce, especially upstate. It’s a workforce that’s used to manufacturing work. People understand factory work; they get it, they’ve done it. That kind of labor history is important. In many cases, partnerships with higher education institutions, where a lot of the technological advances are occurring, that’s manufacturing. The new direction is exemplified by the governor’s announcement of this $4.6 billion consortia. That’s manufacturing.

Robin schimmingeR

Chairman, Assembly Economic Development Committee

Q: What is the state’s manufacturing future? Rs: New York is blessed with an excellent workforce with the appropriate skills for modernday manufacturing. However, the business climate in the state continues to be a challenge for manufacturers. Working to improve that business climate continues to be my main focus. The manufacturer of some products has a short life expectancy. With changing times,

Jim Alesi

Chairman, Senate Economic Development Committee

KA: Manufacturing is no longer based on the production of low-cost consumer goods. That has gone to China, where labor costs are much lower. What emerges is a new world of manufacturing that isn’t necessarily a household name. They aren’t producing mass quantities; they are focused on specialty items. For example, New York State is home to a significant number of high-tech manufacturers in aerospace and defense. The direction is based on innovation. They are leveraging a skilled labor force. The concerns remain chiefly the broader business environment of the state. It is a very expensive state to do business [in]. More still needs to be done. Energy costs are a critical problem. You got to give them access to low-cost power. Manufacturers pay very high workers’ comp rates. Workers’ comp reform is a fundamental

KA: We have to make sure we do everything we can to assist existing New York State manufacturers. The manufacturer is usually the last man standing when it comes to property taxes. Manufacturers in some communities pay a disproportionate amount of property taxes. I am increasingly optimistic that we can attract manufacturers into New York State that will build plants, buy equipment and employ New Yorkers. Despite our reputation as a high-cost state with many regulations, our administration is, step by step, improving our reputation. They’re building on the higher education infrastructure that started in SUNY Albany. China wants to also have industries here. They already make solar panels in China, but they want a facility in the Hudson Valley, in a state that over time will be employing more and more solar technology.

certain products will become outdated and go the way of the buggy whip. Before the age of the automobile, the preferred mode of travel was by horse. The buggy whip was critical to that. No one manufactures buggy whips any more.

of New York manufactured products fall short of those products manufactured in more hospitable businessclimate jurisdictions. So we must move toward competitiveness, first and foremost. And we’re doing that, whether it’s by capping property taxes, by not increasing state taxes, by creating Recharge New York. I am confident that better days are ahead.

Q: How can the state’s manufacturing sector be revitalized?

Rs: First and foremost we need to continue to work to improve job creation and the business climate. New York’s manufacturers compete with their counterparts in other, more favorable jurisdictions. Over time, the sales Q: How can the state’s manufacturing sector be revitalized?

JA: The manufacturing Q: What is the state’s manufacturing future?

Jim Alesi: The manufacturing industry has faced very difficult times over the past several years. But manufacturing remains an extremely important part of the economy. As chairman of Economic Development, I fully understand that New York needs to ensure that manufacturing remains an important part of the state’s economic future. To do this, we need to adopt sound policies that retain and grow our existing manufacturing industry and encourage new manufacturers to locate in New York.

OCTOBER 24, 2011

sector can be revitalized by making New York more business-friendly. Thus, we must work to lower the cost of doing business in New York. Working with Governor Cuomo, we made significant strides this year by capping local property taxes, enacting important reforms such as Recharge New York and reauthorizing and modernizing the Article X siting process for major electric-generating facilities. Most importantly, we passed an on-time budget that closed a $10 billion deficit without raising taxes.

Q: Are they receiving state subsidies as well to encourage them to come? KA: We’re giving them some of our Excelsior tax credits. It’s a whole package. It’s not like they are coming here to make low-cost consumer goods. They are coming here for access to universitybased research and a skilled labor workforce. We are making the reforms to improve the business climate. We are going to let people know about our access to our abundant natural resources. Q: What other policy initiatives should the administration revisit to make sure manufacturing remains a vital sector in the state? KA: It’s likely that based on the sectors you have in the region, you’re going to see different regulatory issues emerge. In some areas you might have more of an emphasis on completing workers’ comp reform. In others you’ll have a real focus on energy. In others you can have a focus on real estate and tax issues. For the larger ones, it’ll be about health insurance. It’s the smaller ones that are really specialized that have their own problems. Over the next few months we’ll see different policy recommendations.

Rs: There are specific affirmative programs which aim at helping New York

manufacturers innovate, be it the Centers of Excellence program, or perhaps initiatives that come from regional economic development councils. Anything that adds costs to manufacturing in New York State versus other states hurts our effort. To extent that we can reduce workers’ comp costs, shrink the 18(a) assessment and corporate franchise tax, those are all steps in right direction. We don’t want to minimize the significance of the property tax cap. Businesses pay property taxes too, and those can amount to big bills. This gives them assurance that those property taxes will not skyrocket in the future. And it sends an important signal effect to companies in New York that we’re open for business.

are being promoted to jump-start manufacturing?

to partner with businesses and manufacturers to grow our economy.

Q: What other policy initiatives should the administration revisit to make sure manufacturing remains a vital sector in the state?

JA: We need to build on last session’s legislative successes and look for ways to reduce mandates placed on manufacturers. For example, this year the Senate Republicans advocated repealing the payroll-mobility tax, which negatively impacts all employers, including manufacturers, in the Metropolitan Commuter Transportation District. The state must repeal this jobs-destroying tax. The Senate Republicans also advanced accelerating the Article 18(a) sunset to reduce energy costs. Also, earlier this year the Senate Republicans partnered with Governor Cuomo to ensure taxes were not raised to balance the state’s budget. This coming year we need to consider reducing taxes to spur economic growth. Finally, we need to continue to find ways to leverage our universities and colleges

Q: What are ideas out there that www.nycapitolnews.com

Q: What does the new face of manufacturing look like in New York? JA: There are parts of New York that have done very well in high-tech manufacturing, and new opportunities continue to develop, as we can see with the recent announcement regarding the nextgeneration computer-chip technology. New York still has many smaller low-tech manufacturers. We need to ensure that these manufacturers not only continue to be viable but that they also grow and flourish. And we do that by reducing costs and making New York a more business-friendly environment. Q: What state programs work? What don’t? JA: New York has had success with

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its Centers of Excellence across the state. In particular, the College of Nanoscale Science and Engineering at SUNY Albany has helped Albany become a hub for nanotechnology. In addition, New York’s Power for Jobs program has been working well for many years, which is why it was important to make the lowcost energy program permanent this year by passing Recharge New York. Conversely, New York’s Excelsior Program continues to be a disappointing program and does not provide enough of a boost to make a significant difference in the business environment throughout the state.

Q: Where do you stand on legislation

Seth PinSky President and CEO, New York City Economic Development Corporation

Q: Is today’s manufacturing industry sustainable?

Seth Pinsky: It includes things like wholesale, distribution and construction. These jobs create good, blue-collar jobs. The industry has been relatively stable, with the exception of the manufacturing industry, which has been experiencing decline. But in recent years what you started to see is the trend in manufacturing decline begin to level out. Independent economists believe the industry will be very stable over the next several years. The reason for that is that a lot of the kinds of manufacturing are easy to offshore, to places like China and India. What we have now is the core of the manufacturing sector in New York, because there is a competitive advantage for the company to be in New York, because it requires a specialized workforce. Many have already moved there. Manufacturing is growing because of that. There is promise in food manufacturing. This is a sector where we’ve seen growth in recent years. Q: Do you think there is enough of a skilled workforce to meet manufacturing labor demand?

SP: I think the workforce in New York is second to none anywhere in the world, especially in manufacturing. That wasn’t the major challenge businesses cited. The major challenges break into three different categories. One, there is a scarcity of industrial space in New York City in appropriate condition for modern manufacturing businesses. Challenge number two is, as with a lot of small businesses, it remains a challenge for businesses to bridge cash-flow issues and invest for growth. The third is that although there are a lot of programs in the city available to entrepreneurs, many of them aren’t specifically directed at manufacturing. Even if they were, they were often hard for these individuals to find. We put together, about six months ago, a set of 22 initiatives that will invest about

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pertinent to manufacturers in New York: Workers’ comp reform? Corporate franchise tax sunset? 18(a) assessment sunset?

JA: I continue to support legislation that reduces the cost of doing business in New York and saves taxpayers money. Thus, we should consider reducing the corporate franchise tax and accelerating the sunset of the Article 18(a) assessment. At a minimum, the additional Article 18(a) assessment must sunset in 2013. With respect to workers’ compensation reform, the 2007 reforms were intended to increase benefits and decrease costs. We need to ensure that these reforms are implemented and that these objectives are being met. $100 million into the manufacturing sector in New York to address these challenges in different ways.

Q: What are some of the areas where New York City is the strongest in manufacturing? Where is there room for growth?

SP: Certainly high-skill manufacturing; that’s one area where we are very strong. We are also strong in areas that draw off of the diversity of our population. Food manufacturing is another area where New York has done comparatively well. Businesses that started by serving the varying ethnic communities in New York can take their product on the road to different cities. In the larger industrial sector, businesses have also continued to thrive in the city. We’re looking at other sectors that might have growth opportunity through the city, areas like prototyping, things that take advantage of our higher education institutions. For example, we launched with Columbia, NYU and CUNY something called the Urban Technology Innovation Center. It is designed to generate and encourage the growth of cutting-edge green technology. Q: What policies should be enacted at the state and federal level that could help improve the environment for manufacturers? SP: Certainly ensuring that immigrants are still able to come to New York and bring their skills with them. There are a whole host of state businesscondition issues that the governor focuses on and that the mayor is supportive of. The mistake economic development officials make is trying to pick winners and losers among industries when our primary focus needs to be creating the business conditions that allow our smart and talented workforce to pick the winners and losers. We’re trying to make sure there is space available. Same with financing. We’re looking not just at incubators for high-technology businesses but also for the manufacturing sector. Providing space for these businesses to allow our workforce to find the trends of tomorrow is important.

The New Assembly liNe No more smokestacks—New York’s manufacturing is high-tech, and hurting for labor By Andrew J. HAwkins

nce upon a time, New York was a manufacturing giant. Lackawanna Steel, Kodak, Xerox, Carrier—names synonymous with high-end goods designed and assembled in the United States—all had their headquarters in New York. They employed hundreds of thousands of workers, earned billions of dollars and sent millions in tax revenues to the state’s coffers. Today, the manufacturing sector is much changed. The old manufacturing stalwarts now employ thousands instead of hundreds of thousands. Fewer than 500,000 workers are employed in manufacturing statewide, down from around one million in the early 1990s. The production and distribution of low-end goods has relocated overseas to countries like China and India, where the workforce is cheap and plentiful. In short, the giant that was New York manufacturing has been replaced by a

“Manufacturing today is not your grandfather’s manufacturing.” highly specialized, highly trained dwarf—smaller in workforce size, but more efficient and more competitive. “Part of the issue is that when people think of manufacturing in New York, they think of old tall smokestacks they grew up with,” said Brian Sampson, executive director of Unshackle Upstate, a pro-business group. “Today’s manufacturing is much different—it’s high-skilled and high-tech.” In New York City, the predominant type of manufacturing is food products and artisan crafts. Sara Garratson, president of the Brooklyn-based Industrial and Technology Assistance Corporation, says that while job losses continue to hit larger companies with over 500 employees, there has been an explosion of smaller-scale production. The average size of a manufacturing firm in New York City is 12 employees. “What we are seeing, which is exciting, is a whole set of new entrepreneurial activities and new firm generation,” she said. “Some are artisanal, design-oriented, and many are technology businesses.” The Capital Region is experiencing a mini-renaissance in microchip and nanotech manufacturing. The Cuomo administration recently secured a deal between IBM and several other technology firms to place their design and manufacturing operations in and around Albany-based universities and research facilities, with an anticipated $4.4 billion in economic activity. Rochester is also undergoing a boom in manufacturing activity, as former employees from the downsizing Kodak and Xerox corporations spin out their own design boutiques. But as manufacturing in New York becomes more specialized, a shortage of skilled workers to meet the demand is presenting a new and difficult challenge. Mike Haugh, director of the Manufacturing Assistance Center for the Finger Lakes Region, suggested that the state encourage more robust partnerships among manufacturers and local universities in order to promote skilled training programs. “They are industries that need to proximate to university and R&D sources, because things are moving so swiftly,” Haugh said. “You can get technologically out-of-date real fast if you’re not sitting practically on top of the university.” Gone may be the days of the factory town, where small communities flourished around a single employer. But with opportunities in new and emerging manufacturing fields, including advanced and lean manufacturing with cheaper, more efficient energy output, New York’s manufacturing sector appears likely to continue to evolve and grow. “Manufacturing today is not your grandfather’s manufacturing,” said Todd Tranum, president and CEO of the Chautauqua County Chamber of Commerce. “Technological advancements have significantly changed the work environment within today’s facilities.” — ahawkins@nycapitolnews.com

www.nycapitolnews.com

OCTOBER 24, 2011

New York Manufacturing

The Manufacturers Association of Central New York represents 350 businesses, with a total of 55,000 workers across upstate New York. The group routinely sends legislative memos to keep its members informed of goings-on in the state capital. An offshoot is the Manufacturers Council of the Southern Tier, a 110-yearold organization that focuses on companies in and around Chautauqua County. The Business Council and Unshackle Upstate both have robust manufacturing agendas. The Industrial and Technology Assistance Corporation, a nonprofit based out of Pratt College in Brooklyn, focuses on manufacturing in New York City. And the Rochester Tooling & Machining Association represents some of the more technologically advanced companies in the Monroe Country area.

456.8

300 200

2002

2001

2000

1991

100

Source: NYS Labor Dept.

475.9

531.9

566.4

551.6

595.5

579.4

650.7

706.7

611.9

2010

500

2009

2006

2008

2005

2007

2004

2003

600

1990

OCTOBER 24, 2011

1999

700

BY THE NUMBERS 458,00: Number of workers currently employed in manufacturing in New York State

6: Percentage of the state’s GDP represented by manufacturing 55: Percentage decline of employment in manufacturing sector since 2002

1998

800

(in thousands)

1997

400

This statewide technology transfer and research center is located in Rochester, funded by the Department of Environmental Conservation, and focused on helping businesses and manufacturers become “better environmental stewards” for New York State. The institute offers training programs for business owners about how to reduce toxic-chemical use and emissions, as well as the more environmentally efficient use of raw materials. Despite massive cuts at the DEC, advocates have their fingers crossed the state will continue to fund the project. Dr. Anahita Williamson, the institute’s director, recalled a recent consultation with a Utica-based manufacturer of titanium turbine blades that helped reduce the company’s production of hazardous waste by 40 percent and reduce their overall costs by 64 percent.

1996

Pollution Prevention Institute

1995

900

1994

One of the premier programs in ESDC’s arsenal, this tax-credit program is designed to help high-tech, biotech, clean tech and manufacturing companies grow their business and create jobs. Some advocates and lawmakers find the benefits of Excelsior inferior to the program it replaced, the Empire Zone project. Excelsior offers four separate tax credits: for job creation, for investment, for property tax relief, and for research and development.

1993

Excelsior Jobs Program

MANUFACTURING JOBS IN NYS, 1990–2010

1992

1,000

771.3

This ESDC-sponsored program is offered to businesses to help “modernize their equipment and/or expand their facilities for productivity growth or to introduce new technologies; to facilitate ownership transition; and to promote job creation retention.” Businesses using Linked Deposit achieve a 2–3 percentage point savings on the prevailing interest rate for “linked loans,” to make borrowing less expensive, with a maximum loan amount of $500,000 for four years. Geared specifically toward manufacturers, the program is called a “hidden gem” by business advocates.

The Advocates

749.3

Linked Deposit

Robin Schimminger, a Democrat representing Erie and Niagara counties, chairs the Economic Development Committee in the Assembly. His Senate counterpart is Jim Alesi, a Republican representing parts of Monroe County, which is a hub for manufacturing in New York. Both Schimminger and Alesi are seen as business-friendly by the state’s many private-sector advocacy groups. Alesi also sits on the advisory board of the Center for Integrated Manufacturing Studies at the Rochester Institute of Technology. Assembly Speaker Sheldon Silver is also a proponent of manufacturing, having labored to lure Sematech, a research consortium from Austin, Tex., involved in nanotechnology, to Albany. A former top aide to Silver, Dean Fuleihan, now works at the University of Albany NanoCollege, which recently announced a $4.4 billion deal by leading technology companies to place R&D operations at the school.

795.6

THE PROGRAMS

The Legislature

790.3

In New York there are many high-paid manufacturing jobs available, but employers routinely lack the skilled workers to fill them. To that end, several programs have sprung up around the state to better train workers to meet that demand. One program, the Manufacturing Technology Institute, is a partnership between the Manufacturing Association of the Southern Tier and Jamestown Community College. Over 50 students are enrolled, with courses in welding and skills in mechanical technology. Mike Weaver, director of engineering science and technology, boasts a 100 percent employment record for students leaving the program. Unfortunately, few other programs similar to MTI exist around the state, Weaver says. “They just need skilled workers,” Weaver says of state manufacturing businesses. “There are positions open, just no one to fill them.”

Gov. Andrew Cuomo has empowered the Regional Economic Development Councils to develop strategies for business growth and job creation for each of the 10 regions around the state. Kenneth Adams, president and CEO of the Empire State Development Corporation, and Lt. Gov. Robert Duffy are tasked with oversight and management of the regional councils. Manufacturing is regulated by several state agencies, including the Department of Environmental Conservation, run by Joe Martens; the Department of Labor, headed by Colleen Gardner; and various energy and power authorities, like the New York Power Authority, the Long Island Power Authority and New York City’s Department of Environmental Preservation.

795.3

Workforce

The Administration

808.8

The property tax cap was a big win for business owners in New York, including manufacturers. Pushing to extend certain tax credits will rank high on the list for manufacturers next year, especially the Qualified Emerging Technology Company tax credits, which are set to expire in December. This tax credit is said to encourage manufacturers to include new technology and innovative products in their preexisting processes, which some argue will help in making new products and gaining new customers. The current bill—S 5633-B, sponsored by Sen. Jim Alesi, and A 7705-B, sponsored by Assemblywoman Donna Lupardo—would extend the credit to 2016.

THE PLAYERS

814.2

Taxes

—Kenneth Adams, president and CEO of the Empire State Development Corporation

868.2

Energy policy and prices have a disproportionate effect on the manufacturing industry’s ability to compete in the global marketplace. New York has long had some of the highest energy costs in the country. Some industrial electricity prices are 32 percent higher than the national average. Policy initiatives like Recharge New York, which allows manufacturers and business owners to apply for low-cost energy allocations from the government, are expected to help, but some advocates say the government should take into account the manufacturing sector’s unique energy intensity when deciding which businesses are able to take advantage of those programs. Allowing the state’s 18(a) assessment to sunset, which manufacturers argue would reduce energy costs, is also a high priority in the state.

834.9

Energy costs

“Manufacturing is no longer based on the production of low-cost consumer goods. That has gone to China, where labor costs are much lower. What emerges is a new world of manufacturing that isn’t necessarily a household name. They aren’t producing mass quantities; they are focused on specialty items.”

908.4

THE ISSUES

981.6

SCORECARD

www.nycapitolnews.com

Source: Manufacturing Research Institute

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BACK & F O R T H

Jockeying For Position

ames Featherstonhaugh is a veteran of Albany politics who has made friends with Republicans and Democrats alike over the years. And as a lobbyist and a lawyer, he’s represented some of the state’s most influential players. Now he’s focused on an industry near and dear to his heart: horse racing. He spoke with The Capitol about his recently formed New York Gaming Association, his part ownership of the racetrack and casino at Saratoga, and his proposal for a constitutional amendment to expand gaming at the state’s nine racetrack casinos.

The Capitol: How did you get interested in horse racing? James Featherstonhaugh: I enjoyed watching it and betting on it since I was probably 15 or 16. When I used to go to the harness track up there, I’d wager. I owned horses that raced, and way back—it must have been in the early ’80s—I participated with a group of people who bought the track from the Morrisons. So basically I’ve been interested in it all of my adult life. TC: What role does the weak economy play in driving casino expansion? JF: I don’t think the current state of the economy is really a compelling factor one way or the other, although the expansion of the nine racetrack casinos would create a substantial amount of employment. That’s certainly important in this economic time. But the other benefits that flow from it, which are primarily increased revenues that are dedicated to education and supporting the agricultural and equine industry, those things will remain in constant need for the foreseeable future. TC: Is there any downside to expanded gambling? JF: If your question is: “Is there any downside to the proposal that the New York Gaming Association is making?” the answer is an unequivocal no. We are simply suggesting that gaming be improved at its current venues only, or be made more diverse. All of those venues have socially responsible gaming programs in place. We work hand in hand with people at the lottery in trying to identify and work with that small number of people who do have a problem with gaming. All of those programs would continue to be in place. If your question is not just about our proposal but about just opening the state up for putting gaming everywhere, then I think you’d get a different answer. And the answer is: There could be a substantial downside if you do that. TC: What could stop this from moving forward in New York? JF: I fully anticipate that our proposal will be vigorously opposed by people from Atlantic City, from Connecticut, from Pennsylvania, perhaps even Massachusetts now that they’ve passed their statute. I expect it to be opposed by the current Native American facilities. And frankly, I would not be surprised if we receive opposition from Las Vegas interests. All of those are very substantial groups with lots of money and a real interest in seeing to it that New Yorkers continue to spend their gaming money in their facilities rather than keeping it at home in New York, where it supports New York schools and farms. I think we will have all kinds of ginned-up opposition to it from primarily out-of-state groups, and probably

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from some parts of the Native American tribal gaming groups. Having said that, I think that New York’s legislators and New York’s citizens are smart enough to realize that this proposal is very good for New York. So I think we will be successful. TC: Has a proposal like this gotten to a public referendum? JF: I don’t know about ever, but the closest it has come in my lifetime is in the early 1990s. A proposed constitutional amendment achieved one passage but then failed to pass the Senate during the second legislative effort—because it has to pass two separately elected legislatures and then go on the ballot. We have to get it passed in 2012. In November of 2012 the new Legislature will be elected. We’ve got to pass it again in 2013. Then if we’re successful, that will go on the ballot for a public referendum in November of 2013. TC: Could lobbyists dictate state policy on gaming? JF: I’m concerned that the amount of money and the

out-of-state connections that oppose this may present a formidable obstacle. There are nine separate business entities that belong to the association, NYGA. To date, NYGA—we don’t have a lobbyist other than our executive director, Mike Wilton. Each of the other groups has lobbyists of their own, but that’s really a function of them doing business day-to-day in a very regulated environment, dealing with the [New York] Lottery and the Racing and Wagering Board. There’s nothing I’m aware of that’s extraordinary about it. TC: Would expanded casinos essentially be subsidizing horse racing? JF: In New York, a certain amount that comes into a casino through video lottery terminals, on average around 8 percent, goes to support purses, which is the horse-racing industry. And then one and a quarter percent goes to support the breeding industry. In a sense, the casinos are very supportive of racing and of the equine industry generally. TC: What’s the public benefit of that? JF: The major public benefit of that portion of money

that goes to racing and breeding, the major portion of that is spent in other areas of the state, in upstate areas where there are breeding farms and training facilities and the equine industry in the state. The last time I had someone quote a number to me...it supports tens of thousands of jobs, mostly agricultural. That’s where that money goes. So it’s real important in upstate New York. TC: What if someone wants to compete with one of the nine racinos?

www.nycapitolnews.com

JF: There’s a license out there now that you’re free

to go compete for. It’s one as yet unallocated license. The answer to that is really a public policy answer. Go take a look at Atlantic City. It’s really on its last legs. The casinos are feeding off one another and then they all fail, and they are all struggling in that direction in Atlantic City. If you look at any of the new states that have decided to do this, they are all much more along the New York model of spreading gaming out so that it’s available in all areas but not pervasive in any areas. TC: Does the Las Vegas model work? JF: Take a look at Las Vegas—no. Vegas worked fine

when nobody else had it. It doesn’t work so fine now. TC: Why not allow expansion of casinos through Native American lands? JF: Well, the answer is: If you look at the facts, Native American casinos in New York have not contributed one thin dime to the support of education or anything else for the last three years. If they were to decide to comply with their agreements at some point, they would pay a tax rate—or an exclusivity fee, is really what it is—of 25 percent. The racetrack casinos pay essentially 50 percent of their money directly to education; another 10 percent to the state to support various lottery operations and some track operational things also; and another 10 percent to that racing and breeding industry. So the racetrack casinos are working in a tax atmosphere of almost 70 percent. If you’re going to make an argument for Native American casinos, it’s not going to be an economic argument. TC: Do you gamble? JF: I’m happy to say that I do from time to time. I have two favorites. I do like to bet on horse racing, and I love to play blackjack. —Jon Lentz jlentz@nycapitolnews.com OCTOBER 24, 2011

A City Hall News Four-Part Series

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