Taxes, HMOs on Spitzer’s agenda
By ALEX PHILIPPIDIS

Silda and Eliot Spitzer.


Everything state government does, Eliot Spitzer told lawmakers last week, must promote Albany reform as well as “revitalize our economy and lead New York into a new era of opportunity and prosperity.”

Business advocates and state government observers predict Spitzer’s words will be matched with some deeds on many of the issues that matter to business, albeit not the total overhaul of Albany suggested by the campaign slogan.

Spitzer comes into office with the state seemingly in better fiscal shape than expected a year ago.

True, the state faces a $2.9 billion shortfall over the next two years, but that’s half the gap Pataki faced entering office, and that could shrink further this year. Wall Street bonuses and the office sales market boom have filled state coffers, while health-care costs have slowed thanks to the federal Medicare Part D program. And the state Court of Appeals has set $1.93 billion -- a much lower figure than many expected -- as the cost of the “sound basic education” Albany will have to pay in coming years.

“It’s going to be harder for him (Spitzer) to push the Legislature to make tough decisions because they tend to react better when there is a crisis,” said E.J. McMahon, director of the Empire Center for New York State Policy, a project of the Manhattan Institute.

“He’s going to have to do a superb job of really communicating why reforms are needed, assuming that Spitzer really wants to restrain growth in the budget and put the state’s finances on a more stable long-term basis,” McMahon said. “We can’t sustain spending at the level we’ve been doing.”

Yet Spitzer has already promised to spend more for schools than the minimum required under the court case, brought by the Campaign for Fiscal Equity (CFE). He has also promised a three-year, $6 billion tax cut that would increase the STAR property-tax rebates for households earning up to $235,000 a year. Until now, STAR has failed at its purpose of easing the tax burden for property owners due to runaway spending by school districts.

“Between Spitzer’s promise to increase STAR, the school establishment’s chronic desire to get aid increases at roughly triple the rate of inflation, and the CFE case, which Spitzer seems determined to outdo, we have a very well-funded education sector that we’re about to add even more money to,” McMahon said.

Trudi Renwick, senior economist with the labor-funded Fiscal Policy Institute in upstate Latham, said her group will press Spitzer to enact reforms proposed in its “One New York: An Agenda for Shared Prosperity” policy paper. The agenda includes:

+ Steering economic development benefits to companies that pay above-minimum wages, increase the skills of their workers, and meet job and economic activity targets enforced by state government.

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Increased revenue sharing by Albany with local governments.

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More job- and skill-development programs by the state.

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Shifting the tax burden away from middle-income households.

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Boosting the depressed upstate economy, in part by requiring that mass-transit equipment be manufactured in that region.

“It’s certainly not a plan for the first 100 days, or even for the first 1,000 days,” Renwick said. “It’s really trying to figure out, where does New York want to be, and what kind of investments can the government make to move us in that direction.”

The state’s workers’ compensation system is one area where Spitzer’s reform campaign is likely to enjoy its first fruits. Business advocates have long sought to contain system costs by setting a time limit on the now-indefinite benefits paid out to workers compensated for “permanent partial” disabilities.

Currently, the state pays out these benefits for the remainder of an injured worker’s life. In 2004 and 2005, Spitzer’s predecessor George E. Pataki called for a 10-year limit on permanent partial payments -- a move he projected would save employers $850 million, or 15 percent of workers’ comp costs.

Michael V. Barrett, legislative representative for the Independent Insurance Agents and Brokers of New York (IIABNY), noted that Spitzer pushed for a workers’ comp solution by meeting jointly with leaders of two groups long at odds over the issue: New York State AFL-CIO president Denis Hughes and Kenneth Adams, the new president and chief executive officer of the state’s largest business group, The Business Council of New York State Inc.

A week after the Nov. 9 meeting with Hughes and Adams, Spitzer named both to his transition advisory committee on labor and work force development. Those moves have raised optimism that Spitzer will broker a workers’ comp reform plan agreeable to business and labor interests.

Hughes and his group have resisted the time limit on permanent partial benefits and have called for raising the maximum weekly benefit well above the current $400 per week set in 1992. In recent years, Pataki offered to raise that maximum to $500 per week, an increase the AFL-CIO says still leaves workers well behind inflation.

Wick’s law change?

A dialogue between business and labor interests will be essential if Spitzer is to fulfill promises to reform other laws that have long chilled the state’s business climate -- such as the Wicks Law requiring separate general, electrical, plumbing and HVAC contractors for public construction projects costing more than $50,000.

Spitzer has said he favors raising the minimum value of contracts subject to Wicks, but has not offered a figure.

“I think we’ll get relief on the Wicks law. That will have a favorable impact on property taxes for local school districts,” said Paul Vitale, vice president for government and community relations with The Business Council of Westchester.

Less certain, he said, is whether Spitzer will push reform in the state’s liability law. Section 240/241 of state labor law imposes full liability on contractors even if they are only partially responsible for an on-the-job accident. Assembly Speaker Sheldon Silver, D-Manhattan, has so far sided with labor leaders who oppose any change.

“That’s an issue where we can see the dynamics of the relationship between the speaker and the governor. We’ll see how quickly he wants to push it or if he pushes it at all,” Vitale said.

The Business Council, Vitale said, will join other business groups statewide in pressing for expanding energy availability and containing its price, in part through renewal of the Article X power-plant siting law that expired in 2002. Other priorities: Promoting high-deductible health savings accounts to contain business health-care cost, and securing support from Spitzer and lawmakers to rebuild the Tappan Zee Bridge linking Rockland and Westchester counties with a rail component stretching from Suffern east to Port Chester.

“Given the huge mandate that Spitzer came in with, and his background as an attorney general and reformer, he’s really beholden to no one and he’s going to have a freer hand than his predecessors have had to forge change in Albany,” Vitale said.

HMO reform: round 2

Another issue likely to see action by the Legislature is reform of some practices by health maintenance organizations or HMOs.

Newburgh-based Northern Metropolitan Hospital Association -- which represents health-care providers in seven counties, including Dutchess, Orange, Putnam, Rockland, and Ulster -- last year joined a coalition of advocates for doctors, hospitals and business groups that successfully navigated three reform measures through both houses of the state Legislature to a signature by Pataki.

The measures require a single coding standard for all HMOs in the state, a two-year rather than six-year time limit for HMOs to challenge claims and a 90-day deadline for HMOs to accept the credentials of new doctors. Business and medical groups blame those and other practices with skyrocketing insurance premium costs of recent years.

NorMet joined the coalition within months of its formation by the Westchester County Association in White Plains. County Association president William M. Mooney Jr. says the coalition will press for additional HMO reforms, including:

+ Scheduling state hearings whenever HMOs want to raise premiums above 5 percent.

+ Requiring HMOs pay “community reinvestment” subsidies -- akin to those required of banks -- to the state’s hospitals.

+ Raising Medicaid reimbursements to levels paid out by Connecticut and New Jersey.

HMOs have resisted those moves, arguing they will hinder the ability of insurers to contain costs for businesses and their employees by saddling them with more regulatory red tape.