The October 24, 2011 Issue of The Capitol

WWW.NYCAPITOLNEWS.COMVOL. 4, NO. 16 OCTOBER 24, 2011

County executive races across the state heat up.

Page 6

James Featherstonhaugh doubles down on gambling.

Page 27

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

Page 4

How unhealthy relationships between Albany’s lawmakers and the

health-care industry hurt New York pg.8

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www.nycapitolnews.comwww.nycapitolnews.com THE CAPITOL OCTOBER 24, 2011 32 OCTOBER 24, 2011 THE CAPITOL

When 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, 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 develop-ment, 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

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 fi lers 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

basis of belief is a tense battle. There’s no middle ground when fundamental princi-ples 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

UPFRONT

24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14

M T W Th F S Su M T W Th F S Su M T W Th F S Su M

The Month Ahead (Oct. 24–Nov. 14)

Sen. Chuck Schumer and Rep. Kathy Hochul attend

Eleanor’s Legacy fall luncheon at Grand Hyatt

Faith In Millionaires

Albany lobbyist James Featherstonhaugh’s

birthday

DEC public hearing on hydrofracking, Dansville

Oct. 16

Rep. José Serrano’s birthday

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

Rep. Maurice Hinchey’s birthday

State Sen. Tony Avella’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

2005 2006 2007 2008 2009 2010 2011

By The Numbers1,400

1,300

1,200

1,100

1,000

900

800

700

600

500

Source: United States Department of AgricultureAll 2011 fi gures are forecasts

In billio

n po

unds

990

12501310

1250

1380

1270 1250

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

Apple Harvest Time in New York

took a toll on agriculture across New Yorktook a toll on agriculture across New Yorktook a toll on agriculture across New Yorktook a toll on agriculture across New Yorktook a toll on agriculture across New Yorktook a toll on agriculture across New York

Adam Lisberg


EDITORIALEditor: Adam [email protected] Editor: Andrew J. [email protected]: Chris Bragg [email protected] Nahmias [email protected] Lentz [email protected] Editor: Andrew SchwartzIntern: Michael Mandelkern

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BY LAURA NAHMIAS

Albany’s legislators may be at an all-time low in statewide approval ratings, but the state

government’s seasonal “Haunted Capitol” tours have never been more popular.

For about a decade, the Offi ce of General Services has led twice-daily tours of the Capitol building’s spookiest sites. (Insert your own joke here about the frightening specter of fi scal collapse—or

lobbyists.) Last year and this year, the tour has completely sold out, said Stuart Lehman, head of the OGS Education Department and de facto tour captain.

“There’s really been a resurgence, a great interest in things that are haunted,” Lehman said, likening the Capitol tour to a ghost walk in cities like Boston, Savannah or New Orleans.

The Capitol, with its Gothic Revival architecture, gargoyles, heavy metals and history as a place built amid the fi lthy

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 fl oor in his dark waistcoat with brass buttons. His ghost doesn’t realize he died in the famous Capitol fi re of 1911, Lehman says.

The tour winds around to the “million-dollar stair-

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 fl oor, 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 Para-normal Society, “and do not have knowl-edge of any offi cial investigations taking place there.”

[email protected] ghost is said to haunt the fourth fl oor of the Capitol ever since perishing in the 1911 fi re.

The Capitol, After DarkGothic architecture and an undead night watchman make New York’s Capitol a popular Halloween destination

What’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 outfi ts 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 semi-homemade. (There’s no word what she has up her sleeve for the governor, either.)

EDITORIAL Adam Lisberg

ADVERTISINGAssociate Publishers: Jim Katocin,

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to the “million-dollar stair- has come on the tour,” he said. [email protected] ghost is said to haunt the fourth fl oor of the Capitol

Costume Party

Courtesy The Food Network

www.nycapitolnews.comwww.nycapitolnews.com THE CAPITOL OCTOBER 24, 2011 PB4 OCTOBER 24, 2011 THE CAPITOL

By Jon Lentz

Gov. 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 strin-gent regulations while also emphasizing the economic benefits of gas drilling as it speeds up the state’s drawn-out review process.

Schneiderman, who ran for attorney general with the strong backing of the environmental community,

has raised red flags on drilling, from suing the federal government over regional drilling regulations to subpoe-naing 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 Schnei-derman to push back if drilling is allowed.

“I do believe that Schneiderman and other elected offi-cials 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 Envi-ronmental Conservation’s drilling regulations if environ-mentalists challenge them in court, which several groups have promised to do.

“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. Schnei-derman, who as attorney general doesn’t have to weigh things like budget shortfalls, can focus on limiting any adverse effects of drilling.

“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 elimi-nate 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 encour-aging 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

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 delib-erate 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

Action, said that she would expect some friction between Schneiderman and Cuomo if gas companies start hydro-fracking.

“If the governor decides to move forward with this in blatant disregard for the overwhelming scientific evidence and the clear and incontrovertible indica-tions 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 Schneider-man’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.”

[email protected]

FrACk OFFCuomo and Schneiderman pushing in different directions on gas drilling

“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

www.nycapitolnews.comwww.nycapitolnews.com THE CAPITOL OCTOBER 24, 2011 5PB OCTOBER 24, 2011 THE CAPITOL

By Jon Lentz

In 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 gerryman-dering and made other moves designed to preserve their narrow majority.

But under the radar, Assembly Demo-crats are pushing to keep control over the process too.

Assemblyman John McEneny, Demo-cratic 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 commis-sion 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 indepen-dent 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 prob-ably 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.

“Right now, each legislator plays a signif-icant 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 redis-tricting 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 skep-tical 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.”

[email protected]

LOCAL 1000 AFSCME, AFL-CIODANNY DONOHUE, PRESIDENT

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


By RoBeRt HaRding

This 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

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

CounTy Lines

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 promi-nent 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 Assem-blyman 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 chal-lenge, 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 presi-dential, 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.”

[email protected]

Courtsey of Collins for Our Future

Executive DecisionLevy 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 inves-tigation 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,

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 state-controlled 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

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 refer-endum 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 [email protected]

Mark Poloncarz Chris Collins Courtsey of Poloncarz for Erie County


BY RICHARD BRODSKY

Occupy Wall Street is a phenomenon so new, so unlike any previous social uprising, so

successful, so impervious to conventional forces that it defi es 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, intro-ducing 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 fi sh 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 space of Zuccotti Park, and replicating in thousands of communities across the world. It’s going through the same stages of development of the last 150 years of mass politics: Ontogeny recapitulates phylogeny.

Forty years ago lots of folks, myself included, were part of an effective, hierar-chical set of movements that changed the world. The worst thing we can do now is compare what’s going on now to what went on then. Old people look for leaders, spokespeople, agendas and demands. They don’t exist.

The contradictions are obvious. Zuccotti Park palpi-tates and pulses with drums and music as people move sinuously through the crowded aisles and trees of a single city block. It is clean; it is messy. It is rude; it is conscientiously polite. It is astoundingly low-tech and astound-ingly high-tech. It uses the services of the same large corporations it condemns.

There’s no hierarchy, no group that shapes or leads. Old people on the left cluck at the lack of a central committee or a list of things OWS wants to get done. Old people on the right describe them as freaks and hippies, or simply lie about it.

Visit the nightly general assembly that governs OWS through a series of audi-ence repetitions of each speaker’s words, hand gestures, good-humored patience, and its own kind of consensus building, and you’ll begin to understand how OWS is developing its own methods and values.

Things were progressing along these lines when Mayor Michael Bloomberg gave the movement new momentum. He

decided to move OWS out of Zuccotti Park, ostensibly to clean it up, but really to crush the nerve center. The mayor said he was responding to a request from Brookfi eld Prop-erties, the owner of the park, but City Hall was calling the shots.

Real pressure came down from pols and some of the brighter lights among the city’s elite. But the threat coalesced OWS, and brought 1,000 people to a general assembly meeting who decided to resist any attempts by the police to remove them. The mayor backed down, and OWS had a real and easily understood political victory.

Nobody knows what happens next. Demonstrations will continue; the general assembly will begin to grope toward a governing structure; Brookfi eld and the

mayor will look for someone to cut a deal with; all over the world people will watch and listen and nod their approval; and even-tually the new consciousness will penetrate the political classes, which will turn it into a series of fi ghts about policies and laws.

It is by no means sure that this genera-tional 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 fi nance 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 Legisla-ture, my contribution to the world revolu-tion 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.

BY JOHN FASO

The 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 Repub-licans 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 offi ce almost four years ago is unlikely to repeat itself next year.

The Democrat base is naturally

unsettled by the state of the economy and persistently weak employment pros-pects for millions of Americans. History shows—whether it be Martin Van Buren, Herbert Hoover or Jimmy Carter—that incumbent presidents are unlikely to win with the economic numbers so dismal. History also indicates that the party occupying the White House will also suffer losses at the congressional and local levels.

In order for Obama to have a chance to win, he needs to have an overwhelming fi nancial advantage and an energized base. He has far exceeded his prospective GOP chal-lengers in the money race for now, but once the Republicans decide upon an opponent—almost sure to be Mitt Romney—the fi nancial disparity will narrow.

But what about the enthusiasm gap among the base? Obama is trying to energize his base by playing the class-warfare card. His constant talk of taxing “millionaires and billionaires,” oil and insurance-company demagoguery, and economically irrelevant calls to change tax treatment for leased private aircraft, represent an effort to prove that he is a

fi ghter against the rich and the privileged.The risk of this strategy is that Demo-

crats risk alienating independent centrist voters in the critical swing states. Aston-ishingly, Obama and the Democrats have embraced the OWS movement despite clear indications that many involved are part

of the lunatic-left fringe who aren’t even willing to partici-pate in the electoral process.

Pollster Doug Schoen, writing in The Wall Street Journal, revealed shocking details about the political ideology of participants in the movement. For instance, one-third of respondents said they

support violence to advance their agenda. They are virtually unanimous in their “opposition to free-market capitalism and support for radical redistribution of wealth, intense regulation of the private sector, and protectionist policies to keep American jobs from going overseas.”

This philosophy may be fashionable in various academic lounges and low-rent coffee houses, but it does not represent a prospective governing majority in the United States. We are not yet Argentina or Greece, nor are we likely to become so.

None of this is meant to discount the genuine fear felt by many on both the left

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 ineffi cient and riddled with loopholes, exemptions and prefer-ences 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 offi ce of the national law fi rm Manatt, Phelps & Phillips, LLP.

Occupy Wall Street Is A Boon For Republicans

John Faso

Fringe behind movement will hurt Obama among mainstream

PERSPECTIVES

Richard Brodsky

Standing On The Sidelines Of The Frontline


BY LAURA NAHMIAS

BAD MEDICINEHow unhealthy relationships between Albany’s lawmakers

and the health-care industry hurt New York

Andrew Schwartz


In 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 fl ounder special and the usual 24-hour breakfast fare.

It is not known whether Seminerio had bacon and eggs during his conver-sations 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

everyone else was feasting on a seem-ingly inexhaustible supply of federal health funding and Medicaid cash?

“What the [expletive] does it mean [to be an] elected offi cial?” he asked McLaughlin. “It doesn’t mean [expletive].”

What Seminerio didn’t realize was that McLaughlin, facing indictment on a series of corruption charges, was wearing a wire.

Over the past two decades, as health care grew in the state and legislators deregulated parts of the industry, the calculus shifted to a free-market free-for-all, where some big hospitals were 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 Legisla-ture,” said Assemblyman Dick Gottfried, who has chaired the Health Committee for 24 years. “There were often adamant and sometimes bitter divisions within the hospital community about where money was going to go.”

In 2008 and 2009, Seminerio was indicted and imprisoned on charges of honest-services theft for his role in a scam that aided a series of Brooklyn and Queens hospitals in exchange for annual payments. He died in prison last year, but the fallout from his trial and McLaughlin’s turn as a star witness continues.

Former MediSys CEO David Rosen was convicted on charges related to a bribery scheme this September. Assemblyman William Boyland Jr.’s trial begins on November 1, followed by State Sen. Carl Kruger’s trial in January.

On the same day Boyland’s trial begins, a work group for Gov. Andrew Cuomo’s Medicaid Redesign Task Force will recom-mend how to restructure ailing Brooklyn hospitals. Some worry more funding will be cut or more hospitals may be closed.

The fi rst work group, held in July, had all the tension of a game of Russian

roulette, as hospital administrators pleaded for the continued existence of their facilities, arguing that the negative effects of a shuttered hospital would ripple out into their respective communi-ties.

The Boyland trial and the hospital tribunal are not unrelated.

Lesser hospitals courted favor in Albany to better their chances at survival. Boyland, for example, stands accused

of accepting a no-show job for $40,000 a year in exchange for his help securing funding for MediSys hospitals. He lobbied Assembly Speaker Sheldon Silver to spare Jamaica Hospital’s Medicaid funding from cuts. He petitioned for discretionary funds to help the hospital, which served a poor community, avoid the Legislature’s annual budget dance—what one hospital

executive referred to as a “frenetic game of musical chairs.”

And in the end, like Seminerio, he

may end up in jail for his alleged crimes.

The health sector in New York has done exceedingly well over the past two decades. It was the

fastest- and largest-growing sector of the state’s economy from 1990 to 2009—not that you would know it from reading news coverage of the industry, where reporting was often molded to fi t industry experts’ dire predictions of collapse should cuts befall them.

In 1988, for instance, “scary” was the

word former United Hospital Fund Presi-dent 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

how to pay for it.New York State’s health-sector growth

outpaced the nation’s. The state has the second-highest hospitalization costs per patient in the entire country but ranks 31st in preventable hospitalizations. It ranks eighth in public health funding and 25th in overall health, according to statis-tics from the United Health Foundation.

Over the past two decades, the Legisla-ture has made several half hearted attempts to right-size the Medicaid system. Recent gover-nors Eliot Spitzer and David Paterson were attacked politically for attempts to cut the system. When Gov. George Pataki took offi ce in 1995, for instance, the state’s Medicaid spending had hit $22 billion, which seemed outrageous. Last year it had risen to $52 billion, more than a third of the state’s overall budget.

Lawmakers point to several missteps. Shortly after Pataki took offi ce in 1995,

he pledged to end a program, in exis-tence since the early ’80s, that regulated payments for inpatient care by third-party

payers to hospitals. Surcharges were added that funded pools for indigent care and to pay teaching hospitals for physi-cian training. The program set a fl oor under prices to protect smaller hospitals, and limited the market bargaining clout of larger, wealthier hospitals and payers.

For years, the legislation, called New York Prospec-tive Hospital Reim-bursement Method-ology, was subject to

contentious budget arguments, but when Pataki came into offi ce, he decided he would not sign the bill again.

“Some of the hospital community felt that in a free-market world, they could do better,” Gottfried said. “They 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.”

Pataki’s decision to kill the program was guided in part by ideology, but also by his close relationships with some of the people

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

225,000number of health-care jobs added in New York between 1990 and 2009*

29 percentincrease in New York State health-care jobs between 1990 and 2009*

1 percentincrease in New York State jobs in all

other sectors between 1990 and 2009*

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

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who would benefi t 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 health-care 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 offi cer 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 confer-ence to take a call from Seminerio on

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 Assem-blyman Daniel Feldman.

By 1996 Seminerio had begun outside work as a consultant to the Neighborhood Health Providers, run by a woman named Arlene Pedone. Pedone served as Semi-nerio’s campaign treasurer a year earlier. Their relationship soured by 1998, and a year later Seminerio offi cially registered a sham consulting fi rm, Marc Consul-tants, that he set up to receive payments in the broad-based bribery scheme he was indicted for in 2008.

He may have been found guilty by the court, but there are many indications he was playing by the Albany rules. A recorded phone conversation between Seminerio and Rosen, the former MediSys CEO, features the assemblyman bragging that he had convinced Assembly Speaker Sheldon Silver not to cut MediSys hospi-tals’ Medicaid in the state budget.

Seminerio boasted about his relationship with former Senate Majority Leader Joe Bruno, a Republican who was also close with 1199’s Dennis Rivera.

“Let me tell you something, you know, and I can tell it to you,” he told Rosen. “I walk into Bruno’s offi ce like I walk into your offi ce…and I talk to Bruno like I talk to you.… That kind of relationship you can’t buy for a million dollars.”

The easy interplay between health interests and lawmakers was so rampant, with billions of dollars in circulation, that Seminerio used Albany’s lobbying culture as part of his defense in his criminal trial. He was not aware that receiving money for his efforts on behalf of the hospitals was a crime, his lawyer argued. The court disagreed.

At a recent meeting of the Medicaid Redesign Task Force, Commis-sion on the Public’s Health System director Judy Wessler spoke about the continued infl uence of those interests, in the form of the Healthcare Educa-tion Project, a joint coalition of the Greater New York Hospital Associa-tion and 1199 SEIU.

“They pool resources. They have an extraordinary amount of money,” she said. “It short-circuits the appropriate public channels.”

The Healthcare Education Project took out ads supporting the Medicaid Redesign Task Force’s cuts because the organizations fared well in the cutting process, Wessler added.

A spokeswoman for 1199 SEIU did not respond to a request for comment. For its part, the Greater

New York Hospital Association said the organization has no effect on what the Legislature chooses to do or not do.

“We have no control over legislative decisions,” wrote GNYHA spokesman Brian Conway. “We simply present our case in the court of public opinion.”

The coda to 10 years of explosive growth in the health sector under the Pataki administration was the

Commission on Healthcare Facilities in the 21st Century, also known as the Berger Commission, which addressed New York State’s glut of hospital beds.

Chairman Stephen Berger said the

excess was partially responsible for the state’s enormous health costs. The commission’s fi nal report in 2006 led to the mergers or closures of dozens of hospitals throughout the state, including Cabrini Medical Center and St. Vincent’s Hospital in Manhattan.“Part of the rationale was that it would be better to make thoughtful decisions rather than letting the dog-eat-dog jungle marketplace kill the weaker hospitals,” said Gottfried. “The only problem I have with that rationale is that…I think the results from the Berger Commission were largely the closing of hospitals that probably would have been the ones eaten alive by a market process.”

After a recent health-care forum, Berger conceded the commission’s plans had not gone as well as he had hoped. He said his commission was focused on distributing funding more evenly across the health-care system in order to give those distressed institutions a better chance of survival.

“I think that was correct, but it was only meant to be the fi rst step of a major overhaul,” he said. “Once the commission was done and some of its recommenda-tions were implemented, it stopped. That

was it. Everyone assumed we were done, and nobody read what we said or wanted to deal with what we said.”

Berger said hospitals built and spent too much in past decades, though state grant funds abetted much of their unchecked physical plant expansion over the past 20 years.

“Everything has been built up on a silo system,” Berger said. “You have large embedded costs sunk into physical plant,

and you have not made that into a fl exible, intelligent system.”

The growth didn’t happen overnight, and in the short term it was benefi cial to many in govern-ment who were supposed to regulate the health system.

Pataki’s fi rst health commissioner, Barbara DeBuono, may have had an incentive to benefi t hospitals’ bottom lines. In 1998, DeBuono, now the CEO at global health organization Orbis Interna-tional, signed off on a merger between Columbia Presbyterian and New York Hospital just months before taking a job at the newly merged hospital, where she earned a reported $300,000 salary.

In 1997 Pataki moved to transition the state’s entire health industry to managed care, a change that was supposed to cut

30 percentincrease in New York State home-health-

care jobs between 1990 and 2009*

7 percentdecrease in all other jobs outside

New York City between 1990 and 2009*

27 percentincrease in health-care jobs outside

New York City between 1990 and 2009*

“[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.”


costs at the state and federal level. But New York was the only state to negotiate an additional $1.8 billion federal-aid package to smooth the transition.

“Unlike a lot of states, we had to think about the conse-quences on the hospital industry,” DeBuono told The New York 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 comment.

The deregulation encouraged hospitals to merge. The hospitals that no big institution would absorb were closed. In spite of research suggesting health care should move toward a system of smaller providers, hospitals sought and received grant funding for expansions, new laboratories and specialty wings, which they believed would help their institutions remain competitive in the new market.

The entire system, although largely funded by

government money, was very lightly regulated. In 1999, after 1199 SEIU launched a campaign warning of widespread hospital closures if the state cut funding, Pataki, again backed by Seminerio, pushed a bill that would funnel all of the state’s tobacco settle-ment money back to Medicaid, which reimburses the bigger hospitals at a higher rate than the smaller ones, many of which serve poorer communities.

GNYHA balked at the notion the organization had made any decisions that benefited larger hospitals at the expense of smaller ones.

“The suggestion is beyond absurd and demon-strably false,” said GNYHA’s Conway. “GNYHA is as committed to the financial health of safety-net hospitals in vulnerable communities as any person or organization in existence.”

The top three industries that contribute to New York electeds’ campaign coffers are real estate interests, financial services and health care. Within Albany’s nexus of health-care lobbyists and legisla-tors, many privately acknowl-edge that, in exchange for the funds they need to be reelected, lawmakers have relaxed stan-dards that paid hospitals for performance, and have proven unequal to the task of actually cutting growth in health spending.

At the federal level, audits were few and far between. Of the more than 7,000 hospitals listed as nonprofit by the IRS, the Times reported that only 375 were audited between 1996 and 2006.

Berger is chairing a new commission to look at continuing problems in the Brooklyn health-care system. At a recent meeting, Berger sat glumly listening to a stream of health workers desperately begging for the preservation of “financially distressed hospitals” in their borough, including Interfaith Medical Center and Wyckoff Heights Medical Center.

Berger, who wore two sets of glasses on lanyards around his neck, fielded testimony from doctors, home-health workers and patients, as each suggested solutions to the health industry’s problems.

He said he didn’t know whether politicians could make the changes necessary to save the system.

“I don’t know what’s politically possible,” he said. “I can’t see around the corner, but I’ll tell you this:

Things that are not politically possible in certain times become politically possible when the [exple-

tive] hits the fan—which is a high-level description of We’re in big trouble. We’re going to have to rethink and redo almost every-thing.”

Then he added, “It’s going to be brutally painful.”

MediSys’ Rosen seemed to believe that hospitals survived by struggling upward. He pushed for Seminerio’s help, and eventually

Kruger’s as well, in his ultimate goal of acquiring two struggling Queens hospitals. According to the judge’s order read in his conviction, Rosen had “correctly understood that MediSys was fundamentally dependent on the vicissitudes of the New York State budgeting process.”

Rosen wanted his dog to eat the smaller ones, in order to avoid getting eaten himself.

In the health industry, feelings about Rosen range from revulsion to something almost like sympathy. He had broken the law, but had done it in the name of staying alive. Even the judge who convicted Rosen seemed to feel sympathy.

“This is a sad, even tragic case, as it reveals how a widely admired hospital administrator who dili-gently sought to better the health care of impover-ished communities nonetheless chose to entangle himself in the bribing of state legislators,” Manhattan Federal Court Judge Jed Rakoff wrote.

The choice to become a criminal was wrong, but the state had all but encouraged it.

Hospital executives now express optimism that future budget battles will be less rancorous than in the past, because the recession has dimmed expec-tations of growth. Some argue that Cuomo has masterfully worked the system by involving the big health-care organizations in spending cuts.

But the governor still bent to the state’s most powerful health interests in this year’s budget. Several recent stories in The Wall Street Journal suggest Medicaid cuts were made only after Cuomo promised 1199 SEIU a $50 million bailout of home-

health-worker insurance funds in exchange for the union’s imprimatur on the bill. A spokesman for the governor dismissed those claims as ludicrous, and suggested the reporter’s story was on par with a “conspiracy theory.” Still, the best-funded inter-ests may survive, even as smaller hospitals plunge further into fiscal problems.

Former Lt. Gov. Richard Ravitch marveled at the tangle of it all.

“We have evolved a kind of Rube Goldberg system to finance our institutions,” he said. “You sometimes get very perverse methods to ensure the survival of these hospitals.”

—With additional reporting by Michael Mandelkern

*Sources: New York Public Interest Research Group, Center for Health Workforce Studies, University of Albany School of Public Health

[email protected]

$8,037,850.67:amount given by donors identified as

being in the “health and mental hygiene” sector in 2010 state elections*

19 percentproportion of New York State acute-care hospitals that closed between

1995 and 2010*

The best-funded interests may survive, even as smaller hospitals plunge further into fiscal problems.

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

“These 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 communi-ties, sending an estimated 9,936 patients to the already over-taxed 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 occu-pancy 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 emer-gency 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 recom-mendations 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 reca-librate 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 insur-ance—a proposal that has been advanced in the Legisla-ture for years to no avail.

“While the frailty of some facilities may be extreme, you must break this cycle of physical and programmatic deterio-ration that threatens Brooklyn safety-net providers,” Klein-felter said emphatically. “To squander these ever-shrinking dollars on facilities that have alternative funding mecha-nisms 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


BY SUSAN ARBETTER

Superintendent Casey Barduhn seems uncomfortable. There is some throat clearing. After a

moment he rallies, saying he doesn’t want to discuss the so-called “gold parties” that have occasionally transformed his school district’s high school cafeteria into a swap meet. But he will, to make a point.

Last year, a sports booster club in his Mount Markham district asked permission to throw a few of those parties on school grounds. He had no idea what a gold party was at the time.

“We had to have quite a few conversations about this,” he recalled.

Barduhn learned the concept is simple. The public is invited to bring unwanted gold chains and mismatched earrings to sell to on-site gold representatives. At the end of the 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 offi cials across the state have been forced to reevaluate their check-books, sometimes resorting to unorth-odox methods to raise the necessary funds to pay for basic services. And with budget shortfalls predicted to get worse, school districts are complaining about the state’s education funding formula, while bracing for additional cuts.

The gold parties are perfectly legal, but Barduhn is aware of how unseemly they sound.

“The parties are a symptom of a much bigger problem,” he said. “Upstate rural districts are in a bind. They’re suffering from years of funding inequities and state aid reductions.”

Mount Markham encompasses 11 townships, over a 200 mile region of the Mohawk Valley, straddling four of the state’s poorest counties: Madison, Oneida, Otsego and Herkimer. It’s a district with a 60 percent free- and reduced-lunch population, which is one way the state measures poverty.

Another measure is the income-wealth ratio, which is created by a combination of income and property values. In a portion of the Foundation Aid formula, no district can receive

an additional state aid benefi t if it is “poorer” than 0.65. This deprives these districts of the additional aid they need because they are so “poor.”

“In effect, the state has placed a base-ment on how poor you can be,” Barduhn said.

His district’s ratio is at about 0.4, which is not uncommon in rural areas

across the state. In this way, Barduhn argues, the Foun-dation Aid formula moves toward greater inequity as state aid is either “saved” or redistributed to those “less poor.”

Recently the New York State Council of School Superintendents (NYSCOSS) sent a survey to school districts asking: “Which is of greater concern

to you, the new tax cap, or school aid cuts?”

Most school districts are about split down the middle. But looking exclusively

at rural superintendents, the results are telling: 90 percent of superintendents in rural communities say the loss of state aid is of far greater concern than the tax cap.

The reason, says Barduhn, is that rural districts are far more reliant on state aid.

“We lost $1.2 million in state aid over the past few years,” he says. “If we raised taxes by 2 percent this year, we’d see $110,000.”

These districts are so poor they won’t take the legal exemptions allowed under the new cap. Dr. Rick Timbs, executive director of the Statewide School Finance Consortium, calls this “being capped by circumstance.”

Residents expect no more than a 2 percent increase, so superintendents know in advance that asking for more than that will be a tough sell. And selling your budget under the new cap is a must for superintendents.

“Remember,” says Timbs, “If the budget fails twice, the levy is not allowed to increase at all.”

Neil O’Brien, superintendent of the Port Byron Central School District, char-acterizes this provision as punitive. Like

Barduhn, O’Brien is trying some nontra-ditional ways to keep his district afl oat.

“I have a class right now taking AP American History online because it’s no longer being taught by one of our teachers. That’s positive. But eventually we just keep cutting, and the cuts become more devastating as you go further into the process.”

A majority of the super-intendents surveyed by NYSCOSS reported that “their district’s budget this year had a negative impact on instruction in core subjects.”

In response, a spokes-person for Gov. Andrew Cuomo issued the following statement: “The schools and school districts chose to make these reductions in the classroom rather than dip into their reserves, cut back on the bureaucracy, or reduce the growing number of adminis-trators.”

Barduhn fi red back: “The governor said, ‘Use your fund balance.’ We did. And we still had to lay off teachers. We used our fund balance and we still had a tax increase of over 5 percent. Eventually you have to ask, ‘What do you do when you’re out of money?’ ”

It’s a question Bob Lowry is forced to think about a lot lately. As head of NYSCOSS, he responds by telling districts there is no legal mechanism for 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 fi nding answers, District Superintendent Mark Vivacqua of the Herkimer-Fulton-Hamilton-Otsego BOCES says that the Cuomo administra-tion hasn’t been helpful.

“One of the things that is not helping us right now is the intellectual dishon-esty going on,” Vivacqua said. “You know, where they take these esoteric data and misapply them and then get the public angry about schools wasting money.”

Vivacqua brings up the elephant in the room.

“You know, Fire Island, down in Long Island, can spend $96,000 per student, and they do,” he said. “That’s fi ne. I don’t want to take their money away. But it really gets down to: Does the state want to meet its constitutional obligation to provide a sound basic education for every child in the state?”

“At this point, we don’t know whether in the next few years our schools will exist,” he added. “And if they do, if we will be able to provide the basics to get our students a diploma,” he said. “And we’re not talking about ‘Can we have an orchestra program?’ ”

After last year’s state budget cuts, Mount Markham’s Barduhn knew he would have to eliminate

the $40,000 junior varsity sports program; it included football, fi eld hockey and soccer for 9th and 10th graders. But before he could implement the cuts, 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. “These are all wonderful people and they do great work, but the reality is that for the most part we are tapping into the same community that is already paying school taxes.”

Mount Markham’s budget troubles will start all over again next year.

“So this is what we’ve come to?” asks Barduhn, no longer hesitant, just frus-trated. “To keep programs alive in rural schools, we sell gold?”

The Golden RuleThe Golden Rule

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

For rural school districts in dire straits, budget cuts lead to unorthodox fund-raising ideas

Susan Arbetter reports from the Capitol in Albany for Central New York’s PBS station, WCNY in Syra-cuse. She hosts a daily live radio show, “The Capitol Pressroom,” and produces The Capitol Report, broadcast daily on television across New York.

BEYOND THE CAPITOL

Casey Barduhn Mark Vivacqua


BY MICHAEL BENJAMIN

This month’s frenzy over the racially offensive name of Texas Gov. Rick Perry’s

hunting camp amused me. No, we can’t be a postracial society if we avoid honest discussions of race, race relations and historic slurs. But other racial discussions are more important—and we have avoided them for too long.

Our willingness to sweep the word “nigger” away in polite conversation, even as young black men shout it at each other on every corner, greatly contrasts with the ways race still makes a difference in New York.

Those same black men are more likely to be stopped and frisked, more likely to be arrested for possessing small amounts of marijuana, more likely to end up with criminal records, and more likely to fi nd themselves shut out of opportunity, in part because of the disparate impact of New York State laws.

When I served in the Legisla-ture, my colleagues largely viewed 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.

Despite data showing that seemingly race-neutral statutes are applied differently when black defendants are brought before a predomi-nantly 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 rela-tions in the process.

Under the Rockefeller drug laws, minority group drug dealers and users were imprisoned in higher numbers and given longer sentences than similarly situated white offenders. And too often, black defendants were wrongly convicted based on sloppy

police work, false confessions and incompetent counsel.

Years of effort failed to change those laws until New York elected a black governor and a minority-led,

Democrat-controlled State Senate. They fi nally achieved those reforms, as well as a redistricting law that counts incarcerated black and other minority prisoners in their home districts instead of predominantly white

rural upstate communities.Contrast that with how quickly

the Department of Environmental Conservation moved this summer to change the little-known names of two roads, a stream and a lake when researchers discovered state regulations included the word “Nigger” in their names.

Too many of us accept white-wash as a solution, instead of confronting the unresolved issues of race and racism that lie beneath our postracial veneer. The racial components behind too-high rates of black male incarceration and unemployment, for example, remain unaddressed.

Yet it is easier to point fi ngers

at those who mar that veneer with a racial indiscretion. The media’s inability to say or print the infa-mous “N-word” is absurd: Our discomfort with this word has even led to a sanitized version of Mark Twain’s The Adventures of Huckleberry Finn, a mighty work that was meant to prick our racial sensibilities.

Long before today’s rap music and culture, Huck Finn liberated me from the oppression signifi ed by the term. Nigger Jim was a good man who would not and could not be defi ned by a name. And neither should black Americans today.

Like Mark Twain, we should prick our racial sensibilities and perceptions. We should engage each other in a frank discussion of race relations that goes beyond the short-lived ire at outdated place names and shibboleths. Unless we honestly confront the enduring signifi cance of race and the role played by our different perceptions, we will bequeath this unresolved burden to our grandchildren.

Michael Benjamin retired from the Assembly last year after eight years representing a Bronx district.

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

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By Andrew J. HAwkins

Earlier this year, Jay McHarg, president of the Rochester-based 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 produc-tion of custom-made packing mate-rial. 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 busi-ness 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 manu-factures a Styrofoam-like packing substance used to ship specialty prod-ucts like pharmaceuticals, is not alone in this sentiment. The complaints from across the state about overregu-lation 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 posi-tion. The state was once a manufac-

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,

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-

erty taxes. But many want his admin-istration to do more to help struggling businesses.

“We have to reduce taxes,” said Todd Tranum, president and CEO of the Chautauqua County Chamber of

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 competitive-ness 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

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 Incor-porated 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 manufac-turers 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 least-competitive 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 practi-cally 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.”

[email protected]

ISSUESPOTLIGHT New York Manufacturing

Manufacturing DissentFor manufacturers in New York, a complex and expensive climate

“Our argument is that if you had this tax three years ago, maybe we wouldn’t be here.”

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.

Cou

rtesy

of A

mer

ican

Aer

ogel


Kenneth AdAmsPresident and CEO, Empire State Development Corporation

Q: What is the state’s manufacturing future?

Kenneth Adams: There’s a great history of manu-facturing in the state. What you see today are manufacturers whose competitive advantage is in being a technology-oriented 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 manu-facturing 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.

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

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

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 aero-space 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. Manufac-turers pay very high workers’ comp rates. Workers’ comp reform is a fundamental

step toward state competitiveness. When you get into manufacturing, they experi-ence much higher rates.

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?

KA: We have to make sure we do every-thing 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 reputa-tion as a high-cost state with many regula-tions, 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.

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 university- based research and a skilled labor work-force. 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.

EXPERT ROUNDTABLE New York Manufacturing

Robin schimmingeR Chairman, Assembly Economic Development Committee


Rs: New York is blessed with an excellent workforce with the appropriate skills for modern-day manufacturing. However, the busi-ness 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,

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.

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 favor-able jurisdictions. Over time, the sales

of New York manufactured products fall short of those products manufac-tured in more hospitable business- climate jurisdictions. So we must move toward competitiveness, first and fore-most. 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: What other policy initiatives should the administration revisit to make sure manufacturing remains a vital sector in the state?

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

manufacturers innovate, be it the Centers of Excellence program, or perhaps initia-tives that come from regional economic development councils.

Anything that adds costs to manufac-turing 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.

Jim AlesiChairman, Senate Economic Development Committee


Jim Alesi: The manu-facturing industry has faced very difficult times over the past several years. But manu-facturing remains an extremely impor-tant 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.

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

JA: The manufacturing 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: What are ideas out there that

are being promoted to jump-start manufacturing?

JA: We need to build on last session’s legislative successes and look for ways to reduce mandates placed on manufac-turers. For example, this year the Senate Republicans advocated repealing the payroll-mobility tax, which negatively impacts all employers, including manu-facturers, in the Metropolitan Commuter Transportation District. The state must repeal this jobs-destroying tax. The Senate Republicans also advanced accel-erating 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

to partner with businesses and manufac-turers to grow our economy.

Q: What does the new face of man-ufacturing look like in New York?

JA: There are parts of New York that have done very well in high-tech manu-facturing, and new opportunities continue to develop, as we can see with the recent announcement regarding the next- generation computer-chip technology. New York still has many smaller low-tech manu-facturers. 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


The New Assembly liNe

No more smokestacks—New York’s manufacturing is high-tech, and hurting for laborBy Andrew J. HAwkins

Once 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

highly specialized, highly trained dwarf—smaller in workforce size, but more effi-cient 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 Tech-nology Assistance Corporation, says that while job losses continue to hit larger compa-nies with over 500 employees, there has been an explosion of smaller-scale produc-tion. 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 nano-tech 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 manu-facturers 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 manufac-turing fields, including advanced and lean manufacturing with cheaper, more effi-cient 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.”

— [email protected]

“Manufacturing today is not your grandfather’s manufacturing.”

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 low-cost 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

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.

Seth PinSkyPresident and CEO, New York City Economic Development Corporation

Q: Is today’s manufacturing industry sustainable?

Seth Pinsky: It includes things like wholesale, distri-bution 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 advan-tage for the company to be in New York, because it requires a specialized work-force. Many have already moved there. Manufacturing is growing because of that. There is promise in food manu-facturing. 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 busi-nesses 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 indi-viduals to find.

We put together, about six months ago, a set of 22 initiatives that will invest about

$100 million into the manufac-turing 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 manufac-turing; 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, busi-nesses 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 Tech-nology 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 immi-grants are still able to come to New York and bring their skills with them. There are a whole host of state business- condition 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 indus-tries 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.


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

THE PROGRAMSLinked Deposit

This ESDC-sponsored program is offered to businesses to help “modernize their equipment and/or expand their facilities for productivity growth or to intro-duce 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 specifi cally toward manufacturers, the program is called a “hidden gem” by busi-ness advocates.

Excelsior Jobs ProgramOne 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 fi nd the benefi ts 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.

Pollution Prevention InstituteThis statewide technology transfer and research center is located in Roch-

ester, funded by the Department of Environmental Conservation, and focused on helping businesses and manufacturers become “better environmental stew-ards” 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 effi cient use of raw materials. Despite massive cuts at the DEC, advocates have their fi ngers crossed the state will continue to fund the project. Dr. Anahita Williamson, the institute’s director, recalled a recent consul-tation 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.

THE ISSUESEnergy costs

Energy policy and prices have a disproportionate effect on the manufac-turing 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 elec-tricity 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 busi-nesses 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.

TaxesThe 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 Qualifi ed Emerging Tech-nology Company tax credits, which are set to expire in December. This tax credit is said to encourage manufacturers to include new technology and inno-vative 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.

WorkforceIn New York there are many high-paid manufacturing jobs available, but

employers routinely lack the skilled workers to fi ll 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 fi ll them.”

THE PLAYERS The Administration

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 regu-lated 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.

The LegislatureRobin 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.

The AdvocatesThe 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-year-old 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 nonprofi t 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.

BY THE NUMBERS458,00: Number of workers currently employed in manufacturing in

New York State6: Percentage of the state’s GDP represented by manufacturing

55: Percentage decline of employment in manufacturing sector since 2002 Source: Manufacturing Research Institute

SCORECARD New York Manufacturing2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1,000

900

800

700

600

500

400

300

200

100

981.

6

908.

4

868.

2

834.

9

814.

2

808.

8

795.

3

795.

6

790.

3

771.

3

749.

3

706.

7

650.

7

611.

9

595.

5

579.

4

566.

4

551.

6

531.

9

475.

9

456.

8

Sour

ce: N

YS L

abor

Dep

t.

MANUFACTURING JOBS IN NYS, 1990–2010(in thousands)


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 rev-enues 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 gam-bling?JF: If your question is: “Is there any downside to the pro-posal that the New York Gaming Association is making?” the answer is an unequivocal no. We are simply sug-gesting 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 iden-tify 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 vig-orously opposed by people from Atlantic City, from Connecticut, from Pennsylvania, perhaps even Mas-sachusetts now that they’ve passed their statute. I expect it to be opposed by the current Native Amer-ican 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

from some parts of the Native American tribal gaming groups. Having said that, I think that New York’s leg-islators 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 leg-islative 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 busi-ness 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 sub-sidizing 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 sup-ports 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?

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 educa-tion; 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 [email protected]

Jockeying For Position James 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.

BACK & FORTH

FOR MORE INFORMATION or sponsorship opportunities call 646.442.1623 or email Jasmine Freeman at [email protected].

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