When insiders rule, New Yorkers suffer

Ron Regon earned a good living negotiating contracts for the aerospace firm Lockheed Martin.

Today, laid off, he hunts for a job and works around the house, helping out and keeping busy.

Renee Lygas, 25, of East Rochester, earns $15,000 a year as a hotel desk clerk, one of thousands of state residents who can't find a better-paying job.

"I want to make enough to live on, but there doesn't seem to be anything,'' she said.

Harry Hughes of Wappingers Falls, laid off from his $60,000-a-year IBM job after almost 25 years with Big Blue, entertains children.

"I do party carnivals,'' said Hughes, 52. "I want to make them smile.''

Like tens of thousands of New Yorkers, from the canyons of Wall Street to shuttered factories upstate, they're un- or underemployed thanks to an anemic job market and stagnant state economy.

"We're dead,'' said Regon, 57, of Binghamton, the hard-hit Southern Tier city at the epicenter of the drop in state manufacturing jobs. "The politicians are doing things as usual, even as the state goes down the tubes.''

With New Yorkers facing the state's worst financial crisis since the Great Depression, many hoped Gov. George Pataki and the state Legislature would adopt needed reforms to spur the economy and provide relief for unemployed and tax-weary residents.

Instead, it was business as usual behind the massive granite walls of the 104-year-old Capitol. The result, critics say, is that New York, once the economic hub of the country, has continued a slow but steady decline compared to other states.

While Westchester, Rockland and Putnam and other Hudson Valley counties have escaped the worst of the downturn, residents and businesses still pay higher taxes and fees, and experts doubt the region will remain unscathed unless New York City's economy dramatically rebounds.

This year, lawmakers and Pataki raised taxes and spending, and borrowed more than $4 billion to pay for everyday expenses such as running prisons and psychiatric hospitals — the practice that almost drove New York City into bankruptcy in the 1970s. And they enacted virtually none of the reforms, such as protection from lawsuits and cuts in spending, that business leaders said were needed to create and preserve jobs.

The reasons: entrenched politicians, bitter partisanship and big money, critics say.

In short, a dysfunctional government — one that critics say works largely in secret for the benefit of politicians and insiders who know how to play the system, rather than for New York's 19 million residents. For New Yorkers, that means higher taxes, service cuts and an economy that lags behind the nation.

"If ever there was an opportunity for the governor and the Legislature to slice into the fat in state government, the budget deficit was it," said James Roche of the Mohawk Valley Chamber of Commerce. "In my view, they blew it.''

And it appears conditions won't change soon. The state faces a deficit of up to $6 billion next year, which could mean more tax hikes and service cuts unless the economy dramatically rebounds.

Even the confluence of momentous events couldn't crack Albany's political foundation.

"It's amazing how resistant to change Albany is,'' said Mark Alesse, head of the New York chapter of the National Federation of Independent Businesses, a business lobby. "Nine-eleven didn't change the way we do business, the recession didn't change the way we do business and the enormous deficit didn't either.''

Now, plagued by a steep drop in manufacturing jobs — the lifeblood of upstate New York for more than a century — and a Wall Street slump that has ravaged the city's job count, New York is again losing jobs faster than the rest of the country, as it has for much of the past quarter-century. Pataki: Legislature stalls reform

Pataki, in a wide-ranging interview, said he was disappointed more wasn't done to spur the economy during the last session, where his vetoes of some spending and tax increases were overridden by lawmakers.

"There are enormous entrenched interests in the Legislature that don't want change," he said.

Pataki, Assembly Speaker Sheldon Silver, D-Manhattan, and Senate Majority Leader Joseph Bruno, R-Rensselaer County, are the "three men in a room" who make all major decisions, often secreted away in the governor's office, emerging only to offer sound bites on whatever agreements they manage to reach, or to blame one another when they fail to act.

But legislative leaders say businesses fared well this year at the Capitol. About $700 million worth of scheduled tax cuts for businesses went into effect, and a deal made to ease redevelopment of polluted industrial sites.

"We got a bunch of things done," said Bruno, who acknowledged many reforms, such as cutting Medicaid spending and tightening workers compensation costs, were blocked.

Silver cited the decision to restore hundreds of millions in education aid that Pataki proposed cutting as a victory for business.

"An educated work force is one of the keys" for a healthy economy, he said.

Still, since the recession started in March 2001, the state has lost 265,000 jobs, 3.1 percent of the total. That compares to a loss of 2 percent nationally. The job-loss figures include about 100,000 positions eliminated after the Sept. 11 terror attacks. The New York losses also include 107,000 manufacturing jobs, a decline of almost 15 percent.

Workers displaced, discouraged

The Binghamton region has lost half of its manufacturing jobs in the past decade and almost 10 percent in the past year. Overall, jobs have slipped almost 6 percent during the past two years in the region.

"We're all in the same boat. We're all sinking," said Mike McManus, 59, of the Binghamton suburb of Endwell, who did defense-related contract work for 30 years before being laid off 18 months ago. His daughter left the area to take a public-relations job near Asheville, N.C., two years ago. His son, who manages a local arts-and-crafts store, may follow.

While some areas of the state, such as Westchester, Rockland and Putnam counties, have weathered the recession fairly well, others have been hit hard. Rochester, long the most affluent region north of Westchester, lost 26,650 jobs in the two years that ended July 1 — a drop of almost 5 percent. Its flagship employer, Eastman Kodak Co., which two decades ago employed 61,000 in the region, recently announced more layoffs that will cut the work force to as few as18,000.

Service jobs, such as those in hospitals or restaurants, have replaced some of the Kodak losses. But younger workers find it's hard to live on their own — much less have a career — on the money they earn. Total wages dropped by 1.6 percent in the Rochester region from 2001-02, according to a study done by the Fiscal Policy Institute, a labor-backed think tank.

Lygas, the hotel desk clerk, said she sometimes needs help from her family to pay for groceries.

"Looking in the paper today, there was nothing I'm looking for,'' she said. "You can clean somewhere, or get a part-time job. That's not doable for me.''

Many in her generation have fled the state. Between 1995 and 2000, New York lost 150,000 people aged 25 to 34 — the biggest drop of any state.

Lygas said she wants to stay in the region because she has family and friends there. But those ties are fraying. Her 54-year-old father, a longtime toolmaker for the Xerox Corp. in Webster, was laid off at Christmas and moved to Florida. One of her best friends recently moved to Baltimore, where her friend's husband landed a job after being laid off 18 months earlier by Kodak.

The state's economy is creating more jobs like the one she holds now and fewer ones like her father had, according to a new report. The 15 industries that added the most jobs between 1992 and 2000, such as nursing care, temporary services and data processing, paid an average of about $41,000 a year, according to the Fiscal Policy Institute.

Meanwhile, the 15 industries that shed the most jobs — like banks, insurance companies and manufacturers of cars, computer equipment and other products — paid their workers an average of almost $60,600 a year.

Of course, people in other states face hard economic times as well. The country has lost 3 million jobs in the past two years, 2.7 million of them well-paid manufacturing positions from companies that have been battered by overseas competition, especially from China. For the first time since the Great Depression, jobs have shrunk nationally for three years in a row. Even in good times, the Northeast has been growing more slowly than the rest of the United States. The Sun Belt, with its cheaper work force, lower taxes and more lax regulations, has drawn jobs away from the Northeast for decades.

But even within the region, New York's poor record stands out. Since 1965, the number of jobs in the state has grown by only about 30 percent, the lowest figure of any state, or just a little more than a quarter of the rate of the nation as a whole, according to the federal Bureau of Labor Statistics. Massachusetts and New Jersey have grown jobs more than twice as fast. Even fellow Rust Belt state Pennsylvania outpaced the Empire State.

Pataki pointed out that in 1999 and 2000, New York's rate of job growth was above the nation's for the first time in decades. He said the most recent job-loss figures are roughly in line with other manufacturing states in the region, and were held down by the terror attacks of Sept. 11 and the stock market collapse fueled by corporate accounting scandals.

"We had extraordinary events," Pataki said. "Maybe you could have predicted Enron. I didn't. Maybe someone could have predicted the economic consequences of 9/11. I certainly couldn't have."

Taxes, cost of living high

What makes New York stand out? Taxes and other costs of doing business and living here, economists and business leaders say.

"We're a high-cost state,'' said Rae Rosen, an economist with the Federal Reserve Bank of New York. "Right across-the-board, we tend to be the highest or among the highest for wages, utilities and taxes. So it's difficult to either get companies to relocate here or grow new companies.''

An Economy.com survey, however, showed the state had been making progress in getting costs of doing business more in line with the rest of the country. A decade ago, the overall costs were the third-highest among states, but that had dropped to seventh-highest by last year. That was helped by labor costs that were only the 11th-highest in the country. Now, some fear that the actions taken this year to raise taxes will reverse that progress.

Bruno pointed out that the increase in the sales and income taxes that lawmakers approved over Pataki's vetoes helped to hold down property-tax increases, which he said would have hurt even more.

Pataki said he's worked hard to get the state's spending and taxes more in line with the rest of the country since assuming office in 1995. He said only six states had raised their spending less in that period. That's partly because state government has shed 25,000 jobs in the past eight years, aides said.

"That's an extraordinary record," he said.

But there are different ways to look at the figures. When adjusted for inflation, state spending in Pataki's first seven years went up twice as fast as in the last eight years of former Gov. Mario Cuomo's reign, according to an analysis by the Manhattan Institute, a business think tank.

The overall high costs make the state vulnerable to other states picking off New York companies.

"It's common knowledge in economic-development circles that New York is at or near the top of the list for other states to cherry-pick,'' said Roche, of the Mohawk Valley chamber, whose job in Minnestoa was to search for companies to relocate there.

Roger Hannay, whose family has run a company just south of Albany that has made reels for hoses for almost 70 years, isn't ready to pull out. But sometimes he is tempted.

"If we were doing a 50-state search for a place to locate a business, New York wouldn't be near the top,'' he said. "But we're staying here because we like it here and because of tradition. But you could build a strong economic case that we should leave.''

He said he was angry that the Legislature this year did little to accomplish what business leaders said all year was a top priority: changing lawsuit rules to give them protection against having to pay what they consider unfair awards.

Hannay and other business leaders wanted the state to limit the time a suit can be brought for damages caused by their products. They also don't want a company to have to pay the full cost of a settlement even when it is only partly responsible.

"All of our pleas fell on deaf ears,'' he said.

Insiders 'pay to play'

Bruno said the Senate wanted to change many of the laws that drive up insurance costs for businesses. But "the Assembly won't touch it," he said.

Silver, himself a trial lawyer, said the Assembly didn't make the changes because he wasn't convinced they were in the best interests of the people because they might have diminished protections for consumers. But Silver spokeswoman Eileen Larrabee said the Assembly rejected Pataki bills that would have weakened the state's Empire Zone program and another that would have increased taxes on insurance companies. And changes still could happen, she said.

The pro-business bills that passed "don't mean we did everything," Larrabee said. "More needs to be done.''

The business leaders say the political clout of lawyers and a health-care workers' union largely account for the Legislature's failure to act on issues like making it harder to sue employers and trimming Medicaid spending.

"It's those that pay that get to play,'' said Alesse, the small-business lobbyist.

"It gives the appearance that they have turned the process over to special interests,'' said Daniel Walsh, the head of the state's largest business lobby, the Business Council of New York State.

The state Trial Lawyers' Association spent more than $1.4 million — fifth- highest of any group — trying to influence state government last year through lobbying expenses and campaign donations, according to a new report from the New York Public Interest Research Group, a watchdog organization

The health-care workers' union that the business leaders decry, Local 1199 of the Service Employees International Union, ranked seventh, spending $1.276 million.

Walsh's group, the Business Council, ranked 11th , spending just over $783,000 on lobbying and campaign donations last year.

But that report overstates the financial power of the trial lawyers, since there are numerous groups on the other side of the issue, said Chris Goeken of the state Trial Lawyers' Association.

And Jennifer Cunningham, of the 237,000-member Local 1199, said the union makes the state's health-care system stronger, which is an asset to the state's economy.

"Since the health-care industry is such a fundamental underpinning of the economy, as well as a service that people need, it is highly irresponsible for the state to consider dismantling its health-care infrastructure to balance its books,'' she said.

One reason for the success of the trial lawyers and the health-care union at the Capitol is they're normally trying to prevent bills from passing, rather than pushing for any new measures.

"It's easier to play defense than offense,'' said NYPIRG's Blair Horner. "To play defense, all you have to do is get one of the three major entities to agree with you (the governor, Assembly or Senate), and you win'' since any of the three can block passage of any bill. All three have to agree before anything new can be adopted.

Nate Wright, a 40-year-old food-preparation worker at St. Luke's Hospital in Utica, is trying to play offense in a different way — to advance to a job that pays enough for him to support his five children. He made $13.50 an hour before being laid off two years ago from the Utica Boiler Co. He makes $7.50 an hour now.

"I'm definitely trying to get something that pays more,'' he said, with words that could be echoed by thousands of New Yorkers. "I need something better.''

© 2003, Gannett News Service