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Revisit 2007 reforms; Spiraling cost of workers' compensation adds to state's anti-business reputation

"Open for Business" is the slogan adopted by Gov. Andrew M. Cuomo to signal a change in state attitude. Cuomo has, indeed, made strides to corral a runaway culture that has saddled New York with one of the nation's worst business climates.

But the fact is that New York still has one of the nation's worst business climates, and things are afoot that won't help. That includes a potentially huge increase in workers' compensation costs that employers must pay.
In 2007, then-Gov. Eliot Spitzer and legislative leaders announced with great fanfare a reform that would bring workers' compensation costs under control. Workers' compensation programs are important pieces of the social fabric, but the structure and the costs of New York's program create a huge disincentive for companies to move to — or remain in — New York. Given the potential now for an 11.5 percent increase in rates, workers' comp remains a significant problem.

The issue revolves around an increase in benefits to injured workers. Included in the 2007 reform, the increase was a necessary step, but it was supposed to be matched by steps to control spiraling costs. As News reporter Tom Precious noted in a recent story, the state hasn't been nearly as prompt at instituting the controls as it has in increasing the benefits.

This might qualify as a lesser problem in other states, where the business climate is friendlier. But the cost of doing business in New York is the nation's second-highest. The state has the nation's highest cumulative tax burden and, according to Michael E. Durant, state director of the National Federation of Independent Businesses, is frequently viewed as having the worst economic outlook.

"For all the positives that have been done in the last year, we really haven't done anything except hit the brakes on the runaway train," Durant said.

This is a potentially severe problem for businesses, but the problem is not confined to the private sector. Taxpayers also pay a price.

Responding to a recent survey by the Workers' Compensation Policy Institute in Albany, 78 percent of municipalities reported that their workers' compensation costs have risen since the 2007 reforms. More than half said their compensation costs comprise a significant portion of their operating budgets.

What is more, in an analysis released early this year, the institute found that workers' compensation costs were rising faster for municipalities and other public entities than for the private sector. Those are costs borne by taxpayers.

The Cuomo administration says it has problems with an 11.5 percent increase, but what if it were "only" a 7 percent or 9 percent increase? That would still qualify as a big increase in any state, let alone one as hostile to business as New York remains.

Plainly, workers' compensation is an issue that requires revisiting. Cuomo has shown himself willing to confront the serious problems that hinder New York's reputation and prosperity, but many battles remain to be fought. This is one for which he needs to suit up now.