Despite some admirable efforts in Albany to cut the costs of workers' compensation and make this state more competitive in attracting industry and jobs, the latest studies of this key business-climate indicator offer some discouraging results.
Although New York has cut workers' comp costs by nearly 40 percent since 1996, the rates paid by manufacturers here were still 20.9 percent above the national average. The problem is that Gov. George Pataki has been trying to hit a moving target -- while our rates have been falling, national rates have been falling as fast or faster.
New York now ranks as the ninth most costly state of 45 states with comparable workers' comp systems. Last year, New York ranked 12th.
"Whatever we're doing, other states are doing better," laments Business Council spokesman Matthew Maguire.
The numbers mean something. The relative ranking of states plays a major role in corporate decisions on where to locate new plants. In the economic competition between states, it's not just the number of points on the board -- it's who's ahead, and who's playing catch-up.
If there's one statistic that drives employers crazy, it's workers' compensation costs. Our local delegation should be screaming the loudest to bring these costs in line with other states, if not make them lower. It's not enough to point to the good work already done, especially when it's clear that it's not good enough. If reducing this job-killing expense isn't on the top of Albany's to-do list, it ought to be.
According to national experts, a major reason costs are dropping nationwide is competition among insurers. Another factor that helps drive insurance premiums down without eroding worker benefits is a good safety record, which leads to fewer claims and insurer pay-outs.
New York has benefited from those factors. The state's workplace accident rate, for example, is 38 percent below the national average and therefore more attractive to insurers. But state businesses have gained even more from efforts by Pataki and the Legislature to drive comp costs down.
There were annual double-digit rate increases from 1988 to 1993. In 1995, New York had the second-highest workers' comp costs in the nation, and in 1996 costs here were 57 percent higher than the national average. The reform effort launched that year included annual rate drops of 18 percent, 8.4 percent and 6 percent, followed by last year's "0.0 percent" rejection of a double-digit increase recommendation from the New York Compensation Rating Board.
On Oct. 1 this year, rates will drop another 2.5 percent. Unfortunately, it won't mean a thing. The premiums may be dropping 2.5 percent, but an assessment imposed by the state to fund the Workers' Compensation Board and 10 special-purpose funds will rise from 13.6 percent of the premium to 16.5 percent. That's a hike of 2.9 percentage points, and it cancels out the drop in premiums.
It's also an increase of more than 20 percent in the assessment category -- following a 44 percent increase last year, when premiums went unchanged.
The Business Council has identified one special fund worth reviewing. It's a "second injury fund" started after World War I so employers wouldn't shy from hiring vets injured in combat. Those vets are now past retirement age, and the Americans With Disabilities Act serves that function now, anyway.
But use of the fund has more than doubled over the past five years and it now consumes more than half the assessment pool; savvy employers use it to shift disabled workers with any "second injury" from their own compensation accounts to an assessment fund that spreads the cost to other employers statewide. That unfairly penalizes companies with good safety records, far from the fund's original intent.
New York is running hard but still not gaining on the pack, and it needs every advantage it can get.