From 2000 to 2010 New York's spending on economic development tripled and yet private sector employment dipped by 2.1 percent during the same time period.
Now Gov, Andrew Cuomo wants to reverse both trends. In his budget speech he stressed the need to expand the state's economy. "We need jobs and we need revenue," he said "Longterm, it's jobs, jobs, jobs."
In the same speech in January, though, Cuomo called for reducing capital spending on economic development and for cutting the operations budget as well.
To accomplish this, Cuomo has set out a few broad strokes, such as improving the business climate and cutting taxes. He has named former Business Council CEO Ken Adams as the new head of the Empire State Development Corp., which is charged with overseeing economic development across the state.
Cuomo has outlined a number of proposals that he says will get the organization back on track toward creating jobs and attracting and fostering new businesses. Past that, it is unclear if Adams or even the Cuomo administration knows what, exactly, they are going to do to turn around the corporation, which has been seen in recent years as ineffective, scattered and bloated.
Neither Cuomo nor officials at the Empire State Development Corp. would comment for this story.
Legislators are anxious to find out what Cuomo has in store. In particular, they want more information about Cuomo's plan to create 10 Regional Economic Development Councils staffed by representatives of local businesses, government and academic institutions. The administration describes the councils as a "one-stop shop" for all the state's economic development programs. The councils are expected to initially receive $200 million in funding.
According to the Cuomo administration, these councils will put an end to the trend that saw state spending on economic development increase from $448 million in 2000 to $1.6 billion in 2010 while private sector employment decreased. According to Cuomo's administration, programs like the Empire Zone program, which gave tax credits and other benefits to lure projects into the state, did not have to account for whether they created job. While the state tried to create jobs on one hand, some in the administration says, Albany's mandates were cumbersome to business and ignored the realities of different parts of the state.
But legislators and economic development experts alike remain unsure exactly how the planned councils will function -- which programs they will bring together, how they will do it, how their success will be measured and where the power will lie in overseeing them.
"We don't have the information," said Sen. Bill Perkins, who sits on the authorities committee. "What are these regions? What is the plan? I am curious. I won't say suspicious, but when someone withholds information I have to wonder 'why?'"
Brian Sampson of Unshackle Upstate, who once worked for ESDC, said he thinks the councils will bring everyone together and improve efficiency "so that businesses in New York can grow faster. There won't be that 6- to 10 -month wait while things get sorted out. You will have the people with local knowledge at the table."
Development covers a wide variety of projects and endeavors, from enticing Jet Blue to expand its operations in the city, to boosting downtown Rochester, to helping cutting edge entrepreneurs -- and to building a basketball arena and luxury housing development in downtown Brooklyn.
As to which type of project he might favor, Adams, who has yet to be confirmed as ESDC chairman, remains a question mark. legislators and the business community think he is friendly to big business and supportive of Cuomo's desire to reduce the burden of doing business in the state by cutting taxes and red tape.
"There are those of us who believe that job creation and opportunity are best handled by small businesses, and I don't know if Ken really comes from that background," said Perkins.
"I think Ken was appointed as a signal to the business community that New York wants to create a pro-business environment. I don't think Ken would embrace something called the millionaire's tax," Perkins added. Neither does Cuomo.
Lt. Gov. Robert Duffy has been assigned to oversee the development councils, but they also are supposed to be part of the ESDC, making it unclear who will be in charge of what. Duffy has been traveling the state with Adams to "find the key decision makers for each region," as he told the Long Island Business News.
"Ken Adams is a great guy, but the question is, 'What is his role?'"said Andrew Rudnick, CEO of the Buffalo Niagara Partnership. Rudnick has worked with Adams before as both represent business organizations.
"We have an ESDC board chair who has yet to be named, and initially we heard before Ken Adams was named that the ESDC would be lesser in some way. So you have to know how will the responsibility be spread out between the regional councils and ESDC central. You don't know if he is the right man for the job until you know what it is."
To appreciate why changes to the ESDC matter so much you have to understand what the ESDC has done up until this point, but many experts say that, too, is hard to quantify.
The ESDC was created in 1968 primarily to oversee the construction of subsidized housing projects. As an authority, the ESDC can issue bonds to fund major projects without voter approval, and it also has the ability to use eminent domain. That has been a hot topic because of the Atlantic Yards project in Brooklyn.
In 1975, after nearly entering bankruptcy because of mismanaged projects, the ESDC was retooled to fund general economic development projects across the state. Gov. Mario Cuomo used the corporation to finance the building of 30 prisons, doubling New York's prison system.
The ESDC's mission is largely determined by the legislature. The Senate and Assembly approve plans to provide incentives to lure business to certain areas and then the ESDC has to carry out the plans. The ESDC also works on major projects like Atlantic Yards where business organizations come to the corporation and ask for assistance with a major project.
The ESDC has been involved in other major landmark projects across the state, projects such as the revitalization of Niagara Falls and the planned construction of a new Pennsylvania Station, the Javits convention center, and the planned work on Governors Island. It has also been in charge of federal funds to rebuild Battery Park.
The ESDC has come under major criticism in its role for Atlantic Yards. Homeowners and property rights advocates say the organization justified the project and seized to benefit one major company rather than the many small businesses that have been forced to relocate to make way for the project.
In its other role -- overseeing programs created by the legislature -- the ESDC has faced major criticism for its handling of the Empire Zones, a program developed to attract companies to upstate. It isn't clear that any of the major tax breaks and funds it handed out led to any significant job creation. Republican gubernatorial candidate Carl Paladino, who was staunchly anti-big government, famously received $3 million in tax breaks from the state but only created 25 jobs.
Over the years, as happened at a number of other state authorities, the development corporation's independence led to unchecked expansion and inner chaos. An audit by then State Comptroller Alan Hevesi found 70 ESDC subsidiaries.
The last several years have been particularly difficult for the ESDC. The agency has had six heads in the last four years, largely a result of the turmoil in the governor's mansion.
This, Rudnick says, has hurt the ESDC. "The last few years have been tumultuous," he said. "The ESDC's impact has been limited by the revolving door in the state government and ESDC heads, and by budgetary problems at the state. The ESDC has been limited by having its directives given by the budget office."
He explained that budget concerns have led to tax breaks being limited or rescinded, and other programs being altered.
The corporation's efforts have been described as scattered at best. "I worked for the Urban Development Corporation, and [former Gov. George] Pataki changed it over to the ESDC," said Sen. Kevin Parker, "but I think they could have saved the cost on printing new letterhead and just called it the Upstate Development Corp. As it relates to my district, I haven't seen any benefits from the ESDC -- the state's biggest, flagship economic development corporation. Their goal should be creating stable jobs with benefits, but I think the resources are going upstate, and yet I don't see very much being created upstate either."
To do that, Parker said, ESDC should focus on smaller companies. "They haven't focused on small businesses," he said. "Businesses that have 100 and less employees create 80 percent of the jobs."
Sampson agrees that the ESDC has ignored small businesses. 'I think the ESDC has focused on chasing larger companies, the same companies that everyone else is going after and that, honestly, Tennessee, Texas and other states have a better chance at getting because they have a better business climate." The ESDC has landed some big companies tech companies like the chipmaking company Global Foundaries upstate.
Helping small business, according to Rudnick, simply has not been part of the development corporation's objective. "I don't think ESDC has been tasked with helping small businesses," said Rudnick. "Small businesses need start up money, and the state hasn't been in that role -- they issue bonds for capital projects. There are smaller, local agencies to help small businesses."
Rudnick does believe, though, that the ESDC needs to refocus its values and core mission. "The ESDC needs new criteria. Most economic development experts would tell you that they no longer use the standard of how many jobs are created, which is what the ESDC uses. Instead, you look at quality of job, investment opportunities, the scope of a project and the potential for using green technology," he said.
Rudnick, Parker and Sampson all share a similar hope for the agency's future -- that the new regional zones will allow businesses all over the state to be better served, to bring people with local knowledge together to help them figure out how to grow.
"We need to get all different agencies speaking the same language," said Rudnick. "I've not seen one project that required just the ESDC. They may need energy or workforce development funding, and it's like the United Nations: Each agency speaks a different language about incentives. They are all saying something different and we need them to be on the same page."
Parker hopes Cuomo's new approach will get the agency on track. "The realities in Brooklyn-- Bensonurst, and Bath -- are totally different, and I think that these commissions will reflect that and show how the agency works in different environments. The mission should be creating good jobs with benefits, and I haven't seen them do that."
Sampson would like to see the ESDC working with local universities to harness new business models and the green energy opportunities. Not surprisingly, he also wants to see ore focus on upstate.
"Legislators from downstate need to realize a vibrant economy upstate is important for the downstate economy," said Sampson. 'Upstate has so many resources: agriculture, skilled labor and universities. We need to work with the universities, partner with them to create jobs, to plant seeds."
While Parker is concerned about what the ESDC will do for downstate, he also has his eyes on upstate. "I want to see the ESDC get involved with the green economy, partner with upstate universities where green jobs are spilling out of the universities and into tech parks," said Parker. 'They need to look at investing in creating our own green technology. Not only creating solar panels, but the blades for windmills."
As to whether any of this is part of Cuomo's plan, no one knows. As Sampson said , "We think we will hear more details soon."
Gov. Andrew Cuomo delivered his State of the State address resembling the CEO of a floundering company as much as a proud new governor. Using three screens to deliver a PowerPoint presentation, Cuomo outlined his plan to help bring businesses back to the state, reduce taxes on individuals, revamp the juvenile justice system, reform campaign finance, fight political corruption and restore New Yorkers' trust in their government. The screens often displayed newspaper headlines announcing scandal and corruption in the legislature.
"What is the state of the state?" he asked the 200 politicians and 1,800 New Yorkers gathered at a convention center near the capitol building. "This is a time of crisis for our state, a time when we must transform our government to once again become the progressive capital of the nation and the seize the moment of opportunity," he said.
Just about anyone in the room would admit that Cuomo has a tough job ahead of him. Ask anyone off the record and they will tell you accomplishing his goals may very well be impossible, but daunting as the task may be, they want him to succeed.
Like a company chairman at a board meeting, before he delivered his speech Cuomo allowed the leaders of the State Senate and State Assembly majorities to address the crowd. They shared similar themes -- increasing jobs, reducing spending. Assembly Speaker Sheldon Silver, who is expected to be Cuomo's main opponent on trimming services and cutting spending, made it a point to say that some important programs -- notably rent stabilization, which expires this year -- must be saved.
Every year legislative leaders express support for governors and their declarations of the need for financial sacrifice and unpopular decisions -- only to stymie the governor at each turn. And the chaos that defined the senate last year has not exactly gone away; it's mostly just confined to the minority party.
Shortly before the speech, sour Democratic senators announced that they would not conference with the rest of the Democrats because they are disgusted with the way the party carried itself during its two years in the majority. The four are Jeffrey Klein, Diane Savino, David Valesky and David Carlucci. Their departure will likely further weaken the Senate Democrats, who mostly represent New York City, and yet may strengthen Cuomo's hand, because it is expected that those senators may lean more toward Cuomo's fiscally conservative policies than the Senate Democratic leadership.
While he still must fill in many details, Cuomo made it clear -- as he did in his inauguration speech Saturday -- that he would not be content with half measures. This was evident in his proposal for ethics reform.
Cuomo told the legislators in no uncertain terms that massive ethics reform will pass this year. "It is time to pass ethics reform. And it is time to pass ethics reform now!" he said, adding that this announcement wasn't meant as, "I'm proposing," or "I want us to."
Cuomo’s ethics reform plan went beyond anything proposed by his predecessors and even by some good government groups. Ethics reform, he said, would include ending pay to play, independent monitoring, full disclosure -- which Silver, for one, has resisted in the past -- and some public financing of campaigns.
"Maybe, just maybe, the stars have aligned,” said Blair Horner of the New York Public Interest Research Group. "This could be the year that reform finally comes to Albany. The governor's State of the State address not only offered a road map for the comprehensive overhaul of the structure of state government, but also added a sweeping prescription to cure the ethical ills plaguing Albany."
Cuomo took a similar broad view of spending.
This year's budget process, he said, will not simply be an exercise in trimming. "This is a fundamental realignment for the state. You can't make up these kinds of savings over this long a period of time through a budget cutting or trimming exercise. We are going to have to reinvent government. We are going to have to reorganize the agencies. We are going to redesign our approach because the old way wasn't working anyway," he said.
Cuomo also said that taxes are simply too high for all New Yorkers.
A good portion of Cuomo's speech did not directly deal with the city. Consolidating local government, a property-tax cap and plans to stimulate financial growth upstate were main themes, but not relevant to the city. But at a press conference following the speech Mayor Michael Bloomberg was in a chipper mood. He said he felt very positive about Cuomo's speech. He saw a lot of himself in Cuomo, in that Cuomo is operating as a "CEO" and willing to put his reputation at stake to make changes the state needs.
"It's time to roll up our sleeves and help the governor as he makes the tough and necessary choices," said Bloomberg. Bloomberg liked Cuomo's centrist message, which downplayed partisanship and focused on fiscal responsibility.
Noting that other governors have laid out ambitious programs and failed, one reporter asked what Bloomberg saw that gave him hope that Cuomo will succeed. "The people are at his back," the mayor answered. "The time is right."
Bloomberg said, "Cuomo didn't come up and say we are going to kick the can down the road. He said this is the time, and he put his reputation on the line and said 'I'm going to do it,' and that's the kind of accountability you need. Everything the governor does won't work, everything he wants to do won't get done, but I would rather have someone do 12 of the next 10 things we need, rather than the next eight."
Others were far less enthusiastic. A number of anti-poverty groups responded after the speech, focusing on taxes for the rich. They want Cuomo to extend a millionaires tax to help close the state's $9 billion dollar budget gap and to insure that the poor continue to receive services in the depressed economy. Mark Dunlea of Hunger Action Network said, "The poor were missing from Cuomo's vision."
The aspects of the speech that will affect the city -- a team that will "redesign" how Medicaid is distributed, performance based financial rewards for schools, reforming the juvenile justice system and possibly closing some upstate prisons where many city residents are incarcerated -- were all very relevant and fresh on Bloomberg's mind.
Bloomberg, who was accompanied by new schools chancellor Cathleen Black, was exuberant about Cuomo's plan to set aside a portion of the state's education aid funds to award to schools that increase their performance. "I was just thrilled the governor said he thought aid should be given out by performance, and if the state did that, New York City would get a great percentage of state educational support," Bloomberg said. He said most schools in the city are improving on some level regardless of how they currently perform.
The question, Bloomberg said, is, “Where are they gonna get the amount of money we depend on to carry us forward?”
Cuomo was blunt in his assessment of programs for young people under the supervision of institutions other than the school system. He proposed a consolidation of the state's juvenile justice system, saying: "You have juvenile justice facilities today where we have young people who are incarcerated in these state programs who are receiving help, assistance, program treatment that has already been proven to be ineffective. Recidivism rate in the 90th percentile. The cost to the taxpayer is exorbitant. For one child over $200,000 per year. The reason we continue to keep these children in these programs that aren't serving them but are bilking the taxpayers is that we don't want to lose the state jobs that we would lose if we closed the facilities."
While Bloomberg supports closing underutilized facilities and prisons, he wants the state to give localities control of where they send youthful offenders so that New York City youth won't be shipped upstate.
"I have always thought it is better to incarcerate people near their families,” said Bloomberg. 'The separate issue is that the state has too many facilities to incarcerate people. The number of people we are sending to jail is going down, but our costs have not been going down."
Cuomo also proposed consolidating upstate prisons, which are increasingly underpopulated. To upstate legislators who steadfastly oppose closing prisons in their rural districts Cuomo said, "An incarceration program is not an employment program. ... You don’t put people in prison just to give people jobs."
On Medicaid, Cuomo said he learned during his time as attorney general how wasteful the health program for low-income people can be. In his speech, he announced the creation of a team to look at revamping the reimbursement process. "The Medicaid program needs a desperate overhaul," Cuomo said. "It is dysfunctional on many levels, so this process has to be done anyway."
The Medicaid Redesign Team will begin work on Jan. 7 and report to Cuomo on April 1.
Bloomberg said the city can't bear large cuts in Medicaid reimbursement. "We have to, by charter, treat anyone who shows up at our front door," said Bloomberg of the city's public hospitals. "If Medicaid would stop paying, that would be a burden we plain and simply can't afford."
But Bloomberg said he did support overhauling the Medicaid system. “We cannot afford to put all this money into Medicaid. It will bankrupt the state. It will bankrupt the country."
Cuomo, with the use of his PowerPoint presentation, did inject moments of levity into the speech. He described the budget process as "ships passing at midnight." The image of three military ships floated by each other on the screen. "Wait," he said, and in a mock-startled tone informed the audience that he thought he saw someone he recognized. On one ship was Senate Majority Leader Dean Skelos, on the other Silver. And on the large destroyer was Cuomo. Suddenly out of the sky swooped "special interests: in a jet that dropped bombs on S.S. Cuomo. Cuomo pointed out that he was the only one targeted by the special interest bombs.
Cuomo has said he will wage a year-round campaign against labor unions and special interests to fight back against whatever negative press he receives for his proposed cuts. He did not drop some of the bigger bombs on the unions--like changes to the pension system during his speech.
In other words, the tough work still lies ahead.
Outside the convention center a large group of union members shouted and chanted. "How’s the new suit?" one state trooper patrolling the area asked another. "He's a pretty loose, nice guy the other answered, "But he's got a big job in front of him."
Eliot Spitzer's inauguration four years ago was an event driven by hope. Crowds of onlookers stood on the capitol lawn to watch the Sheriff of Wall Street take his oath and then deliver the reform he promised: "Day One Everything Changes." James Taylor performed; there was a sense of jubilation, and for many voters it felt like Albany's time had come.
Four years ago Albany was regarded as a cesspool of ineptitude, corruption and privilege. Four years later, after Spitzer's resignation, the improprieties and missteps surrounding his successor, Gov. David Paterson, turmoil in the State Senate, and a slew of lawmakers caught up in investigations and scandal, voters hold Albany in even lower esteem. The state faces a $9 billion dollar deficit and escalating financial woes, and its government seems unable to even begin to cope with it.
In this climate, Andrew Cuomo was inaugurated in a small gathering of about 170 people in the “War Room” of the capitol, away from throngs of people, away from union members holding signs protesting proposed cuts, and without much of the reviled legislature in attendance. The magic of the Spitzer inauguration wasn't there; certainly that was in part because Cuomo did not want it. But if he did, he probably would not have gotten it. Albany, as Cuomo acknowledged in his inaugural address, is now both the punch line and the joke, and many New Yorkers, even those who voted for Cuomo, doubt how much one man can change that.
As he did during his four years as attorney general and his campaign for governor, Cuomo kept the environment at the inauguration well controlled and sent messages as much through what he didn't say as through what he did. He did, however, deliver a speech that was impassioned and emotional.
>"It is a time for deeds, not words, and results, not rhetoric. It is time for a bold agenda and immediate action. There is no more waiting for tomorrow, and there are no more baby steps, my friends," he said, seemingly warning the legislature that he would not stand for more half measures on fixing the state budget or on ethics reform.
And Cuomo did take action: His first cut as governor was not to the budget but to a red ribbon signaling that the second floor, which houses the governor's offices (once known as "Fort Pataki”), would now be open to the public. And he ordered the concrete barricades -- the ones erected in the wake of 9/11 -- removed from the front of the capitol.
Cuomo told a story about walking in the capitol behind a mother and her young daughter. The daughter remarked how beautiful the capitol is and wondered why there weren't more people walking in the hallways. Cuomo seized on the girl's musings.
"To get into this capitol is like running an obstacle course, and it shouldn’t be," Cuomo said. “People refer to the capitol as a fort or as a bunker, and it is anything but. This is a beautiful monument to democracy, this building. This is the people’s meeting place, and they should be invited in. And today, my friends, we will reopen the capitol, literally and figuratively.”
Cuomo also made promises during his inaugural address and in conversations with reporters afterward. He vowed there will be no new taxes and said that he will unveil an “emergency financial reinvention plan” during his state of the state address on Wednesday. During the campaign Cuomo did not divulge how he would address the state's looming deficit, other than to say he would not raise taxes. He has provided few, if any, details about what he would cut and did not offer any more specifics on Saturday. But that seems likely to change Wednesday.
In his speech Saturday, Cuomo said that he wants to pass a property tax cap during this legislative session. He also spoke of consolidating both state and local governments to reduce waste. Previously, he has talked a lot about cutting the state's Medicaid system, so that may be in play in his fiscal plan as well He could outline specific service and programs reductions -- something almost certain to attract howls of protest.
Cuomo has also taken the state of the state address out of the the Assembly chamber. It became tradition to deliver the speech there in 1923 when Gov. Alfred E. Smith decided he would give his speech rather than just write a letter to legislators. Smith spent years in the Assembly and wanted to keep the legislature on his side. Cuomo decided to hold his state of the state in a convention center to make it more accessible to the public. The administration is holding a lottery for members of public to win the chance to see Cuomo the deliver the speech in person. Some see it as a blatant slap at the legislature -- an attempt to distance himself from them and send a message. But publicly most legislators back the idea.
In his inauguration speech. Cuomo outlined some of his priorities.
“We have a very specific mandate for change that the people want. And our expectation is that the politicians and the elected officials of people are now going to do what the people voted for and what the people need. It starts with jobs, jobs, jobs, getting the economy running once again, getting the economy running all across this great state," said Cuomo.
"Number two is going to be cleaning up Albany and restoring trust. ... Any relationship is only as good as the level of trust, and we have lost the trust. And we are not going to get it back until we clean up Albany and there's real transparency and real disclosure and real accountability and real ethics enforcement. That's what the people have voted for and that's what the people deserve."
Cuomo issued an executive order mandating his staffers undergo ethics training.
Cuomo said the issues have been clear for years its just been the will and discipline that has been missing.
"We know what needs to be done. We have known, in truth, what needs to be done for many, many years. What we have to do this time is we actually have to do it, we actually have to deliver for the people of the State of New York."
A number of legislators and advocates are very optimistic about Cuomo's chances for accomplishing the goals he has laid out. They say Cuomo has matured from the brash, self-obsessed, back-room dealer he was when he worked for his father and even during his first run for governor in 2002. They say he is goal oriented and has gained discipline from his time as attorney general. Further, they note, he has been around Albany a long time and has learned from watching the successes and failures of his predecessors: his father Mario, George Pataki, Spitzer and Paterson. Being governor , they say, is what he has been waiting and planning for for years.
Other legislators, however, are not convinced. Quietly and privately, they say that Cuomo has himself more in mind than his party. That his entreaties across the aisles to the Republican majority in the may improve relations in the senate where Republicans recently retook the majority but may further complicate relationships with the Democratic controlled Assembly. Tensions between Cuomo and Assembly Speaker Sheldon Silver have been speculated about for months as it is expected that Silver will stand against a lot of Cuomo's budget cuts.
Further, skeptics say, say Cuomo's demand that the courts settle legal disputes over contested senate races before he took office and his conservative leanings have hurt Democrats and were only done to further his political aspirations. They worry that Cuomo has his sights set on national politics.
And then there are the state workers in Albany who fear that their unions have been snowed by Cuomo; they expect there will be many more cuts to state and education jobs under the new governor. Some unions refrained from endorsing Cuomo because he has made it clear that he wants concessions; others endorsed him and hope a good relationship with the governor will keep them from getting the worst of it.
Spitzer famously vowed to go it alone, to be a steamroller while Cuomo acknowledged in his inaugural address that he needs the legislature as a partner and that he may even be asking them to give up some of their power.
"To the state legislators I say, I reach out to you to form a new partnership, because in truth the partnership between the executive and the legislature has not been working well for years, and that must change.
I respect the electoral responsibility of the legislature, I respect the constitutional independence of the legislature, but I also know that success will require a different approach. We must accomplish more, faster, smarter, and better, than we have in decades. We have no more time to dally.
"To my Republican colleagues I say, I will not govern in a partisan way and my administration will not be a partisan administration. I was not a partisan attorney general, I did not run a partisan campaign. I don't believe the Democrats or the Republicans alone created the problems we face today and I don't believe the Democrats or Republicans alone will be able solve the problems we face today. I believe we are going to have to do it and do it together."