Department of Economic Development

The 30 day amendments propose minor technical corrections to proposed legislation related to the Empire Zones Program (Part K) (analysis as of January 20, 2009).

According to the Senate and Assembly analysis, the Executive requests $18.8 million to support ESDC operations, of which $8.8 million is for personal service associated with 116 additional FTEs. The balance, $10 million is for nonpersonal and operating expenses including lease costs. The Corporation reports that for the year ending March 31, 2008, general and administrative expenses for ESDC, not including its subsidiaries, were $59 million. ESDC's budget will support 364 full-time equivalent (FTE) staff positions.

The Executive Budget recommends (analysis as of December 18, 2008):

Proposes abolishing the Department of Economic Development and the NYS Foundation for Science, Technology, and Innovation (NYSTAR) and merging their functions into the Empire State Development Corporation (ESDC) and eliminate duplicative administrative support for a purported savings of $11 million.

• Department of Economic Development (DED): -200 FTEs including 83 FTE position abolitions/layoffs and the attrition of 117 positions.  Five of these positions are “normal” attritions and an undetermined amount of the remaining 112 attritions will be merged into the Empire State Development Corporation (ESDC) effective March 1, 2009.  The merger will also include the Foundation for Science, Technology and Innovation (NYSTAR) but its 26 FTE positions will be abolished and subject to layoff.  Executive Budget documents claim that this merger will save $11.1 million in SFY 2009-10 and $11.8 million in SFY 2010-11.  However when we add the State Operations and Local Assistance SFY 2008-09 Enacted Budget appropriations for DED, NYSTAR, and ESDC it totals $158,938,000 and the proposed SFY 2009-10 State Operations and Local Assistance appropriation for ESDC is $151,030,000 or $7,908,000 less than the combined SFY 2008-09 enacted appropriation for all three agencies.  Other Executive Budget documents show a $186 million SFY 2008-09 State Operations/Local Assistance disbursements for Economic Development and a $176 million appropriation for SFY 2009-10. The true savings needs to be clarified at labor-management.

• The Executive Budget asserts that the ESDC will have a total workforce of 364 in 2009-10 which reflects the transfer of 116 staff from the Department of Economic Development and the Foundation.  In a briefing with the union, the Division of Budget would not confirm that 116 FTEs would be transfers from DED to the ESDC.   It is not clear how these FTEs will be funded since the ESDC, unlike State agencies, does not break out FTEs by program and fund.  We believe that an undetermined number of FTEs may be supported by Aid-to-Localities funds.  Based on SFY2008-09 numbers, it will take approximately $8.3 million to fund 116 FTEs.

• Proposes State Operations funding of $6,070,000 for the Economic Development Program.  However, only $285,000 is for personal services as $4.1 million is non-personal service and $1.67 million is maintenance undistributed. 

• The abolishment of DED will result in the ESDC being responsible for the following:  Tourism, Empire Zones, Minority and Women-owned Business, Linked Deposit, Regulatory Compliance, and International Trade.

• Proposes legislation (S59/A159, Part EE) to permit the merger of DED, NYSTAR, and ESDC which is effective March 1, 2009.  Notwithstanding any law to the contrary, the legislation provides that: all rights and benefits, including terms and conditions of employment, and protection of civil service and collective bargaining of all employees affected by the transfer of the department of economic development to the corporation, shall be preserved and protected under the transfer, and all transferred employees shall be considered for all purposes of article fourteen of the civil service law public employees and employees who are transferred shall remain in the same collective bargaining unit.  It is not clear how this will be accomplished.

• Proposes legislation (S59/A159, Part X) to make permanent the general loan powers of the ESDC.

• Proposes legislation (S60/A160, Part K) to reform of the Empire Zone Program to require that all new program participants to demonstrate that they are producing at least $20 in actual investment and wages for every $1 dollar in State tax incentives.  Reforms will reduce total tax expenditures for the program to $338 million and increase tax revenues by $272 million in SFY2009-10 and $292 million in SFY 2010-11.  When fully effective, $100 million of savings from these reforms will become available for reinvestment through the following initiatives:  GAINS Fund ($50 million); Research and Development tax credits ($50 million).

• Proposes legislation (S59/A159, Part CC)  to create a new $50 million New York Growth, Achievement and Investment Strategy Fund (GAINS) targeted to job creation in strategic industries such as manufacturing, financial services, agri-business, and high technology/biotechnology

• Proposes legislation (S59/A159, Part BB) to authorize ESCD/UDC to transfer up to $60 million in excess funds received from the Port Authority of New York and New Jersey to the General Fund by March 3, 2009. The Corporation would also be required to remit any additional payments received after March 1, 2009 from the Port Authority to the General Fund, subject to a plan approved by the Director of the Division of Budget

• Estimates disbursements for contract employees to be $4.985 million a decrease of $100,000.  The estimated number of contract employees declines by 2 to 75 with an average annual salary of $66, 467. It is unclear whether this is an accurate reporting of consultant expenditures. According to Comptroller reports DED spent $8.3 million on consultant services in SFY 200708.

• Proposes funding the I Love NY program at $11 million, a decrease of $6 million and International Trade funding at $1.5 million, a decrease of $2 million.