Soundings

William J. Stern
Small Compensation
Autumn 1996

The most remarkable thing about this year’s legislative session in Albany was not so much the lateness of the budget—by 104 days, a new record among the states—as that workers’ compensation, an issue completely unrelated to the budget, was responsible for the long delay. Governor Pataki insisted on commonsense reform of the expensive and counterproductive system; Assembly Speaker Sheldon Silver fought it with all his might, using the tardy budget as his lever; and, in the end, both showed why real, far-reaching change in Albany remains a distant hope.

Workers’ compensation, a widely accepted solution to a very difficult problem, is a kind of no-fault insurance that provides income to employees injured on the job and protects their employers from legal action. In New York, however, the system has a unique twist: it allows an injured worker to sue the manufacturer of equipment that caused his injury and, in turn, lets the manufacturer sue the employer. New York businesses pay some of the highest workers’ compensation premiums in the country because the system also insures them if they lose these circular lawsuits.

Governor Pataki was far from alone in wanting to fix this provision of the law. Groups like the Business Council were clamoring for change, of course, but even the anti-business New York Times called the current system “ring around the courtroom.” Virtually every editorial page in the state agreed. Even 33 Assembly Democrats, risking the disfavor of the party leadership, openly petitioned Silver to support Pataki’s proposals.

So why did Silver oppose so reasonable a measure, especially when tied to ending a long deadlock over the budget? The answer is simple: the trial lawyers. The trial lawyers profit handsomely from “ring around the courtroom,” and the influence of this tiny, wealthy group on Silver—and the state Democratic Party as a whole—is so strong that he was willing to go to the wall to protect their interests. When Silver finally agreed to much of Pataki’s reform package—thanks to the governor’s hardball tactics on a rent-control regulation dear to the speaker’s loft-owning Manhattan constituents—he had the audacity to apologize to the trial lawyers, in public, for letting them down, as if there were no such thing as the public interest.

Pataki’s determination paid off—but it was far too little, far too late. Yes, the state’s businesses will save an estimated $1.3 billion a year in premiums (while New Yorkers continue to enjoy some of the most generous workers’ compensation benefits in the country). But workers’ compensation isn’t where Pataki needed to show his mettle. Months before the showdown in July, he allowed the Assembly and the Senate to restore the prudent cuts—amounting to about $1.45 billion of the $60 billion budget—that he had proposed in Medicaid, higher education, and welfare. In these negotiations, Silver and Joseph Bruno, his Republican counterpart in the Senate, were the big winners, backed by the usual array of lobbies and pressure groups.

No one should underestimate the difficulty of fighting the status quo in Albany, but Governor Pataki simply has not done enough to earn the high marks that reform-minded groups like the Cato Institute have given him. He has yet to stand up and make a forceful case for cutting back the bloated state budget, for restructuring the sleazy and debt-ridden state authorities, for shrinking the state workforce (and its overgenerous benefits), for imposing modern ethics laws on the state legislature, and for giving the people recourse to initiative and referendum. As New Yorkers melt away to other states, the need for these changes is too profound for us to spend much time celebrating minor victories.
 

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