All New Yorkers are affected by the global market, which has tested state and regional economies across the nation. We must encourage new and existing businesses to invest in New York State. In order for the Empire State to be more attractive in this competitive environment, it is essential we take steps to reform the states expensive workers compensation system.

In January, Governor Pataki included in his executive budget his plan for workers compensation reform in New York. Following up his commitment to his legislation introduced in November, the governors bill takes a balanced and inclusive approach and addresses the concerns and the interests of both injured workers and employers.

The new measures proposed by the governor would further improve New Yorks business climate, expand the states job creation efforts, and keep New York business " especially manufacturing-based business " competitive.

The need for significant reform is evident and has been petitioned for by all constituencies, including organized labor, the insurance industry, businesses, and health care providers.

Businesses in New York, particularly upstate, are the lifeline of our economy. It is imperative that they not only endure, but thrive and create jobs. The governor understands that businesses cannot excel if the high costs of workers compensation stunts their growth. At the same time he wants to ensure that workers injured on the job receive fair compensation.

Patakis Plan

The governors proposal follows his landmark reform effort in 1996, which has already reduced costs by 25 percent. Building upon this record of success, the governors reform package increases weekly benefits to injured workers while, at the same time, reducing the overall cost of the system to employers. When fully phased in, the governors bill would raise benefit levels for injured workers by 25 percent while lowering costs to businesses by 15 percent.

The proposal increases benefit levels for workers injured on and off the job, increasing the maximum weekly indemnity benefits paid to injured workers by 25 percent from $400 to $500 per week over four years. This is the first increase in the maximum weekly benefit rate in over 12 years.

The bill also authorizes a 100 percent increase in the maximum disability benefit for workers injured off-the-job (Disability Benefits) from the current $170 maximum to a maximum of $340. These significant increases recognize the needs of injured workers.

The governors plan would reduce workers compensation costs for businesses by creating a system of tiered benefit levels for injuries that are not currently scheduled under the law, thereby reducing litigation.

Reforming PPD Claims

New York is one of only eight states that does not apply a schedule to all permanent partial disabilities (PPD). As a result, while permanent partial disabilities account for only 11.7 percent of all claims, they equate to more than 73 percent of all workers compensation costs.

This is a key reason why an independent study of New Yorks workers compensation system conducted in 2001 by the Workers Compensation Research Institute concluded that New Yorks average indemnity cost per PPD claim is 110 percent above the median state.

The governors innovative proposal addresses this inconsistency by establishing a schedule for such injuries, thereby reducing the litigious nature of these claims and coordinating benefits with the level of disability sustained by a worker. The majority of PPDs involving specific body parts " with the exception of back injuries " are already subject to a schedule.

The proposal ties the number of weeks of benefits for these disabilities to the degree of lost earning capacity. While most states just set a flat maximum number of weeks of benefits, the governors reform provides for a greater duration of benefits for partially disabled employees with greater losses of earning capacity. Benefits range in 10 steps up to a maximum of 500 weeks. Only six of the states with a flat maximum set a longer duration.

Again, the governors proposal does not limit the duration of benefits at all for injured workers with the most serious injuries, those with permanent total disabilities, or for the surviving spouse and children of workers who are killed by work-related injuries. Rather, the governors proposal would increase benefits payable to these individuals.

In addition, Patakis comprehensive proposal addresses a number of important concerns for both labor and business. For example, the governors plan also generates savings by reducing frivolous claims against the Second Injury Fund and expanding the Alternate Dispute Resolution program to include the unionized manufacturing sector. The bill also establishes a fee schedule for prescription drugs and medical equipment.

As the largest writer of workers compensation insurance in the state, the New York State Insurance Fund regularly meets with business owners and hears their complaints that compensation premiums are a burden. At the same time, the administration is well aware that benefit levels for injured workers must be significantly increased. The challenge for the state is to address both of these concerns.

The governors proposal achieves this difficult balance with a reform package that benefits both businesses and workers throughout the state. We strongly support the governors comprehensive approach to workers compensation reform.

David P. Wehner is the CEO of the New York State Insurance Fund and former Chairman of the New York State Workers Compensation Board.