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Do incentives really work?

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New York relies heavily on perks like tax breaks to induce businesses to come or grow here. According to a study by the Fiscal Policy Institute, the state handed out more than $5-billion in tax incentives last year alone. But as the Innovation Trail's Zack Seward reports, business groups say structural changes are needed if New York wants to boost economic development.

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Mark Peterson's job is to sell companies on setting up shop in and around Rochester.

The CEO of Greater Rochester Enterprise says New York has a lot to offer: a high-quality workforce, access to major markets and plenty of logistical support.

PETERSON "So there's a lot of reasons why doing business in New York is a great play for companies, but they really gotta batten down the hatches and say, "Gosh, I gotta really deal with the massive paperwork and regulation and mandate system that's in place," and that can be debilitating."

Peterson says high taxes and layers of regulation can make doing business in New York a costly proposition.

Last year, New York placed dead last in a think tank's ranking of how friendly state taxes are to business.

Calls for making the state more economically competitive have grown increasingly louder ever since.

PARKER "First and foremost, we have to cut spending."

Sandy Parker is the CEO of the Rochester Business Alliance. Earlier this month, her organization presented an economic "Survival Guide" to Albany lawmakers.

The RBA"s three main demands of state government are pretty standard for pro-business groups:

SEWARD "To cut spending, to cut burdensome regulations and""

PARKER "And no new taxes."

It's a formula that Parker says will make New York more attractive to business, and so far it's a message that Governor Andrew Cuomo has seemed to take to heart.

Parker was on Cuomo's transition team, and she's also on the board of the powerful state-wide business group called the Committee to Save New York.

Parker says the committee's goal is to make the case that deep spending cuts and business-friendly reforms are necessary if the state wants to be on a QUOTE "positive pathway."

PARKER "There's going to be a tremendous push from public sector special interest groups to push back on that."

With a projected budget deficit of about $9 billion, early indications are that Parker's prediction could be spot-on.

Recent media reports said Governor Cuomo was considering laying off between 10- and 15,000 state workers in his forthcoming budget.

New York unions like the Public Employees Federation responded to the news by saying that such cost-cutting measures would be devastating.

Darcy Wells is the union's PR director.

WELLS "Even to discuss the possibility of laying off 10,000 or more state employees, we have to ask, you know, which services are taxpayers then willing to do without."

Wells says state workers shouldn't have to shoulder the burden of the massive budget gap.

So here's the choice the governor is faced with: cut government spending in an effort to make business in the state more affordable. Or raise some taxes to maintain services like education and state parks for an already-strapped working class.

Frank Mauro, head of New York's Fiscal Policy Institute, says the state is in a bind.

MAURO "States don't have any easy choices. During recessions to balance their budgets, states have to either increase taxes or cut services. Neither of those are good for the economy."

Cuomo has pledged not to raise any taxes. Mauro says that's emblematic of the governor's so far pretty one sided approach to fixing the budget, largely seeming to favor business interests at the expense of services.

Mauro says Cuomo and his pro-business lobby are playing down certain positive economic indicators, while playing up the magnitude of the fiscal crisis.

MAURO "The deficit is being pictured as more daunting than it really is and I think it's being done in order to justify more radical solutions than would otherwise pass muster."

The Governor is expected to present his budget in Albany on Tuesday. Business, labor and watchdog groups can expect to find out then just how business-friendly Cuomo plans to be.

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