By JOSEPH SPECTOR
Gannett Albany Bureau Chief
ALBANY - Soon after he became lieutenant governor in January, Robert Duffy started reaching out to business executives to lure companies to New York. Some of the reactions were startling.
One CEO "actually laughed when I talked about coming to New York," Duffy recalled Friday from his office at the Capitol.
But Duffy quickly added, "They're not laughing anymore."
After scoring a number of legislative victories and a state budget that cut spending for the first time in a decade, Gov. Andrew Cuomo's administration is feeling confident it can tackle its next and perhaps most difficult challenge: reviving the economy.
Cuomo is expected within weeks to roll out 10 regional economic-development councils that will serve as the backbone to the Democratic governor's effort to improve an economy, particularly upstate, that has struggled for a decade or more.
"If we do our jobs correctly, this process can be transformational," said Duffy, the former Rochester mayor who will head the councils. "But it is not quick, it is not an easy fix. It is both a short- and long-term focus."
The councils come with myriad challenges and uncertainties, and many governors have laid out highly touted plans to kick-start the economy only to be met with minimal success.
The Empire Zone program started in the late 1980s under Cuomo's father, Gov. Mario Cuomo, and was expanded so greatly under Gov. George Pataki in the 1990s that it became rife with abuse.
In 2007, Gov. Eliot Spitzer tried to split economic-development efforts into upstate and downstate entities, but that led to infighting and ineffectiveness. Gov. David Paterson tried to change the Empire State Development Corp. back to one agency, but the recession and state's budget woes wiped out any progress.
Business groups have high hopes for Cuomo's plan, which is modeled after his efforts while federal housing secretary to create pots of money for regions to seek competitively.
Each regional council will have about 20 or so members and they will be made up of leaders from business, labor and colleges working collaboratively with state agencies. The goal is to establish a mission for each region and build on its strengths.
"We're encouraged by it because you're going to take the decision making out of Albany and out of New York City and it put in the hands of the local communities," said Brian Sampson, executive director of Unshackle Upstate, a Rochester-based business group.
Cuomo has pledged $130 million in seed money statewide to help the regions attract jobs and new companies. That's a pittance compared to what the state has spent on job-creation efforts that have produced marginal results.
State budget documents show that from 2000 to 2010 economic-development spending more than doubled, from $448 million to $1.6 billion. Private-sector employment, though, declined statewide by 2.1 percent, or 150,000 jobs, and dropped 38 percent, or by 288,000 jobs, in the manufacturing sector, mainly in upstate.
In May, New York's unemployment rate was 7.9 percent, down from 8.6 percent a year ago. The numbers are better than the national unemployment rate of 9.1 percent.
Economic-development officials said Cuomo's goal shouldn't be to simply spend taxpayers' money to entice companies, which has been past practice. He should be looking to work with existing companies to help them expand and to build hubs of hi-tech industries - which, for example, is already bearing fruit in the semiconductor field in the Albany area.
Eighty percent of business growth in the state comes from existing businesses, said Brian McMahon, executive director of the state Economic Development Council.
"Regional councils can play an important role in kind of shifting the state's focus in economic development from looking outwardly to try to attract businesses in to taking a more bottom-up approach," he said.
How the councils will work and how they will interact with each other remains unclear. Cuomo and Duffy have yet to detail specifics or who will serve on them.
But Duffy said one main council will oversee the rest. As Cuomo has done with other panels he's established in his six months in office, he's expected to include a variety of interests on them and give them specific target dates to finish parts of their work.
The Empire State Development Corp. will have paid staffers handling the day-to-day operations of each council, Duffy said. He plans to attend each full meeting of the councils.
Andrew Rudnick, executive director of the Buffalo-Niagara Partnership, said the councils will need a clear focus.
Cuomo succeeded at having a clear agenda during the legislative session that ended last month, he said. He got a reluctant state Legislature to adopt a property-tax cap, ethics reform and legalize same-sex marriage -- his top priorities.
A tax cap and a cut in state spending this year have been touted by Cuomo as signs that New York is aiming to rid its stigma as a high-tax state.
Rudnick said the job-creation efforts need to get away from a matrix that bases state aid solely on the number of jobs a company creates. It was a system used under the Empire Zone program, in which companies got tax breaks for every new job. Many times, though, they got the breaks even when jobs weren't created.
"I think it's a lot more complex than that," he said. "I think it's about quality of job. I think it's about investment. I think it's being green."
He and others also questioned whether the competitive grant program would pit one region against other. Also, rural areas with fewer resources may struggle to compete with larger metropolitan areas for the money.
"I don't want the competition for funds to get in the way of necessary collaboration," Rudnick said.
But Duffy said the regions would be working together. He pointed out that many regions already developed job-creation blueprints under prior administrations, which could be used as the councils get underway.
"What Governor Cuomo is creating with these councils is almost one-stop shopping for business development by having all state government there as a partner with the regions," Duffy said.
"It really creates a tremendous alignment to get this whole economic-development platform moving."