Looking out from her State Street office, Sandy Parker points to a vacant parcel between the river and the Inner Loop. The leveled site is a rough-looking reminder of Rochester's past, when much of the area was the pulse of the city, with small factories, stores, and businesses.

Parker heads a nine-county organization whose members come from industries ranging from agriculture to defense communications. President and CEO of the Rochester Business Alliance since 2005, Parker says that upstate, like much of New York, is at a crossroads. Either upstate becomes more business friendly or it will continue to stagnate and lose jobs and people to other parts of the country, she says.

Parker has spent much of the last 20 years trying to connect businesses large and small to Rochester's economic future. Her frank and unwavering support of the area's business community has made her a welcomed guest in some circles and an anathema in others. You can't offend her by calling her a lobbyist.

She was instrumental in the formation of Unshackle Upstate, a coalition of businesses that has been trying to revive the upstate economy. Her mantra -- reform, reform, reform - has won her few friends among public labor unions. And she raised eyebrows a few years ago when she promoted radical change in the governance of the city school district.

Even if you don't agree with Parker's positions, there's no question that the Rochester region has struggled to find its economic foothold. Parker's advice to Governor David Paterson and politicians across the state is to cut spending and to stop increasing taxes at every level of government.

Whether it's through consolidation of services or by cutting government employees, New York's bloated bureaucracy and era of government giveaways has to end, Parker says. The private sector has already made extreme cuts to survive, she says. Now it's government's turn.The following is an edited version of two recent interviews with Sandy Parker.

CITY: Rochester has been in decline since the 1970's. Why did medium-size cities like Austin, Texas or Charlotte, North Carolina grow economically during the last 30 years and Rochester didn't?

Parker: I think to a significant extent it has been due to the economic environment in New York State. And downstate in particular has received more than its amount due in attention in recent years compared to upstate.

You have to consider that Rochester had a higher percentage of its employment coming from manufacturers than most parts of the country. Manufacturing jobs paid more so it really served our economy well for many years.

But as the economy shifted to a more service-based economy, that was good for New York City, but we experienced a loss in our wage growth here. That was coupled with an increase in property taxes, state income taxes, and our business taxes. We began to see an exodus of people from upstate, and I would say from New York State in general. When you drive the businesses out, you drive the jobs out.

Those are the primary reasons that we have not done as well as other parts of the country like Austin, which by the way, doesn't have a state income tax.

What are the primary impediments to our economy looking into the future?

I firmly believe it is the overall business climate and dysfunction in Albany. It costs businesses more to come here and set up shop. It costs more for existing businesses to expand. And when they recruit employees here, those people are hit with higher taxes.

New York State is really being driven by special interest groups, particularly public labor unions. So it has created an atmosphere that is not private-business friendly.

Can you be more specific?

All you have to do is look at the conversation about what they're calling the "millionaire's tax". It's really a tax on individuals earning $250,000 a year or more. These people are largely business creators and incubators.

If they keep seeing their income taxes increase, they will go elsewhere. They're not wedded to upstate or New York. They will go to North Carolina or Texas or any number of other places that are more pro-business.

You see the population decline in this region going hand and hand with the loss of businesses, don't you?

Oh yes. People move to where the jobs are. I think if we had more jobs and a greater diversity of jobs, we would not have seen the decline in population that we've experienced. And we would have more success in retaining our young people if we had an array of good-paying jobs to offer them after graduation. This is a serious problem for our region.

But some would argue that high taxes can't be entirely to blame for the upstate slump. If you look at states like California and Massachusetts, they both have very high taxes. And look at the explosion in growth they've experienced in multiple industries, particularly in high technology.

Well, first, I think we are seeing the implosion of California.

But there is another piece to this. When Wall Street was strong, we had good revenue coming off of those salaries. And that offset the job losses in upstate. But when Wall Street imploded, you can see what this has done to the entire state, especially when there is no help coming from a strong upstate economy.

The same thing has happened in California for many of the same reasons we have discussed. They are in as bad or maybe worse shape than New York. I really think that there has to be real reform there for many of the same issues New Yorkers are facing. It can't be a series of patches. We need real reform.

You have expressed disappointment in Governor David Paterson. You're not alone; his poll numbers have dropped significantly. What do you think of him now?

Well, I am a little disappointed in him, but I am still a supporter. I think he truly wants to do the right thing and I think he understands the serious problems New York State faces. We cheered when he held his ground against the Legislature on many of the spending items and reform issues.

I, quite frankly, was very disappointed in the deficit reform bill because all that does is plug holes. It increases taxes. It takes money from one pot and moves it to another pot. It does nothing to reform the way the state delivers services.

The tax on gym memberships and soda pop, though I hear now that is dead, and taking money from the Power Authority's general fund, which took money away from Power for Jobs - these things do nothing to create jobs and stop spending. They just look to other sources of spending to fill the hole.

If you were advising Paterson on the budget and how to revitalize the upstate economy, what would you tell him?

I would tell him he has to cut the work force, just like private businesses have been forced to do to reduce costs. The cuts that they've made so far don't even begin to make a dent in what needs to be done.

I would raise an awareness campaign to withhold the 3 percent pay increase public employees are scheduled to receive. I mean, you can pick up the paper every day and private employers are saying no pay increases right now. And people will understand because they are thankful to have the jobs.

I would look at Medicaid benefits because the benefits people receive in New York State are the Cadillac of all benefit programs.

And I support his idea of reforming Tier 5 pensions, which would make it mandatory that employees contribute to their pensions. I mean, that's the real world we live in now.

All that being said, he's been facing a real battle. And there have been signs that he is wavering. He needs to put strong people around him, because I think this governor really wants to do the right thing, but the clock is ticking.

To switch to a subject that is more local, you weren't the first person to come out in support of mayoral control of the city school district, but you revived the conversation. Do you still support it?

I meant what I said and I still support it.

There are many different forms of mayoral control and I think when you talk about it, you have to exclude the current mayor because it has to work no matter who is in the mayor's office. I happen to think that it would be especially right for our current mayor, but you can't just look at Bob Duffy and say he should have mayoral control.

But I think there needs to be greater accountability and authority over those dollars the city provides to the district, something like $119 million.

What is the problem with many of the city's schools? Why have we seen such a low graduation rate, though it is improving?

I think there are several things going on there. I think they have just too many programs, and not enough focus. I think we still have too many dollars spent in administration and not enough on teaching in the classrooms. And I don't think we have the right leadership in some schools.

If you look at those schools that are recognized as high-performing institutions, they are institutions with excellence in management at the principal level. So I think we need to do a better job of making sure that we have the highest quality principals running all of our schools and that they have the appropriate authority to do their jobs, just like in a private business.

Too often, I think principals find their hands are tied in trying to get rid of a bad teacher or a bad administrator. They just move them to another job somewhere else in the district and live with them.

What role has the school district played in business and real estate values? People may like city living, but if they have children, they head to the suburbs before those children reach school age.

The school district right now is an obstacle to raising the economic profile of the person who lives in the city. Until we solve the problems with our schools, you're going to have that very scenario. We know that young people want to live in the city, and I think we're doing a tremendous job of providing them with the kind of housing options that they want. But once they get married and that kid gets ready for kindergarten, they're out of here.
Then we see that once the child leaves and they are empty nesters, they want to come back to the city. But we're losing a whole cohort of people that work, live, and spend money here. And most of all, we lose those people who add to the overall tax base of the city.

When you look at the high technology growth of the Silicon Valley and Boston's high-tech corridor, it was more than the clustering of colleges that caused that growth; there was an enormous amount of venture capital money flowing into those areas. But here Rochester is right next to Wall Street, and it gets very little investment.

You're absolutely right. And that is something that the region really has to work very hard on because until we have that, we won't have the sheer volume of entrepreneurial ideas and small start-up companies that you see in those parts of the country.

I mean, you've got groups like the Trillium Group and High Tech Rochester that focus on that, but we must have more money coming into the area to support these people who are trying to create new businesses here and need the capital.

Is that because Rochester has an image of being an old company town?

I think that's true, but I think that image is transforming itself. But I don't think we've made the full transformation yet.

Again, I think that the business climate in New York overall doesn't encourage entrepreneurship. You don't have people chomping at the bit to start companies here.

A lot of your critics would say that you're anti-union. Are you?

I think there was a time and a place for unions in this country, and there may still be a place for unions. But particularly in this state, I feel the pendulum has swung too far to the other side.

I think I gave you the figure that 70 percent of New York State workers are unionized. I think part of the demise of the automobile industry, which greatly impacts our area, is partly the fault of the unions. When you look at the benefits and wage packages that they bargained for, they put themselves in a spot where they became totally uncompetitive.

But if we had health-care reform in this country, the auto industry might be more competitive. The Japanese and the Ontario, Canada employers don't have to carry that burden, so they can produce a less expensive product.

You know I am not a proponent of universal health care. And I know that everyone likes to point out the Canadian model as the one the US should follow. But tell me why when it comes to elective surgery, so many Canadians come across the border to get the care that they want? It's because they can't get it there, and if they can, they have to wait so darn long to get it.

I do think we need to reform the health-care system to make it more efficient. I think employers genuinely want to provide their employees with that benefit. But a national health care system is going to be a very expensive system. We need to realize that we have to pay for it if that were to happen. And the only way to pay for it would be to increase our taxes, which I don't think is a good way to go.

The University of Rochester is the area's largest employer. Looking 20 years into the future, what are the growth industries of tomorrow?

I think our future is with our 19 colleges and universities; many of them are top-ranking institutions.

I don't think that the growth will come out of their teaching capabilities, but out of the research and development capabilities that they have. Companies are coming out of this work that they are doing. Two examples are the Clinical and Translational Sciences Center at the UR and the Golisano Institute for Sustainable Manufacturing at RIT. The Center for Governmental Research did a study on the latter and they found that 6,000 jobs could come out of there. These institutions have the unique capacity to transform our region.

I think health care will continue to grow in our region and we have a lot of defense industry-related companies. With the number of large and small conflicts we have throughout the world, the Harris Communications and ITT Systems will continue to grow.

Manufacturing as it was once known has taken a beating. But there are CEO's and managers of local companies that have jobs they can't fill.

That's true. For as long as I've been CEO of this organization, we've had companies in the tool and die industry in particular with this problem.

You need to understand that these are the companies that supply a lot of other companies with the parts they need to function. They just cannot get these young people interested in these jobs.

I think there is a lack of understanding about what this work is like now, and I think parents want their kids to get a four-year degree rather than look at the trades. They have an old frame of reference of what the environment is like in these places. But these are good-paying jobs that start at $40,000 to $60,000 a year.

We really need to reach our guidance counselors and parents because I think there needs to be some education about what the trades can offer some students today.

Rochester has traditionally had this thing about being a white-collar town; we've always looked at Buffalo as the blue-collar town. What is Rochester today?

I think the people who live here have an appreciation for the arts and culture. We are a concerned community. We're involved. I don't think that we ever were a blue-collar town. I think first and foremost, we're a college town at this point and we're just beginning to realize that.

I also think we are resilient. When you think of the downsizing that Kodak went through over the last 10 years, it wasn't pleasant, but we've survived it where a lot of other places wouldn't have done as well.

The people who live here want to stay here. Even when people lose their jobs, they often hang on as long as they can because they really would like to stay here. They don't want to leave. And I think that says something about upstate.