Do Not Let New Jersey Tip the (Arbitration Awards) Cap

By Suzanne M. Walters

When unions representing local police and firefighters cannot agree to new contract terms with local governments, State law mandates that the parties submit to binding arbitration. A third-party referee, then, sets the terms of the contract, which include economic items like the salary scale, longevity bonuses, uniform allowances and overtime. In the past, that process has yielded results that all too often did not consider the interests of our property taxpayers.

In 2010, Governor Christie took the bull by the horns. He was joined by a bipartisan group of legislative leaders and a cap was imposed on arbitration awards. As Senate President Sweeney said at the time, “For too long, the system has been tilted in favor of the public unions and arbitrators have enjoyed too free of a hand in crafting contracts that did not even have to consider a town’s ability to pay. This compromise legislation will ensure that taxpayers are protected and that workers are treated fairly.”

The reforms capped arbitration awards on base salary items to no more than 2% in the aggregate per year of the contract, provided for random selection of arbitrators, expedited the determination of awards, required the arbitrator to provide a written report detailing the weight accorded to each of the required considerations and expedited the appeal process.

The law was a compromise and given the dynamics of the negotiations, the best compromise at the time.  Under the terms of the ultimate compromise, the limit on arbitration awards is set to expire in April of this year.  Failure to extend the 2.0% cap on interest arbitration awards will force municipalities throughout the State to further reduce or even eliminate crucial services, personnel, and long-overdue infrastructure improvement projects in order to fund an arbitration award.

A keystone in the effort to control local costs – and property tax rates – is Police and Fire Binding Arbitration Reform. Even if your municipality does not have paid police or fire services, excessive arbitration awards can drive up your property taxes. A ripple effect takes place when uniformed employees receive generous terms. Other employees seek similar increments. Then, their counterparts in neighboring jurisdiction do likewise. These increases are, then, taken into account in the next wave of arbitrated settlements.

You can see why arbitration reform has long been a priority in local government’s broader campaign for meaningful mandates relief. Especially in these trying times, all municipalities – and all property taxpayers – have a stake in binding arbitration reform.

Absent timely action by the Legislature, any contract that expires on or after April 1, 2014, will be subject to all new procedures and requirements, EXCEPT the 2% awards cap.  Without those limits, arbitrators will be able to impose awards similar to those issued prior to the implementation of the 2% cap.  Such awards would immediately threaten funding for all other municipal services. And, in the not-too-distant future, such awards could force local budget makers to reduce public safety staffing levels, as fewer local employees steadily take home higher percentages of local funds.

Governor Christie highlighted the 2010 Interest Arbitration Reforms and the need to “renew the cap on interest arbitration and make the cap permanent” in his State of the State address. But to date, no legislation has been introduced. New Jersey property taxpayers need the Legislature to act.  The ‘sunset’ is now just one month away. The clock is ticking. Please contact your Legislators as soon as you can.

With the 2% revenue cap remaining on the municipal employer, there absolutely has to be a 2% cap retained on the largest appropriation in most municipal budgets.

Suzanne M. Walters is President of the NJ League of Municipalities and Mayor of Stone Harbor Borough

Do Not Let New Jersey Tip the (Arbitration Awards) Cap