Assembly bill would bind arbitrators in effort to keep tax hikes in check

Posted: October 25, 2010

TRENTON - Ask a New Jersey mayor what he or she needs most to keep property-tax increases in check and chances are you'll hear about changing the salary-arbitration process for police and firefighters.

"For the past three decades, no other single driver has had a greater impact" than binding arbitration, Bill Dressel, executive director of the New Jersey State League of Municipalities, said at an Assembly committee hearing Thursday.

The Assembly is scheduled to vote Monday on a Democratic proposal to overhaul the process, which determines compensation when contract negotiations reach an impasse. The state Legislature in 1977 gave police and firefighters, who by law are forbidden to strike, the right to go to arbitration.

New Jersey's law enforcement officers are among the highest-paid in the country, according to the U.S. Department of Labor's Bureau of Labor Statistics. It is not unusual for officers in North Jersey to make six-figure salaries after seven years on the job, though salaries in South Jersey are often lower.

The Christie administration says the Democratic proposal, supported by Assembly Speaker Sheila Oliver (D., Essex) and Senate President Stephen Sweeney (D., Gloucester), does not go far enough. The bill cleared the committee level in the Assembly on Thursday, with lawmakers voting along party lines.

Christie has called for a hard 2 percent cap on increases to all public employee economic compensation, including benefits such as health insurance. The governor argues that towns will need the cap, among other changes, to adhere to a 2 percent cap on property-tax increases that takes effect Jan. 1.

"Gov. Christie continues to maintain that a hard cap on arbitration awards, as he proposed in May, is the only real way to control costs for municipalities and provide real property-tax relief for New Jersey taxpayers," said Christie spokesman Michael Drewniak. The bill "falls far short of those goals."

Some have argued that with health insurance costs increasing by double-digit percentages each year, salaries would have to be cut to meet the 2 percent cap on total compensation increases.

The Democratic proposal, sponsored by Assembly Budget Committee Chairman Lou Greenwald (D., Camden), would require arbitrators to choose the employer's last offer or the union's, but would put no limit on the wage increase.

Under current law, arbitrators arrive at salary and benefit increases by taking elements of either side's final offers or creating awards from scratch.

"This legislation will go a long way toward controlling and constraining property taxes by turning the arbitration process upside down and finally forcing the focus to be on the fairness to taxpayers," Greenwald said.

But New Jersey previously tried the "final offer" approach and found that arbitrators routinely favored the unions, prompting the Legislature to change the rules in 1996.

Greenwald's bill also would change the way arbitrators are chosen, require them to consider the 2 percent cap on property-tax increases in making their awards, shorten the time frame in which they make decisions, and create a new appeals procedure, among other changes.

Mayors and other local officials argue that the current system is broken, with arbitrators routinely awarding salary increases that exceed inflation and gobble up a disproportionate chunk of municipal resources.

Since 2005, the average salary increase of all police and firefighter arbitration awards has ranged from 2.43 percent in the first six months of 2010 to 3.96 percent, according to the Public Employment Relations Commission.

Those figures do not take into account "step" increases, significant raises given to police and firefighters in the early years of their careers and "longevity" bonuses when an employee reaches a tenure milestone. They also do not reflect pensions, health insurance, or other forms of compensation.

Counting those and other benefits, the real cost of labor increases is much higher, Assemblyman Declan O'Scanlan Jr. (R., Monmouth) said Thursday at an Assembly Budget Committee hearing on the Democratic bill.

"If you're going to have a 6 percent increase in labor cost with a 2 percent [tax] cap, we are headed for disaster," O'Scanlan said.

"The system absolutely is broken, without question," he added. "No one can show me math that suggests the current system works."

Police and firefighters' unions argue the opposite, pointing out that with an average of only 15 or 16 arbitration awards over the past several years, it does not make sense to blame arbitration for the state's property-tax problem.

"The problem is not arbitration," said Dominick Marino, president of the Professional Firefighters Association of New Jersey. "The problem is that Trenton is starving cities and towns by taking back promised aid."

Local officials say that they avoid going to arbitration because they believe the results will favor the unions and because the process is expensive, costing tens of thousands of dollars, or more. They argue that arbitrators pay too much attention to what neighboring municipalities have awarded unions and not enough to how much the town can afford.

In Cherry Hill, nearly half of the budget goes to public safety, including pensions and health care, said spokesman Dan Keashen.

In fiscal 2010, Keashen said, the township spent $14.6 million on salaries for its 127 uniformed police officers, compared with $6.2 million in salaries for its 167 nonpolice employees.

"It's a tremendous burden on the budget of the township," Mayor Bernie Platt said. "The sooner they get rid of binding arbitration, or explain to the arbitrators they can't make these awards, or have some guidelines for them, it will benefit us."


Contact staff writer Adrienne Lu at 609-989-8990 or alu@phillynews.com.

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