Senate President Stephen Sweeney (D., Gloucester) called the compromise reached between Christie and Democratic legislative leaders a significant achievement.
"For too long, the system has been tilted in favor of the public unions, and arbitrators have enjoyed too free a hand in crafting contracts that did not even have to consider a town's ability to pay," Sweeney said.
"This compromise legislation will ensure that taxpayers are protected and that workers are treated fairly. It's a revolutionary change for arbitration in general, and especially for New Jersey."
The measure, which would set a cap on arbitrated salary increases, does appear to strengthen the hand of municipalities at the bargaining table. But given the small portion of property taxes that goes toward police and fire salaries - most property-tax dollars flow to school districts - it is difficult to say what the impact would be on homeowners' tax bills.
Critics of the current salary-arbitration process - which determines compensation when contract negotiations reach an impasse - say it is so favorable to unions that towns routinely settle for pay increases higher than they would like for fear of the alternative. Not only can the arbitration produce higher salaries, but it is also lengthy and expensive.
"For the past three decades, no other single driver has had a great impact" on property-tax increases, said Bill Dressel, executive director of the New Jersey State League of Municipalities.
Dressel and other critics say that arbitrators place too much weight on what neighboring towns award unions and not enough on what a municipality can afford to pay.
Public-safety unions, on the other hand, say that the system is not broken, and that they should be fairly compensated for difficult work that is often life-threatening.
"We do feel the police and firefighters of the state are being unduly blamed for property taxes," said Bill Lavin, president of the state Firemen's Mutual Benevolent Association.
According to the U.S. Department of Labor's Bureau of Labor Statistics, law enforcement officers in New Jersey are among the highest paid in the country. In North Jersey, it is not unusual for officers to make six-figure salaries after seven years on the job.
Police and firefighters in New Jersey, who by law are not allowed to strike, have had the right to arbitration since 1977.
The legislation approved Monday would set a 2 percent limit on arbitrated salary increases, including "step" increases, significant raises given to police and firefighters early in their careers, and "longevity" bonuses when employees reach tenure milestones. The cap would take effect Jan. 1 and end April 1, 2014.
Though the cap would not apply to contracts reached through collective bargaining, towns would have a stronger hand if unions could not reject wage proposals in the hope that arbitration would result in a salary increase of greater than 2 percent.
According to a report by the state Public Employment Relations Commission, average salary increases from 1999 to 2009 ranged from 3.64 percent to 4.05 percent, excluding step increases, longevity, and other salary enhancements.
Christie and lawmakers settled on 2 percent because a 2 percent cap on property-tax increases for municipalities also is to take effect Jan. 1. Health-care and pension expenses, significant cost drivers, would not fall under the cap.
The legislation sets a 45-day limit from the date a request for arbitration is filed to the date of the award. Appeals would have to be decided within 30 days. The bill would limit arbitrator pay and would require that arbitrators be chosen randomly, instead of towns and unions being allowed to choose arbitrators together.
A separate bill would create a task force to evaluate the impact of the legislation and the effectiveness of the cap.
Salaries and benefits for public-safety workers represent a significant chunk of a town's budget.
In Cherry Hill, close to 40 percent of the township's budget goes to the Police Department, said Dan Keashen, a spokesman for Mayor Bernie Platt.
Still, a Cherry Hill homeowner who pays the average $8,300 property-tax bill for a home assessed at $140,000 has only $1,300 - or about 16 percent - of that amount go to the municipality. The rest goes to the county (22 percent), the school district (55 percent), and the Fire Department (7.5 percent), with a nominal amount to open-space preservation.
That means even a significant change in compensation for police and firefighters would have only a modest impact on property-tax bills.
To put it another way, Lavin said, "if you were to lay off every single cop and firefighter in the state of New Jersey, homeowners would receive a rebate of $500 to $1,000."
"I reject out of hand any notion that we are overpaid or a burden on the taxpayers," Lavin said.
Lawmakers said they were optimistic that the changes would both bring relief to taxpayers and protect the rights of police and firefighters.
"This legislation is exactly what New Jersey has needed - reform that is both fair to taxpayers and the courageous police and firefighters who protect public safety," said Assemblyman Louis Greenwald (D., Camden).
Another of Christie's "tool kit" measures to help municipalities control property taxes was approved Monday when both houses of the Legislature passed a bill that would revise civil-service rules.
The legislation would make it easier for towns to fire problem employees and should make it easier for towns to share services.
It would not allow towns to opt out of civil service, however. As a result, Assembly Republican Leader Jon Bramnick said, Christie would not support the bill.
Contact staff writer Adrienne Lu at 609-989-8990 or firstname.lastname@example.org.
This article contains information from the Associated Press.