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March 25, 2014                 URGENT LEGISLATIVE ALERT

RE: Interest Arbitration 2% CAP

Dear Mayor:

Yesterday identical companion legislation was approved by the Assembly Budget Committee (A-3067) and Senate State Government Committee (S-1869) to extend the 2% cap on interest arbitration, with modifications, until December 31, 2017.   Both bills are scheduled for floor votes this Thursday, March 27.

While we appreciate the Legislature addressing this issue before the April 1 sunset, the League cannot support this legislation in its current format.  A-3067 and S-1869 have a number of serious issues which will undermine the effectiveness of the cap, as well as the health benefit reforms, and not allow taxpayers to reap the full benefits of any savings.

It is of utmost importance that you immediately reach out to your Legislators, Legislative leadership and the Governor’s office and call for amendments to address the following concerns:

  • A-3067 and S-1869 maintain the “one bite of the apple provision.”   Section 3 of the bill provides that a municipality may only utilize the 2% only once.   Effectively, any contract that expired since the interest arbitration cap was first implemented and for which a successor agreement was reached either through interest arbitration or voluntary settlement may no longer be subject to the interest arbitration cap and an arbitrator could award above 2%.  This provision significantly dilutes the number the municipalities that could utilize the IA cap going forward.   This provision should be amended so that every arbitration award would be subject to the cap going forward.
  • Section 2 amends base salary to include the savings realized by a public employer as a result of:
    • increased employee contributions towards health and medical insurance premiums occurring in the 4th year of c. 78, except if at the time of the new collective bargaining agreement, base salary shall include the savings realized in the most recent year of health benefit contributions of c. 78; and
    • a reduction in force which occurred prior to the expiration of the collective negotiation agreement

This negates the effectiveness of the Chapter 78 reforms. 

  • Section 2 includes a “breakage” provision by which an arbitrator may render an award which increases base salary items by more than 2% but no more than 3% based on the savings realized by the public employer from health benefits and/or reduction in force. Under these circumstances, if a municipality is forced to implement layoffs, or furloughs to other municipal employees to effectuate costs savings, the arbitrator is given the freedom to use those savings to provide an increase over the 2% IA cap, again diluting the effectiveness of the cap and creating a two tier employee class.
  • Selection of Arbitrator.   A-3067 and S-1869 returns the old method of each party shall submit 3 names of arbitrators from the panel.  If none of the names submitted by each party are the same then the arbitrator is selected at random by the commission.  If 1 name is submitted by each party is the same than that arbitrator is chosen.  If 2 or 3 names are the same, then the commission shall select at random from the names submitted.    This provision is unnecessary as the past three years have shown that the random selection of arbitrators has produced dispassionate and objective third party decisions that have benefited the property taxpayers.
  • Temporary Extension. This act will take effect on April 1, 2014 and will sunset on December 31, 2017.  Although the League  has been advocating for a permanent extension to the 2% cap on interest arbitration awards, we would recommend supporting a temporary extension provided it: 
  • Eliminates the “One Bite of the Apple” provision;

  • Prohibits arbitrators from including employee health benefit and workforce reduction costs savings;

  • Maintains the random selection of arbitrators


  • The Hon. Chris Christie, Governor,  609-292-6000
  • The Hon. Stephen Sweeney, President,  NJ State Senate, 856-251-9801
  • The Hon. Vincent Prieto, Speaker, NJ  General Assembly, 201-770-1303
  • The Hon. Thomas Kean, Senate Republican Leader, 908-232-3673
  • The Hon. Jon Bramnick, Assembly Republican Leader, 908-232-2073

Questions on this legislation can be directed to either Lori Buckelew at 609-695-3481 or  x112 or Mike Cerra at 609-695-3481 x120 or

Very truly yours,

William G. Dressel, Jr.
Executive Director

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