February 9, 2010
Re: Interest Arbitration Reform
As you know, there is great public interest and media attention regarding public employee benefits, public sector collective negotiations, and binding interest arbitration for Police and Fire. The League has long supported reforms in these areas and others. Besides interest arbitration for Police and Fire, other areas that warrant review and reform include the collective negotiations process itself, civil service and pensions.
With respect to interest arbitration, in 2005, the League’s Arbitration Reform Committee suggested a number of Legislative reforms to the Interest Arbitration Process. Among the changes proposed by the Reform Committee were that: (1) the Arbitrator may not award salary increases in excess of the expenditure cap (N.J.S.A. 40A:4-45 et seq.); (2) the Arbitrator’s Award may provide for salary increases limited to the budget cap imposed by the State of New Jersey and/or any lawful adjustment adopted by the public employer; and (3) the Arbitrator’s award may provide for salary increases limited to the percentage established by the State or the lawful adjustment adopted by the public employer, as may be appropriate, on a department line basis.
In 1996, the Interest Arbitration statute was amended to require consideration of the "total net annual economic changes for all years of the contract". However, arbitrators do not calculate this nor, do they require advocates to provide them the calculation. If the Christie administration is not willing to support a repeal of Binding Interest Arbitration, they should require that the total net annual economic cost of the Arbitrator’s Award may not exceed the property taxes’ ability to fund this cost.
In 2007, as part of the Legislature’s Property Tax Reform legislation the Interest Arbitration statute was amended to add a new ninth factor (4% Tax Levy Cap). To date, the new ninth factor has had little or no impact on the Arbitrator’s Awards. Now, 4 of the 9 statutory factors in Interest Arbitration address the employer’s fiscal situation. For example, the Arbitrator must consider and analyze the interests and welfare of public; the lawful authority of the employer (including cap law limitations); the financial impact on the governing unit, its residents and taxpayers; and the statutory restrictions imposed upon the employer including the Tax Levy Cap. Arbitrators are not engaging in a detailed analysis of these criteria. Yet, Arbitrators still put too much weight on a single factor-comparability.
Interest Arbitration should be reformed to provide that the cost of living and the employer’s ability to pay should be given greater weight. The total costs of the Arbitrator’s Award, including steps and cost of living (COLA) increases should not exceed the cost of living. Arbitrators must be required to evaluate and analyze the total cost of the salaries and benefits, including step increases, and must provide a detailed line item analysis and explanation of the costs in the award. Arbitrators must also evaluate and analyze the overall compensation received by the bargaining unit, including vacations, longevity, holidays, excused leave, medical and pension benefits. Last, the process of selecting Arbitrators and the length of time the Arbitration process takes needs to be reviewed. In addition Arbitrators should be required to live in New Jersey.
These are initiatives that members of the League have called for and continue to call for in these economically challenging times. We look forward to your support in pursuing reform initiatives. We ask that you reach out to your State Senator and Assembly representatives and urge them to support the League in moving these reforms forward.
For a copy of sample resolution to send to your state representatives contact Lori Buckelew at firstname.lastname@example.org.
Very truly yours
William B. Dressel, Jr.