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October 20, 2010

RE: Arbitration Reform Impasse Develops

Dear Mayor:

As indicated in our October 14 “Dear Mayor” letter, available at, League President Mayor Jim Anzaldi of Clifton led a delegation of Mayors to Trenton, last week, to testify in support of S-2310. The bill, sponsored by Senator Mike Doherty, and its companion, A-3283, sponsored by Assemblymen Declan O’Scanlon and Gary Chiusano, would cap future local employee compensation package increases at the 2% levy cap rate.

In summary S-2310/A-3283 would:

  • Impose a 2% cap on interest arbitration awards and collective negotiations agreements. 

  • Prohibits any mediator, fact finder or police/fire interest arbitrator from recommending or awarding any settlement that would exceed by more than 2% the aggregate amount expended by the public employer on economic issues for the members of the affected employee organization in the immediately preceding employment year. 

  • Provides that no public employer or public employee organization can enter into any agreement on economic issues that exceed the 2% cap.

  • Economic issues are defined as

    • wages, salaries, hours in relation to earnings, and

    • other forms of compensation, such as paid vacation, paid holidays,  health and medical insurance, and other economic benefits accruing to the employees represented by the affected employee organization.

An alternative arbitration reform bill, A-3393, has been introduced by Assemblyman Lou Greenwald. It was scheduled to be heard by the Assembly Budget Committee on Monday, but was not discussed by the Committee. We understand, however, that negotiations on possible amendments among the sponsor, other Committee members from both sides of the aisle and the Governors office are ongoing.

As currently drafted, A-3393 establishes “fair and final offer” as the terminal procedure for resolving contractual impasses between public employers and their police and fire departments. In “fair and final,” the arbitrator must select the final contract offer of one of the parties; basing the selection on the offer the arbitrator deems the “fairer” of the two.  The arbitrator’s decision is binding on the parties.

The bill also changes the procedure for selecting an arbitrator.  Under A-3393, PERC would send the disputing parties a list of five prospective arbitrators.  The arbitrators on the list would be selected by lot from PERC’s special panel of arbitrators.  The parties would have 10 days to review the list.  Before returning the list to PERC, each party is to cross out any names they object to and enumerate any remaining names in an order of preference.  If PERC is unable to appoint an arbitrator based upon the preferences enumerated by the two parties, the commission is to generate a second list consisting of three proposed arbitrators, again chosen by lot.  Each party is to enumerate the proposed arbitrators in their order of preference.  The commission is to appoint an arbitrator based on the preferences enumerated by the parties.  The decision of arbitrator by the commission is final and is not subject to review or appeal.

A-3393 contains a clause that provides that if the parties agree to a method of appointment that differs from the formal procedure set forth in the bill, the terms of that agreement are to be followed.

In addition, the bill mandates that an arbitrator must take into consideration the statutory limitations imposed on a local governmental unit’s property tax levy when evaluating the reasonableness of each party’s last offer.

Finally, the bill modifies the appeal procedure.  Under A-3393, the initial appeal by an aggrieved party would be filed with an appeal panel.  This panel would be made up of two arbitrators, selected by lot, and a member of the Local Finance Board, chosen by the chair of that board.  The appeal panel would have all the powers and authority currently assigned the commission in hearing and resolving appeals of awards, particularly in determining whether an arbitrator fully considered the specific factors outlined in subsection g. of section 3 of P.L.1977, c.85 (C.34:13A-16).  A party aggrieved by a decision of this appeal panel would, as is current practice, file its appeal with the Appellate Division of the Superior Court.   

With the introduction of A-3393, Assemblyman Greenwald has clearly demonstrated his conviction that the current system is broken. The specifics of the bill indicate that new procedures for binding arbitration of police and fire contract disputes must recognize the limits imposed by the new hard 2% levy cap. We thank Assemblyman Greenwald for the time and attention he has given to this problem. And we recognize that A-3393 improves the current process. The requirement that an arbitrator consider the new hard 2% levy cap is positive.

But we fear that it does not go far enough. Instead of asking an arbitrator to consider the cap, we support the provisions of S-2310/A-3283, which require the arbitrator to cap the full economic impact of the award to the same 2% limit.

Nothing short of that can assure local elected officials that they will be able to continue to provide adequate public services to their citizens. Other services will be the first to be cut. But over time, even public safety service levels will decline, as fewer and fewer police officers and firemen and women consume more and more of the levy limited local budget.

Please contact your representatives in Trenton and remind them that when they agreed to impose the new 2% cap on local property tax levies, they committed themselves to enacting serious management reforms and mandates relief initiatives, so that you could manage municipal services within the new limits. Urge them to support identical limits on the costs of future employee contracts, such as those embodied in S-2310/A-3283.

If you have any questions, contact Jon Moran at 609-695-3481, ext. 121.

Very truly yours,


William G. Dressel, Jr.
Executive Director


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