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October 22, 2010

RE: A-3393 – Arbitration Reform Proposal Advanced to Second Reading

Dear Mayor:

Yesterday in Trenton, the Assembly Budget Committee amended and approved A-3393, with a vote of 7 in favor and 4 against. The bill could be scheduled for a vote by the full Assembly as early as this coming Monday, October 25.

 Among its provisions, the bill would:

     * Establish "last offer" as the terminal procedure for resolving contractual impasses between public employers and their police and fire collective bargaining unions, under which each side would present their final offer, with the arbitrator selecting one as the final agreement.

     * Amend current criteria that an arbitrator is required to consider by re-emphasizing the new two-percent property tax levy cap, as one among the 9 factors for consideration by an arbitrator when making decisions.

     * Require arbitrator decisions to be accompanied by a written report explaining in detail how each of the statutory criteria played into their determination of the final award. Such report shall certify that the arbitrator took the local levy cap into account in making the award.

     * Change the process for selecting an arbitrator for interest arbitration to ensure a more varied and impartial group of arbitrators makes decisions.

     * Change the process by which judgments are appealed.

     * Require arbitrators to meet stringent professional responsibility, impartiality and ethics guidelines.

The amendments to A-3393 would also impose tighter time limits on the arbitration process.

While we recognize the positive aspects of this proposed reform, we do not believe that it will provide real relief to our property taxpayers. Nor will it provide, in future years, assistance to local budget makers in dealing with the permanent 2% levy cap.

Having approved an inflexible 2% cap on the property tax levy, State policy makers need to recognize that any arbitration awards with a total economic impact of more than 2% will force cuts elsewhere in local budgets. To fund increased public safety compensation, in excess of the 2% cap, municipalities will need to cut services, salaries and/or personnel in other departments or reduce the number of uniformed personnel. And even those actions will not satisfy the public’s hunger for reduced property tax burdens. They will only slow the rate of growth.

Accordingly, we have advocated for a hard 2% cap on the total economic impact of any arbitration award.  Such a cap is included in the provisions of S-2310 and its companion measure, A-3283.

In summary S-2310/A-3283 would:

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

We support the provisions of S-2310/A-3283, which require the arbitrator to cap the full economic impact of the award at the 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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