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Mayors Advisory
November 24, 2010

RE: Arbitration Reform

Dear Mayor,

Yesterday, Senate President Sweeney and Assembly Speaker Sheila Oliver announced a compromise proposal on interest arbitration reform, one of the key components in the Governor’s “toolkit” initiative.        At a press conference later in the day, the Governor described the proposal as “watered down” reform and vowed to veto the bill if it were to reach his desk.    Each house of the Legislature has one more voting session scheduled before the end of year:  the Assembly meets on December 13, and the Senate meets on December 20.

At issue is whether arbitration awards, including all economic components, will be capped at 2%, consistent with the property tax cap approved by the Legislature and signed into law by the Governor.   The Governor has called for a 2% cap on awards, including health care, pension costs, salary increments and longevity.

The proposal is not yet available in bill language, but here is our basic understanding of the key components of the Democratic leadership’s proposal:

  • Arbitration awards would be capped at an annual, average rate of 2%.   The rate could be more than 2% in any particular year, but would need to average out to 2% over the term of the contract; 
  • The above provision would sunset after three years to, “…to allow the state to gauge its effectiveness.”;
  • Health care and pension costs would be exempted from the 2% cap;
  • Longevity, length of service, salary increments and other similar compensation would be included in the 2% cap.

The proposal would also change the processes for the selection of arbitrators, the appeal of judgments and more stringent professional responsibilities for arbitrators.

As noted above, there is not yet any bill language available to review and analyze.    As you know, the League is on record in support of S-2310/A-3283, sponsored by Senator Doherty and Assemblyman O’Scanlon respectively, which would implement a hard 2% cap on the total economic impact of any arbitration award.   For more on that legislation, please see our Dear Mayor letters of October 22 and October 25.    The League is closely monitoring the developments, and will provide further comment when bill language becomes available.    We view yesterday’s developments as a step towards a consensus between the Legislature and the Administration.  It is extremely important that the Legislature and the Governor’s Office arrive at a consensus and pass reform before the end of the year. 

For more on these developments, please see the following articles:  Star Ledger, Philadelphia Inquirer, or the Associated Press story.   Questions on this letter may be directed to Jon Moran at either or at 609-695-3481 x 121.    

Very truly yours,

Chuck Chiarello                                                           William G. Dressel, Jr.
Mayor, Buena Vista Township                                       Executive Director
President, NJLM                                             




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