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As I See IT

Inefficient System Puts
Fiscal Squeeze on Local Governments

drawing of man holding large oil can to oil three cogwheel gears

By Vanessa Sandom, Mayor,
Hopewell Township;
David Sandahl, Deputy Mayor,
Robert Cacciabaudo, Committee Member,
John Murphy, Committee Member

New Jersey is a great place to live—if you can afford it. Residents, seeing no prospect of property tax relief from leaders in Trenton, are fleeing in record numbers. They came to the harsh reality that a mountain of evidence—census data, polls, studies, reports and expert opinion—confirms: the economic future for New Jersey is bleak. Government costs go up, taxes (especially property taxes) go up, and expectations spiral downward.

One of the root causes of this problem is budget slippage. When local governments negotiate new contracts with unions, the cost of those union contracts habitually go up. A perfect example occurred earlier this week when the town of Plainfield announced that the municipal government and police union had reached a deal on a 3-year contract, bringing great expressions of relief from both sides.

However, when you examine the numbers—the combination of a cost-of-living increase, plus steps and longevity increases—they actually exceeded the 4 percent annual tax levy cap mandated by the state—not only during the life of the contract, but into the future as well. In a static budget environment it is inevitable: when salary costs increase, something must make up the difference, and that can translate into a reduction in services.

While Plainfield and the PBA may walk away from these negotiations pleased with the result, the shrinking base of New Jersey taxpayers is left with new budget pressures.  The downward spiral continues.

We are experiencing something similar in Hopewell Township.

Over 7 months ago, the PBA made a formal proposal seeking a 28 percent increase over three years. That’s an average of 9.3 percent per year—more than double the state mandated 4 percent cap, and far above the annual pay increases typical in the private sector. Two weeks ago, the PBA rejected the township’s most recent offer of a 13.1 percent increase over the three year contract (an average of 4.4 percent increase per year). 

What makes this contract negotiation even more difficult is that we’re speaking about police officers who are truly dedicated to the safety and wellbeing of our citizens, something we’ve learned to appreciate even more keenly since 9/11. Hopewell Township supports its Police Department, but we simply cannot afford pay increases that are so far out of line.

When a municipality cannot come to terms with the PBA, the police union has a right to binding arbitration—that is, a third party will be named to settle the dispute. And indeed the PBA has informed Hopewell Township they intend to seek arbitration.

While we hope the arbitrator considers the state-mandated 4 percent cap, the Hopewell PBA will also point to the precedent set in Plainfield and other municipalities.  If the arbitrator rules against Hopewell Township, residents will need to brace themselves for a big cost increase in 2008. The downward spiral continues.

By law, every single one of the state’s 566 municipalities and 616 School Districts must negotiate with their respective local unions. This is hardly an efficient and effective use of taxpayer dollars. Not only is there enormous waste and redundancy in the administration and delivery of services across school districts and counties, but with 566 municipalities, the unions can typically find favorable examples from which to cherry pick precedents.  The downward spiral continues.

When will this end and what are the solutions?

The problems are real and solutions will be difficult to implement.  But they do exist if all parties, regardless of political affiliation—union or administration, taxpayer or taxing entity—decide to move forward in good faith to support demonstrable change in New Jersey government.  We must all work together to eliminate or reduce redundant and overlapping services at the municipal, county, school board and state levels.
 But one municipality can’t change the system alone.

Last year, the Legislature was challenged to come up with reforms that would reduce the cost of government in New Jersey, reform state aid to education, and control property taxes. After nearly a year of hard work, almost 100 specific reforms were proposed by joint legislative committees.

But the moment was lost when unionized state employees effectively torpedoed statewide reform.
Will the downward spiral continue?

We hope not. The Governor and Legislature together must mandate collaboration among local governments and eliminate irrational fiscal systems that impede collaboration or have the courage to combine counties, municipalities and/or school districts into a much more efficient coalition.

Bring us into the 21st Century of government financial management, reduce the costs of government, and make real property tax reform possible. The Governor and the Legislature can do it—we must all demand that it happen.

Alternatively, will the last taxpayer leaving New Jersey please turn out the lights?

The authors are members of the Bi-Partisan Hopewell Township Committee




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