League of Municipalities Testimony by
William Dressel, Executive Director; Brian Kronick, Labor Relations Counsel; and Gregory Fehrenbach, Coordinator, Interlocal Municipal Cooperation and Management Advisory Service
Before the Governor’s Council of Economic Advisors
Monday, June 14, 2010
Thank you, Chairman Grady and members of the Council. I am Bill Dressel, Executive Director of the New Jersey League of Municipalities. With me today are Greg Fehrenbach, our League Municipal Management Advisory Service Coordinator, and Brian Kronick, our Labor Relations Counsel.
The New Jersey State League of Municipalities is a voluntary association created to help communities do a better job of self-government through pooling information resources and brain power. It is authorized by State Statute and since 1915, has been serving local officials throughout the Garden State. All 566 municipalities are members of the League. Over 560 mayors and 13,000 elected and appointed officials of member municipalities are entitled to all of the services and privileges of the League.
On behalf of all those dedicated public servants, thank you for inviting the League to share our perspectives here today.
No municipal official wants to raise taxes. In addition to their commitment to their constituents, they are also motivated by an enlightened self-interest (They pay property taxes, too.) and by a desire to remain in the public’s service beyond the next election. Local budgets are subject to intense public scrutiny. Inflation alone forces municipalities to spend more, just to maintain current service levels. But aside from inflation, local expenditures are driven by State and federal mandates, demographics, weather-related emergencies and a host of other factors beyond the control of local budget makers.
As you know, in New Jersey, State government and local governments share service responsibilities and resources. Both the State and local governments (municipalities, counties and school districts) must provide a variety of important public services. Municipalities are largely responsible for public safety, sanitation, local roads, emergency response and recreation, to name a few. However, the resources available to different levels of government also differ greatly. Unlike the State, local governments have few revenue options. This has resulted in the continued heavy reliance on property taxation as the major source of revenue for municipalities, counties and school districts.
Both the level of property taxation and the quality of local services directly affect the economic vitality of our State.
As you will hear, personnel costs represent the biggest components of municipal budgets. Police salaries and benefits are often the largest part of personnel costs. The salaries are often set by arbitrators, pursuant to State Law. And the post-retirement benefits are also often mandated by the State. Other State mandates limit local management flexibility in virtually every administrative function – from personnel to planning to purchasing. And still other mandates impose inflexible service and programmatic demands on local budgets.
With regards to post-retirement benefit costs, I want to provide you with a copy of the League’s COPE Report. With regards to mandates that limit management flexibility, I have included a copy of the League’s Privatization Testimony. And with regards to mandates that impose service and program requirements on local budgets, you are also receiving a copy of two Unfunded Mandates Reports – one done by Hardyston Township Manager Marianne Smith, and the other done by Bob Casey, Executive Director of the New Jersey Municipal Management Association.
To describe these matters in detail, I’d like to turn now to Brian Kronick and Greg Fehrenbach.
The League of Municipalities has taken a number of positions over the years regarding reforms in legal processes that impact cost drivers for local governments particularly in the areas of personnel and personnel related costs: interest arbitration and salaries which drive medical insurance costs, pension, workers compensation and other benefits costs, labor relations and collective negotiations including grievance arbitration and civil service.
- 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:
- The arbitrator may not award salary increases in excess of P.L. 1976, c.68 (40A:4-45 et seq)
- 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.
- 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 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.
- Arbitrator’s 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 cost of the arbitrator’s award, including steps and cola increases should not exceed the cost of living.
- Arbitrators must 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.
- In summary, arbitrators must accurately calculate the “Total Net Annual Economic Impact” of their decisions, not merely issue awards of percentage increases to already overbearing and excessively expensive salary guides or to increase clothing allowance or medical coverage without recognizing the real cost to the employer as it now the case.
- The process of selecting arbitrators and the length of time the arbitration process takes needs to be reviewed. Arbitrators should be required to live in New Jersey.
- As is being shown by the current governor, for government to be effective and to execute difficult decisions, it is necessary to provide government the tools to do so. The inhibitors to strong executive decisions must be relaxed to allow municipal and other officials to take responsible actions that will permit prudent management of their scarce resources. Relax the mandates. Relax the regulations. Permit municipal officials to creatively respond to the demands of their constituencies.
- Expansion of managerial prerogatives and the scope of negotiations need to be explored to allow management more flexibility in these difficult times (i.e., furloughs)
- Remove the ability of unions to organize employees by the mere signing of a membership card and return to secret ballot process in effect for nearly four decades prior to change in 2005.
- While subcontracting is a non-negotiable managerial prerogative as recognized by the courts, public employers are required to negotiate the impact of the subcontracting decision. Legislation, which would amend the Employer-Employee Relation Act to permit governmental employers to utilize private and non-profit vendors to supply municipal services without the need to negotiate the impacts of these actions, would assist municipalities that are forced to negotiate the impact of the subcontracting decision.
- Prevailing wages regulations are really union wage regulations. Eliminate the artificial controls that exist on contractors who provide municipal services. Such reforms would allow market forces to determine the appropriate amount to be paid for municipal services. These regulations directly and uniformly increase the cost of services and capital improvements needed to maintain the infrastructure of our municipalities. If the public is concerned about the cost of government, it is necessary to eliminate the artificial inflators that perpetuate the increased cost of governmental services.
- Legislation to permit local governments to remove themselves from civil service. As it stands today, a local government can opt into civil service and can’t get out.
- Regulation reform regarding involuntary furloughs and staggered furloughs. Under present regulations, furloughs are purely voluntary.
- For those municipalities that remain, process personnel actions in more timely and useful manner so the system does not adversely affect attempts to hire, promote, transfer, discipline or take other necessary actions as a responsible employer.
- Reduce the time line to effect layoffs. Municipalities need to make decisions that are timely. A minimum of 105 to 130 days to effect layoffs does not permit municipalities to be efficient or effective.
- Raise retirement age
- Increase employee contributions
- Change pension calculation from last year in PFRS and last 3 years in PERS to last 5 years.
- Continued to encourage municipalities, counties, fire districts and school districts to pursue shared services
- Continue to fund SHARE grant program to pursue this objective
THESE ARE INITIATIVES THAT MEMBERS OF THE LEAGUE HAVE CALLED FOR AND CONTINUE TO CALL FOR IN THESE ECONOMICALLY CHALLENGING TIMES.
Additional Information below.
New Jersey Municipal Management Association, Inc. – Mandates Issues
Hardyston Township Mandates Analysis