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New Jersey's leaders reach deal on arbitration reform

by John Stephenson / /

Late yesterday, New Jersey’sGovernor Christie, Senate President Stephen Sweeney, and Assembly SpeakerSheila Oliver announcedthat they had reached agreement on a proposal to reform arbitration awards forpolice and fire contracts. Theproposal would cap salary increases negotiated through arbitration at twopercent in an effort to make the process fairer for taxpayers who have toultimately foot the bill for salary increases by paying higher property taxes.

The two percent cap, whichwill cover all salary items (i.e. COLAs, step increases) but not pensions orhealth care, will take affect next year and expire in 2014. The proposal alsocalls for a task force to evaluate the cap’s effectiveness. Also, arbitratorswill be prohibited from awarding economic items not contained in previouscontracts. Further, the proposal restricts arbitrators’ fees to $1,000 per dayand $7,500 per case. Arbitrators will also be selected at random.

Police officers claim thatthe arbitration is not in need of reform because relatively few contracts go toarbitration, but mayors have long complained that the current arbitrationprocess is weighted so heavily in favor of the unions that it pushes towns andcities to settle by agreeing to higher salaries. For example, New Jersey’spolice officers are some of the highest paid in the nation.

Legislators,including Senator Sweeney, call this a “truly historic reform for New Jersey”and rightly so; some observers thought these leaders would agree on a cap given the interests involved, namely the powerful police and firefighters unions. This reform will help start to rein in the high costs of governmentthat are consuming budgets and forcing higher property taxes on the backs ofNew Jerseyans. Over the last decade, local government spending has increased from $26.5billion in 2001 to an estimated $44.7 billion this year, an increase of 69percent. Recently, an arbitrator awarded firefighters in the town ofKearny a 17 percent raise over the next five years. Now, Kearny may have to layoff 16 of its employees to meet these expected higher costs. No wonder New Jersey’s state and local tax burden as apercentage of income is the highest in the United States.

Thereis still much work needed to be done – and soon – on reforming New Jersey’sbudget and tax policies. Not only should lawmakers approve this proposal right away, but they should also approve the entire "tool kit" for local government that Governor Christie proposed back in May. But this arbitration proposal negotiated by theGovernor and the General Assembly’s leaders is a good step in the rightdirection.