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New Jersey's leaders reach deal on arbitration reform

by john stephenson / /

Late yesterday, New Jersey’s Governor Christie, Senate President Stephen Sweeney, and Assembly Speaker Sheila Oliver announced that they had reached agreement on a proposal to reform arbitration awards for police and fire contracts. The proposal would cap salary increases negotiated through arbitration at two percent in an effort to make the process fairer for taxpayers who have to ultimately foot the bill for salary increases by paying higher property taxes.

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

Police officers claim that the arbitration is not in need of reform because relatively few contracts go to arbitration, but mayors have long complained that the current arbitration process is weighted so heavily in favor of the unions that it pushes towns and cities to settle by agreeing to higher salaries. For example, New Jersey’s police 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 government that are consuming budgets and forcing higher property taxes on the backs of New Jerseyans. Over the last decade, local government spending has increased from $26.5 billion in 2001 to an estimated $44.7 billion this year, an increase of 69 percent. Recently, an arbitrator awarded firefighters in the town of Kearny a 17 percent raise over the next five years. Now, Kearny may have to lay off 16 of its employees to meet these expected higher costs. No wonder New Jersey’s state and local tax burden as a percentage of income is the highest in the United States.

There is still much work needed to be done – and soon – on reforming New Jersey’s budget 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 the Governor and the General Assembly’s leaders is a good step in the right direction.