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State Assemblyman proposes plan to keep arbitration cap in place

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State Assemblyman Declan O’Scanlon (R-Monmouth) has proposed a plan that would effectively keep the 2 percent arbitration cap in place in order to keep property tax hikes to a minimum.

The 2 percent cap refers to the 2 percent limit on the raises that police officers and firefighters can receive once their contract disputes are taken to binding arbitration. In 2010, the arbitration cap was 4 percent before being lowered by the Chris Christie administration. The 2 percent cap is directly related to property taxes because those taxes are used to pay the salaries of municipal workers. The cap is set to expire at the end of the year, when it can be either renewed or renegotiated.

O’Scanlon’s plan is part of his report of the Arbitration Award Task Force that is recommending to permanently extend the cap before state Assembly breaks at the end of the year, and before the new governor takes office. His report makes nine recommendations:

  • Make the cap permanent without limitations before its expiration on Dec. 31.  Given the spike in the number of petitions filed on the eve of the initial expiration in 2014, the Legislature should act well-before this expiration to avoid unnecessary professional costs.
  • Continue to give arbitrators 90 days to render a decision.  Increasing the number of days from 45 to 90 has helped address scheduling and unexpected issues that arise while concluding in an expeditious manner.
  • Maintain the 14-day deadline to file an appeal and 60-day period for a final PERC decision.
  • Keep arbitrator compensation capped at $10,000. This figure continues to accurately reflect the workload of an interest arbitrator, while maintaining a reasonable cap on costs.
  • Continue to compound the 2 percent cap each year over the length of the collective negotiations agreement.  The arbitrator may decide to include compounding an award or the parties may agree to do so.
  • Continue to include the cost of increments previously negotiated, such as step movement and longevity payments, when determining base salaries.
  • Adopt proposal to require that full cost be publicly disclosed before contracts take effect.  The new rule, proposed by The Local Finance Board in July, creates a form patterned after the PERC summary showing salary costs along with significant cost drivers, such as step increases, longevity and employer health insurance premium costs.  Governing bodies would need to make the information publicly available at least 7 days before a contract is considered and be publically advertised at least 3 days earlier.  Failure to do either would void the agreement ratification pursuant to the statute.
  • Void final agreements not filed with PERC or that don’t contain a cost summary.  The current statute requires PERC to post negotiated agreements and a summary of all costs on its website.  As there is no enforcement provision for compelling local governments or school districts to submit labor contracts, compliance with these requirements is uneven at best.
  • Abolish "dynamic status quo" step increases. The doctrine of the "dynamic status quo" under case law permits step increases after a collectively negotiated agreement has expired. This doctrine should be abolished and salary guides and related steps should be suspended when a contract expires.  This will encourage parties to negotiate successor agreements in a timely fashion while limiting salary progression to only those periods controlled by a valid contract.  Continuing salary increments and longevity payments after a contract expires causes either unions to prematurely resort to arbitration, or local governments seek to recoup increments already paid after a contract is settled.

O'Scanlon, in a prepared statement, countered the argument made by some state legislators that the issue of whether to extend the cap should be tabled until the new governor takes office.

“If the arbitration cap is allowed to sunset, it will ultimately result in the layoffs of cops and firefighters throughout New Jersey,” said O’Scanlon. “The dissolution of the Lake Como police force, and attendant loss of police jobs, is the canary in a coal mine. Even with the cap in place, in times of fiscal stress police costs are the first examined and most impactful on municipal budget costs.  The arbitration award cap must be kept in place to protect taxpayers and police and fire jobs. That's the truth, despite whatever union leadership is telling its members.”

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Vince Calio

Vince Calio


Vince Calio covers health care and manufacturing for NJBIZ. You can contact him at vcalio@njbiz.com.

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