Over the past month, the governor signed a budget that cut municipal property tax relief funding by about $400 million, and a new 2 percent cap on future property tax increases became law.
But true tax reform is not done until municipalities have the means to keep expenses down. Now the Legislature and administration must make it their top priority to provide the promised "tool kit" of management reform and relief from state mandates. Up against a hard 2 percent cap with an empty tool kit, local budget makers will not be able to control costs.
If the Legislature wants to know where to start, we'd suggest arbitration reform.
Binding interest arbitration is a state-mandated process for settling collective bargaining disputes between local governments and police and fire employee unions.
When a town or other public employer can't reach a contract agreement with a union representing civilian workers, it can impose its final offer. But in an impasse with a police or fire union, a third-party arbitrator is called in to decide the terms of the new contract.
Since 2000, this binding arbitration process has resulted in reported salary schedule increases averaging nearly 4 percent per year. Only in the last six months have those average salary increases been reduced.
And those figures don't represent the full cost. Salary steps based on years of service — which can amount to as much as $15,000 per officer — often are not considered by the interest arbitrator as a cost to the employer. As a result, a 4 percent increase to the salary schedule can cost an employer upwards of 10 percent, depending on the way the contract is structured.
Awards like this to police and fire personnel can put pressure on the governing body to give similar increases to other public employees. On the other hand, it can also result in layoffs or furloughs of other government workers to pay for the police and fire contract awards.
New Jersey taxpayers pay the highest median property tax in the country and New Jersey police officers and firefighters are among the highest paid in the country. This is no coincidence. Binding interest arbitration is the primary reason for this never-ending rise in the cost of government.
Personnel and related costs account for the majority of municipal spending, and have increased at faster rates than all other local government costs. The New Jersey League of Municipalities encourages the governor and Legislature to make binding interest arbitration reform the hammer in the cost control tool kit.
William G. Dressel Jr. is executive director of the New Jersey League of Municipalities.