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February 9, 2018

League and NJAC Support New Legislation on Interest Arbitration Cap

Yesterday, Senator Declan O’Scanlon introduced S-1558, and Assemblywomen Betty Lou DeCroce and Holly Schepisi introduced the Assembly companion, A-3378. These bills will permanently extend the common-sense limit on interest arbitration awards and provide immediate tax relief. They will also enact other reforms recommended in the September 2017 Report, made on behalf of the Governor’s appointees to the Interest Arbitration Task Force.

The New Jersey League of Municipalities and the New Jersey Association of Counties both strongly support this essential response to the January 1 expiration of the 2% cap on interest arbitration awards.

The 2% cap on binding interest arbitration awards, first enacted in 2010 and extended for an additional three years in 2014, empowers municipalities and counties across the State to effectively control public safety employment salaries and personnel costs. In general, local governments dedicate the majority of their overall annual operating budgets to employee salaries, wages, health benefits, and other related costs. In addition to these considerable expenses, local governments face a 2% property tax levy cap, which is permanent. The expiration of the interest arbitration cap, combined with the permanent 2% levy cap, creates an untenable position. Failure to permanently extend the 2% cap on binding interest arbitration awards will allow arbitrators to once again award generous contracts that will force municipal and county governments, throughout the State, to further reduce or even eliminate essential services, critical personnel, and long-overdue infrastructure improvement projects.

It’s not just the League and NJAC raising these concerns. In recent weeks, all three rating agencies, Fitch, Moody’s and Standard and Poor’s, have issued analysis, citing their concerns about the possible impact of excessive salary awards on municipal budgets, and about the impact on their respective credit ratings.

At a December press conference, a large coalition of business advocates and local government organizations expressed their support for the extension of the 2% cap, including:

Chamber of Commerce, Southern New Jersey
Commerce and Industry Association of New Jersey
Government Finance Officers Association of New Jersey
International Council of Shopping Centers, NJ Chapter
NAIOP New Jersey
New Jersey Association of Counties
New Jersey Association of County Finance Officers
New Jersey Builders Association
New Jersey Business and Industry Association
New Jersey Chamber of Commerce
New Jersey Conference of Mayors
New Jersey League of Municipalities
New Jersey Municipal Management Association
New Jersey Realtors
New Jersey Urban Mayors Association
Southern New Jersey Freeholders Association

League Executive Director Michael J. Darcy stated:
“A recent editorial correctly described the extension of the interest arbitration a ‘no brainer.’ That is reflective of the overwhelming and bipartisan consensus among local leaders at the municipal and the county level, business interests and newspaper editorial boards across the state that the reinstatement of the 2% interest arbitration cap is in the best interests of the State’s property taxpayers. We thank Senator O’Scanlon and Assembly Representatives DeCroce and Schepisi, for sponsoring this critical legislation. Further, we call on the Governor and Legislative Leaders to support this initiative and for its quick passage.”

NJAC Executive Director John Donnadio stated:
“We all have the utmost respect and admiration for the police, firefighters, correction officers, and sheriff officers who put their lives on the line every day to protect the communities in which they serve. But we must recognize that our State, local governments, and property taxpayers are struggling to make ends meet. The 2% cap has proven to be an effective tool for controlling cost without impacting the recruitment, retention or response of our public safety officials. Property taxes are the number one concern of our taxpayers, so we call on the Governor and the Legislature to make the extension of the IA cap a top and immediate priority.”


John Donnadio, Executive Director, NJAC, 609-394-3467
Michael F. Cerra, Assistant Executive Director, NJLM, 609-695-3481, ext. 120