Interest Arbitration Cap Saved Property Taxpayers Almost $600 million in Direct Costs and Billions Overall from 2011 to 2017

Senator Declan O’Scanlon has introduced legislation that would reinstate one of the key tools that allowed New Jersey’s two-percent property tax cap to successfully contain the growth of tax bills from 2011 to 2017.

The interest arbitration cap limits to two-percent annually the salary increases that can be awarded when disputed police and fire contracts enter the process of binding arbitration.

“One of the biggest mistakes made by the Legislature in recent memory was allowing the arbitration cap to expire at the end of 2017,” said O’Scanlon (R-Monmouth). “If we don’t act quickly to reinstate the arbitration cap we’ll quickly see arbitration awards that exceed the 2% tax cap and the beginning of the evisceration of that essential property tax control. As the noose tightens, we’ll see labor costs skyrocket over time and eat up local budgets at the expense of other important programs and services. That would likely lead to the failure of New Jersey’s two-percent property tax cap. Let me be clear, any legislator who doesn’t back this bill is standing for higher property taxes. One cannot legitimately say he or she backs property tax caps without embracing this bill.”

O’Scanlon served on the Police and Fire Public Interest Arbitration Impact Task Force, which was charged with studying the effect and impact of the arbitration award cap on taxpayers, local governments, and public safety.

A report issued by members of the task force highlighted how the interest arbitration cap succeeded in lowering annual salary increases from well over five percent prior to implementation of the arbitration cap to less than two percent after enactment.

Most importantly, the report demonstrated how lower rates of salary growth due to the cap resulted in an estimated savings to property taxpayers of almost $600 million in direct costs and $ billions from 2011 to 2017.

“There’s no doubt that our interest arbitration cap helped to lower the growth of labor costs for municipal governments to the point that New Jersey’s two-percent property tax cap could work, and it has worked,” said O’Scanlon. “It’s saved New Jersey property taxpayers billions of dollars. Do we really want our homeowners to once again be subject to the old rates of property tax growth that will occur again absent the cap?”

“I want to make clear,” said O’Scanlon. “This isn’t a hard cap on salaries. It is only a cap on the increase that a nameless, faceless, unaccountable Trenton bureaucrat can force municipal property taxpayers to pay. Local officials and taxpayers can grant whatever salary increases they want. This bill keeps control of these costs in the hands of local officials and taxpayers, exactly where it belongs.”

O’Scanlon’s new legislation, S-1858, would implement the key recommendations of the task force report, including:

• Making the interest arbitration cap permanent.
• Giving arbitrators 90 days to render a decision.
• Maintaining the 14-day deadline to file an appeal and 60-day period for a final PERC decision.
• Keeping the compensation of arbitrators capped at $10,000.
• Continuing to compound the two-percent cap each year over the length of the collective negotiations agreement.
• Continuing to include the cost of increments previously negotiated, such as step movements and longevity payments, when determining base salaries.
• Requiring contracts to be posted conspicuously on the municipal or county website at least 10 days prior to the execution of the contract.
• Voiding final agreements not filed with PERC or that don’t contain a cost summary.
• Abolishing “dynamic status quo” step increases after a collectively negotiated agreement has expired.

“The task force’s recommendations that are embodied in our new legislation were the result of a careful analysis of what worked and what didn’t with the process of interest arbitration,” added O’Scanlon. “We know this is fair, that it works, and that it’s very good for property taxpayers. It’s time for the Legislature to stop stalling and get this done.”