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2% Cap on Annual Raises for Police, Firefighters Dies as Democrats Take No Action

Lawmakers allow key Christie initiative to control property taxes to founder, special task force ends in disarray

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Gov. Chris Christie isn’t due to leave office for another two weeks, but Democratic legislative leaders have already let one of his key property-tax reforms fall by the wayside.

By not taking action before the start of the new year, lawmakers have allowed to expire a cap on the annual raises that an arbitrator can give to police officers and professional firefighters in New Jersey to resolve contract disputes with local governments.

Christie signed the arbitration cap into law during his first term in office as part of his “toolkit” that was aimed at controlling property-tax growth. Despite the cap’s esoteric nature, some members of a special task force that was set up to study the effectiveness of the reform have maintained it has had a huge impact on keeping down property taxes, a top concern in New Jersey.

Meanwhile, the issue has drawn the attention of a key Wall Street credit-rating agency, which labeled the cap “beneficial to local government credit quality” in a recent notice to investors. The agency predicted it could require some municipalities to cut services in order to keep tax rates stable.

But unions that represent police officers and firefighters have opposed the cap, and other members of the task force have accused their counterparts of overstating its benefits in the run-up to the cap’s December 31, 2017 sunset date.

Locked in bitter dispute

The task force, which included both Republican and Democratic appointees, was supposed to issue a final report by December 31, but its members ended the year locked in a bitter dispute, and the report was never drafted.

It’s not clear what will happen next, and the AWOL report has thrown a curveball at Democratic legislative leaders, who for months have said they were holding back judgment on renewing the cap until after the task force issued a final evaluation. Adding to the uncertainty is the changeover in leadership in the governor’s office that will occur on January 16, when the Republican Christie, who favors extending the cap, will be replaced by Democratic Gov.-elect Phil Murphy, who has yet to stake out a firm position on the cap. Police officers and professional firefighters are, by law, not allowed to strike in New Jersey when they cannot reach new contract agreements with their local-government employers. Instead, their unions and the government officials have the option of entering binding-interest arbitration when they reach a point of impasse, leaving the size of an annual salary increase up to an arbitrator.

But after the arbitration cap went into effect in 2011, the state law has prevented arbitrators from awarding any annual increases that are worth more than 2 percent. The limit was enacted by Christie along with a broader, 2 percent cap on overall local property-tax hikes, but only the limit on arbitration awards expired at the end of 2017.

The arbitration cap was allowed to sunset once before, in 2014, before it was renewed by Christie with cooperation from Democrats in the Legislature. But as the latest sunset date neared in recent weeks, Democratic leaders pointed to the final report that was due to be released by law “on or before December 31, 2017,” saying they would hold back judgment until that evaluation was available.

Did property owners save $530M?

Discord among the members of the task force, some appointed by lawmakers and other by Christie, emerged in late September as the gubernatorial appointees, led by Assemblyman Declan O’Scanlon (R-Monmouth), released findings without getting consent from the Democratic legislative appointees. The one-sided report concluded the arbitration cap has saved New Jersey property owners a combined $530 million by curbing salary growth among police officers and paid firefighters. Those projected savings for property owners came even as New Jersey’s police officers and sheriff’s officers have been earning the second-highest mean wages in the country — $87,490 — for their occupations, and as the state’s paid firefighters have been earning the highest mean wages in the country for their occupation — $81,730.

But the legislative appointees have faulted their counterparts for not considering several other factors, and they called for another meeting of the panel to be held before the end of 2017 so a more rounded report could be drafted and released. The meeting, however, was never held, and a final report with the endorsement of all task force members was never drafted.

“The failure to issue a final report falls squarely on Governor Christie’s and (O’Scanlon’s) shoulders,” said Eddie Donnelly, a legislative appointee and the president of New Jersey Firefighters Mutual Benevolent Association.

Christie’s office did not respond to a request for comment yesterday, and O’Scanlon has said for weeks that there was no need to hold another task-force meeting since the report released by the gubernatorial appointees looked at all of the same issues the panel has reviewed for prior reports.

“I’m disappointed no report has been submitted,” Assembly Speaker Vince Prieto (D-Hudson) said yesterday. “Hopefully a report is still forthcoming.”

Senate President Stephen Sweeney (D-Gloucester) could not be reached for comment yesterday, but he told reporters last month he was “absolutely expecting” a final report from the task force before the deadline.

The expiration of the arbitration cap doesn’t automatically mean it will be cast aside for good, since the cap was allowed to sunset once before. The cap’s fate could ultimately be determined by Murphy, who has said he was also looking to the task force’s final report for guidance. A Murphy spokesman didn’t respond to a request for comment on the issue yesterday.

Warning of service cuts

Meanwhile, local-government officials have warned the loss of the arbitration cap could bring on service cuts since they still must abide by the broader 2 percent cap on local property-tax hikes that was enacted on a permanent basis in 2011. The notice from Fitch, the Wall Street credit-rating agency, echoed a similar concern, saying that while most local governments in New Jersey “exhibit a high level of fundamental financial flexibility,” losing the arbitration cap could force the local governments to “reduce governmental services and/or rely on one-time resources to accommodate higher wage expenses.”

“Furthermore, elimination of the arbitration cap could also have an impact on pension liabilities and contribution levels, as plan benefits are based on employee wages, among other factors,” the notice said.

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