Municipalities Must Face the Harsh Realities of Today's Economy

The much-talked about 2% levy cap was on the minds of the vast majority of attendees to the 95th Annual New Jersey League of Municipalities Convention. This new levy cap will make next year the toughest in recent memory for mayors and other elected officials, who will be forced to make some very hard choices from an a la carte menu of municipal services. Municipalities will no longer be able to seek waivers from the Local Finance Board. If the tax levy is expected to be greater than 2%, the municipality would have to seek permission from the voters by way of a referendum. Municipal leaders would need to know well in advance of preparing the budget whether or not a referendum would be needed.

A very popular topic at the convention was binding interest arbitration. It is the 800 pound gorilla that keeps consuming as much as 60 to 70% of the taxes that fund municipal operations. Current statutes allow a municipality to impose a contract settlement on non-public safety unions when there is a deadlock in the collective bargaining negotiations. However, under the current system, when there is a deadlock in the collective bargaining process between a municipality and the union representing police and/or fire, the dispute must be settled in binding interest arbitration--it cannot be imposed.

Historically, judges in binding interest arbitration have awarded salary increases that average 4% without any consideration given to any of the other components, such as longevity, holiday pay, uniform allowance, college incentive or acting pay which, together with the arbitrator’s award, pushes the overall increase to about 10% annually. The general feeling is that municipalities can no longer sustain the double digit increases that public safety employees have grown accustomed to, especially with a 2% tax levy.

Greg Fehrenbach, the League's Municipal Management Advisory Service Coordinator, opined that the only solution to binding interest arbitration is to get rid of it. He felt that more people are hurt by binding interest arbitration than are helped by it, and that simply rearranging the chairs on the titanic is no solution. He suggested that dismantling binding interest arbitration is a message that must be communicated, very strongly, to members of the New Jersey state legislature.

Municipal leaders were encouraged to pursue shared services opportunities with neighboring towns and with other local governmental entities in an effort to control and or stabilize rising costs. They were also reminded of the need to file copies of past and future shared services agreements with the Director of the Division of Local Government Services. Additionally, officials were reminded of the requirement to put the last three budgets on their websites.

One of the NJLM attorneys cautioned municipalities on the imposition of across-the-board furloughs (previously believed to be permissible under the rules of the Department of Personnel). The caution was based on a recent PERC (Public Employees Relation Commission) ruling which basically precludes municipalities from unilaterally imposing furloughs, but instead requires municipalities to negotiate furloughs with collective bargaining units. The same is true for reducing an employee’s work week from full time to part time.

Some of the legislation being considered as part of the Governor’s tool kit to address the issue of out of control property taxes would result in ending terminal leave for all new hires, giving municipalities the right to opt out of the Civil Service, and changing the current system of binding interest arbitration for public safety employees.

Officials were reminded of the need to create effective strategies for controlling health benefits costs. They were encouraged to move in the direction of the private sector model where employees’ contributions are based on the cost of the benefits and not on a percentage of salary.

Essentially, municipalities have to face the harsh realities of today’s economy and must, out of shared necessity, let unions know that there is no money to afford them the kinds of increases they have come to expect. If the jobs of their members are to be protected, they must be willing to agree to costs containment concessions at the bargaining table.

Regards,

Adrian