Feeling the Squeeze

To help troubled towns, Jersey should eliminate binding arbitration.

To help troubled towns, Jersey should eliminate binding arbitration.
Illustration by Robert Neubecker.

“Change has arrived,” says Governor Chris Christie. I’m confident he means it. A good start would be putting an end to binding arbitration.

When police and firemen can’t reach an agreement with a municipality on a contract, a third party is brought in to resolve the issue. That’s binding arbitration. If the municipality offers a 2 percent raise and the cops and firemen want 8 percent, the arbitrator may say the right number is 6 percent—and the municipality has to pay. Under binding arbitration, towns have no choice.

At the same time that they are subject to such third-party declarations, these municipalities are told by the state that they can’t increase their annual budgets more than 4 percent. This cap is intended to keep down the cost of local government.

The legislature created binding arbitration because public-safety officers are not allowed to strike. But the law also says that arbitrators are supposed to keep budget caps in mind when working out a settlement. In practice, that doesn’t always happen.

It’s easy to see the disconnect. Local governments are pressured to rein in costs but thanks to binding arbitration have no control over the largest part of the municipal budget—police and fire. And that’s not to mention the contracts the board of education strikes with local teachers.

But the picture gets worse, because municipalities are likely to get less funding from the state. The cuts that will come will be more painful than anyone ever imagined. There is no escaping them, particularly since our new governor is intent on not raising taxes. Remember, New Jersey’s budget has to be balanced. It is in the Constitution.

“The budget crisis is a real problem,” says Rich Keevey, director of the Policy Research Institute at the Woodrow Wilson School at Princeton University. “We have experienced nothing as severe as this in the past.” Keevey, a former director of the New Jersey Office of Management and Budget, foresees cuts of as high as 50 percent in state aid to municipalities, as well as “sizable reductions in school aid,” among other cuts.

How will towns cope?

“I’m hopeful that the lion’s share of any reductions will be absorbed by cuts in the state’s bureaucracy,” says Bill Dressel, executive director of the New Jersey State League of Municipalities. “I’m hopeful if there is going to be any consideration of cuts to other constituency groups like local government, that the pain will be shared among others. Over the past two years, local governments have sustained over $250 million in cuts from state aid.”

For a town to cut expenses, says Dressel, “You have to get control over double-digit pension increases and binding arbitration.” He adds, “These costs continue to skyrocket beyond the 4 percent increases.”
Some will say municipal governments are just crying the blues. But if cuts anywhere near what Keevey is talking about become a reality, local governments are going to be squeezed harder than ever. Ultimately, municipalities will be forced to either dramatically raise property taxes (again!), or slash municipal services to a point that will have citizens up in arms.

There are few tangible solutions to New Jersey’s fiscal mess. One action that will help is reform of binding arbitration. The practice may have made sense at one point in our history, but it does not make sense today. Governor Christie needs to call on the legislature to dramatically change, if not eliminate, binding arbitration. Anything less will produce more of the same, which we just can’t afford.

Steve Adubato, PhD. is an Emmy Award-winning anchor for Thirteen/WNET and a media analyst and columnist for MSNBC.com, who also appears regularly on CBS 2. He is the author of the book Make the Connection, as well as his newest book What Were They Thinking?, which examines highly publicized and often controversial public relations and media mishaps. For more information, log on to stand-deliver.com.

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