Chamber Testifies in Support of Arbitration Reform from Governor's "Tool Kit"
Thursday, October 14, 2010

TESTIMONY OF MARIA PATOUHAS

MANAGER, GOVERNMENT RELATIONS

CHAMBER OF COMMERCE SOUTHERN NEW JERSEY

ON

S-2310 (Doherty)

Before the Senate State Government, Wagering, Tourism and Historic Preservation Committee

October 14, 2010

Good afternoon, Chairman Whelan and members of the Senate State Government, Wagering, Tourism and Historic Preservation Committee. My name is Maria Patouhas and I am the Manager of Government Relations for the Chamber of Commerce Southern New Jersey. The Chamber represents 1,700 companies from the seven southern counties, Greater Philadelphia and Northern Delaware.

The Chamber of Commerce Southern New Jersey supports S-2310 (Doherty). This bill would implement Governor Christie’s “Tool Kit” proposals for public employee collective bargaining, with many of its provisions applicable between local government entities and police/firefighter unions.

The first provision of the bill prohibits any third party, including mediators, factfinders, or police and fire interest arbitrators, from recommending or awarding any settlement that would exceed more than 2.0 percent of the total amount expended by the public employer for the previous year concerning economic issues. Economic issues are defined as wages, salaries, hours in relation to earnings, and other forms of compensation, such as paid vacation, paid holidays, health and medical insurance, and other economic benefits accruing to the employees represented by the affected employee organization.

The legislation also provides that a public employer or public employee organization cannot enter into any agreement on economic issues that exceed the 2.0 percent cap and must take into consideration the impact the award would have on local property taxes.

The 2 percent cap is a much needed reform that would protect taxpayers by preventing arbitrators from rendering decisions and awards that could bankrupt municipalities and act as unfunded mandates, which are ultimately paid by the taxpayers. The cap would additionally empower local governments to manage their budgets more effectively while preventing salary increases and other benefits that are not affordable by the local government and taxpayers.

Since 2001, spending at the local level has increased 69 percent, from $26.5 billion to an anticipated $44.7 billion this year. A majority of municipal and county budgets – as much as 75% -- is driven by personnel and labor costs. This legislation would give the reins back to local governments to control these costs. Forcing arbitrators to consider the fiscal impact of awards on taxpayers and municipal or county budgets will lead to more responsible salary and benefit decisions.

The second and third reforms contained in this bill involve the Public Employee Relations Commission and make changes to the process for selecting an arbitrator. Under existing law, the disputing parties are permitted to consider all members of PERC’s special panel when selecting an arbitrator. This legislation proposes that PERC randomly selects three arbitrators for the disputing parties to consider. If a decision cannot be made on an arbitrator within 10 days, PERC is to make the selection for the disputing parties.

Changing the procedure of how an arbitrator is chosen will ultimately reduce legal fees, eliminate pricey and burdensome delays, and prevent both sides of the dispute from picking “favorites” by removing the negotiations that are usually involved when selecting an arbitrator.

The final provisions in the proposed legislation would improve the arbitration process by limiting the fees charged by an arbitrator to $1,000 per day. PERC would also be required to adopt rules and regulations to subject arbitrators to ethical standards, disclosure requirements and limits on political contributions. These reforms would ensure the highest integrity of arbitrators, free of political influence, while controlling costs associated with the process.

The current collective bargaining system is in need of reform and S-2310 (Doherty) takes the steps necessary to ensure that the big picture is the focus. This legislation ensures that the ability of a local government to pay benefits, and the ability of taxpayers to absorb increased costs are important considerations in an arbitrator’s final decision.

With New Jersey residents continuing to be burdened with the highest property taxes in the nation, any reform to help bring the cost of local government under control is welcomed and much needed. The reforms proposed in S-2310 (Doherty) will put the tools in the hands of the people who are able to fix the problem.

We commend Senator Doherty for introducing this legislation, and we urge you to support S-2310. Thank you for the opportunity to present our position on this issue.