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The 2% Cap Update
Updated On: Aug 07, 2014

After a long fought battle, a bill was passed in both the Senate and Assembly that extends the cap on interest arbitration until 2017. The bill was fast tracked over the past week, without hearings in either the Senate or Assembly committees, and instead moved directly to a floor vote after a compromise was negotiated between the Governor, Senate President Sweeney and Assembly Speaker Prieto.

As you all may be aware, since the Governor’s veto and Senator Sweeney’s support of that veto of the original legislation this past April, Assembly Speaker Vincent Prieto has been working with our FMBA leadership team to forge a better compromise for our members. The compromise included not instituting a permanent 2% cap on arbitration awards but instead provided for the sunset of the cap to occur on December 31, 2017. The cap will also “compound” annually to enhance the base salary amount upon which raises are based for our members. Under the expired cap, raises are based on the Base Salary line item in the final year of the last contract. Compounding means the raise will be based on a Base Salary line item that increases each year of the contract. This growth, although minimal, will impact the value of raises in an award. I have included a financial worksheet that explains how compounding works.

Additional changes to the cap are:

1.       Increases 45 days to render an award to 90 days;

2.       Requires arbitrator to conduct mediation prior to arbitration. This was actually suggested by the NJFMBA in an attempt to affect a resolution before formal arbitration proceedings began.  Mediation has been non-existent since this cap was instituted;

3.       Increases appeal time from 7 days to 14 days;

4.       Increases appeal decision time from PERC from 30 days to 60 days;

5.       Increases arbitrators compensation from $7,500 to $10,000; and

6.       The task force is still in affect going forward.  This means a final report will again be submitted to the Governor and legislature prior to the bill sunsetting.

Our members should also be aware that over the past three months, Speaker Prieto had been working with us on additional compromises.  Among the many proposals, we tried to provide for increases in healthcare costs to be outside the 2% cap law. This change would have allowed firefighters and police the same exemption given under the municipal cap law.  Unfortunately, the support for this initiative was not there among all parties. Another area of disappointment is that the plan put forth removes the “one and done” protection from locals who have gone through the arbitration process under the cap from going through it again. Finally the bill also re-establishes the arbitration task force to continue to study the cap.  This task force has not brought any meaningful economic reform in the past.  The task force is made up of an equal number of labor and Governor appointees, therefore almost guaranteeing a deadlocked decision.

While this legislation was being fast tracked, a sad reality set in, the Speaker was the only one standing firmly for us in this fight.  The Senate President did not support him.  The Governor did not support him.  Almost every Mayor in NJ was urging him to pass the legislation from the Governor’s veto.  Although we didn’t get the relief we sought, unlike the Senate, Speaker Prieto stood firm opposing the veto. While this is a minor win at best for our members, going forward we must continue to fight for issues that benefit our membership.  While pensions and COLA are always in the forefront, we have the expiration of Chapter 78 in June of 2015.  We must continue to make our arguments on health care.  Although our proposals were not considered for relief in this new cap, we have made our arguments and must continue to make them.  The NJFMBA will continue to express its views on the important issues with the leadership in all three branches of Government.

I have included a financial worksheet that explains how compounding works.

2% Cap Compounding Interest Analysis

 Ed Donnelly

President


Elizabeth FMBA Local 9
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