Last Tuesday, October 17th, the Scotch Plains Town Council passed a resolution calling on the New Jersey State Legislature to renew the 2% Interest Arbitration Salary Cap to help local governments control property taxes.
Interest arbitration is used to decide collective bargaining disputes. If local governments can't reach contract agreements with labor unions, unelected third-party arbitrators are asked to award terms of a new contract. The interest arbitration cap limits salary increases to 2%.
Two bipartisan reforms passed in 2010 included a permanent 2% cap to annual property tax levy increases and a corresponding 2% cap on interest arbitration salary increases. The arbitration cap was only temporary. In 2014, the legislature renewed the 2% interest arbitration cap by way of unanimous votes in both the State Assembly and State Senate, and was signed into law by the Governor. That extension expires on December 31, 2017.
While Scotch Plains Township acts as the sole tax collector of property taxes, your property taxes are levied by three governments: Union County, Scotch Plains Fanwood Board of Education, and the Township itself.
For the decade preceding the reform laws, those three government entities each raised their component of the tax levy at annual rates of 5.3%, 5.7% and 5.5% respectively.
Since the bipartisan laws were enacted, the increases have been 4.7%, 2.2% and 1.1% respectively. While NJ property taxes are still astronomical, the change in growth has been noticeable.
Unfortunately, the State Legislature is refusing to act on renewal until after the November 7th election.
The 2% cap on interest arbitration has helped control salaries, not just through arbitration awards, but also by encouraging frugal contract negotiations. If the interest arbitration cap expires while the 2% property tax levy remains law, municipalities will be forced to reduce services to fund the labor cost increases and stay under the 2% cap (or seek voter referendum to exceed the 2% property tax cap).
In a couple weeks voters have the opportunity to elect new leadership in Trenton. Republican candidate Lt. Governor Kim Guadagno has said she would sign a renewal of the 2% interest arbitration cap. Democratic candidate Phil Murphy has said he needs time to study the issue. This is a disingenuous punt on an issue from a candidate who has been running for Governor for well over a year, has decades of finance experience, and on an item that passed with unanimous bipartisan support only a few years ago. Should he win, I would encourage him to study the numbers above.
In the meantime, I urge voters who are concerned with their property tax bills to research where candidates running for Governor, State Assembly, and State Senate stand on this issue. I encourage voters to support candidates who are committed to property tax relief.