STATE AND LOCAL WATCH
by Steve Levy
True reform needed on Mandatory Arbitration
In 2001, a vote took place in the State Legislature to extend mandatory arbitration. It should not have been newsworthy. The arbitration bill had been extended every two years for decades without fanfare. This year was different. As a freshman assemblyman, I did something unheard of — I voted no (the only member to do so).
For the first time since my vote in 2001, news is being made on this issue. Governor Cuomo says he will use his leverage to hold up this usually pro-forma extension unless the arbitration process is reformed. Kudos to the governor for at least addressing the problem. The question is whether he will take it to the mat and deliver real reform or just create a window dressing press release.
Years ago, New Jersey imposed a 2% cap on arbitration awards in conjunction with the 2% property tax cap it enacted. After all, if you are going to force localities to control its taxes, you should also put a clamp on the outrageous mandates that were crippling municipalities.
This year, Governor Cuomo placed a 2% cap on arbitrations in his budget. The legislature removed it, but now the governor has said he will do all within his power to kill the extension unless the system is reformed. But this bold move will be for naught if the governor does not go all out while the iron is hot.
Remember, the state earlier promised substantial pension change, but after succumbing to various special interests, real reform such as replacing the defined benefit programs with a defined contribution was cast aside in favor of merely pushing out by one year the date new employees could retire. It made for grandiose press releases, but true pundits knew that meant little for our beleaguered taxpayers in the near term.
The governor has said that he is establishing a panel to come up with an agenda. Word is out, however, that he will not pursue such an agenda unless both the unions and the reformers come to a consensus. This would be a huge mistake. The property tax cap would never had happened if we waited for the school unions to sign off. This may be a strategy to just get something passed without alienating any constituencies, but ultimately it would just be another example of window dressing.
Even the cap that the governor proposed, while better than anything we saw in the past, was still diluted tremendously when he exempted New York City and put in place a convoluted formula that applied the cap only to counties with an arbitrary shortfall. And as the Empire Center’s E.J Mcmahon has noted, there were also loopholes. While the base salary could not exceed 2%, other salary, including longevity pay and steps, would be exempt. Consequently, clever negotiators could make it appear to the public that there is only a 2% raise while they bury millions in the exemptions.
Mandatory arbitration has led to some officers earning $200,000 a year, with six weeks vacation, 26 sick days (over 100 paid days off per year), $300,000 cash outs upon retirement for unused sick and vacation, and some pensions that are as high as $180,000 per year
So we say to the governor, congratulations on taking the bull by the horns and addressing this important problem, but please do not drop the ball on us. You have a chance to score a touchdown for taxpayers around the state. Unless we are willing to go to the mat and take on the special interest, we will just end up once more with window dressing and a press release rather than the real reform that our taxpayers need. With municipalities on the brink of fiscal disaster, only real, deep mandate reform will do.
Steve Levy is Executive Director of Center for Cost Effective Government