Happier Public Union News From New Jersey

August 18, 2010

A number of towns in New Jersey have been reaching agreements with their local police unions that cut costs while avoiding layoffs.   Last week, the Newark Star-Ledger reported on at least six towns where unions agreed to givebacks (cost cutting) in exchange for a no-layoff promise.  This is a good trend, but New Jersey lawmakers -- and those elsewhere in the country -- can do more to expand it, says Josh Barro, the Walter B. Wriston Fellow at the Manhattan Institute. 

In New Jersey, it is interesting to see where unions and municipalities are managing to reach no-layoff deals and where they are not.   The six towns cited by the Star-Ledger (Princeton, Manalapan, Howell, Montville, South Brunswick and Egg Harbor Township) are mostly affluent, except Egg Harbor which is middle-income.  None are impoverished.  Meanwhile, Newark (median family income: $31,000) has been unable to reach a no-layoff deal with its police force, says Barro: 

  • Instead, the city will lay off 167 officers and demote 112 more, out of a force of 1,062.
  • The article portrays the lack of a deal as a matter of size -- the savings Newark wants are too large to be effectively achieved without layoffs.
  • However, this is not convincing; sharp pay and benefit cuts could produce the same savings as layoffs.  

The key difference is more likely one of fiscal capacity -- Newark isn't able to give up enough of its proposed savings to entice the union into offering givebacks, says Barro: 

  • Manalapan, where the median family income is $114,000 per year, agreed to not lay off 11 police officers in exchange for overtime changes that will save $300,000 annually.
  • But 11 layoffs would have saved more than $1 million per year; the town will come up with other funds to close the rest of that gap, presumably by raising property taxes.
  • Newark does not have that kind of running room; the city already faces a high property tax burden and has many vacant properties.
  • And because incomes in Newark are low, such a tax increase would be a significant hardship even for homeowners not in danger of default.
  • Because unions tend to be dominated by long-serving officers who will be protected in a layoff plan, the union has little reason to cut a no-layoff deal on those terms. 

Source: Josh Barro, "Happier Public Union News from New Jersey," Real Clear Markets, August 17, 2010. 

For text:

http://www.realclearmarkets.com/articles/2010/08/17/happier_public_union_news_from_new_jersey_98626.html  

 

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