TRENTON - Lawmakers in the state Senate and Assembly passed two property tax-control measures Monday that Gov. Chris Christie has been haranguing them over for months, sending back to the governor compromise legislation that reforms arbitration and civil service but does not contain all the provisions he sought.

One bill sets a 2 percent annual cap on salary increases that arbitrators can award police and firefighters who dispute their contracts, and caps the amount arbitrators can charge. The other bill makes it easier for towns to fire or transfer workers and cuts red tape for municipalities that want to share services.

The arbitration bill is the byproduct of a compromise between Christie and legislative leaders in both houses that was announced by the governor last week. The leaders, Senate President Steve Sweeney and Assembly Speaker Sheila Oliver, decided to move forward with the civil service bill while trying to work out differences with Christie.

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"As the governor said just a few days ago, we will continue to work with the legislative leadership to reach an agreeable solution to provide municipalities the relief they need," Christie spokesman Michael Drewniak said after the vote. "A conditional veto is an available avenue to make potential changes to the bill, now that is has cleared both houses."

Christie has been pushing hard for both bills, saying they are needed by Jan. 1, when towns, counties and school districts will be required to keep costs - and property tax increases - to 2 percent per year.

In town halls across the state, the Republican governor has criticized the Democrat-controlled Legislature for not acting on key components of his so-called "toolkit," legislative proposals aimed at helping local government officials control costs that are passed along as property tax increases.

New Jersey residents pay the highest property taxes in the country, at nearly $7,300 per household.

Arbitration and civil service are mainstays of municipal government. Labor costs can eat up 20 percent or more of a local budget.

Christie has warned that layoffs and service cuts will be commonplace next year unless the Legislature gives towns some tools to lower their costs.

Bill Dressel, executive director of the League of Municipalities, said he is satisfied with the arbitration reforms but dissatisfied that the civil service bill does not include a clause allowing towns to opt out. Most state workers are protected by civil service, along with employees in 193 out of 566 towns and 20 of 21 counties.

"Opting out of civil service is crucial to the towns that are in civil service. Civil service really impedes the ability for mayors and governing bodies to be able to affectively manage their personnel. Personnel costs is what drives up taxpayers' costs."

Christie also wants towns to be able to opt out. Assembly Republican leader Jon Bramnick said Monday that the governor would not sign a bill that does not contain such a provision.

"He's going to veto it immediately," Bramnick said. "He doesn't want any fake reform. He wants real reform, and that doesn't get it done."

Linda Stender, the Democrat who sponsored the bill in the Assembly, said civil service is a protection against patronage hiring that preserves due process.

"It does not have opt-out because we believe it's important to protect against corruption and abuse of a system when it comes to hiring people," Stender said. "We need to protect the fact that these are public dollars. There needs to be an open, fair process for the public to seek employment."

The bill passed by votes of 25-15 in the Senate and 43-32 in the Assembly.

The arbitration bill was approved unanimously in the Senate and by a 74-1 vote in the Assembly.

Besides capping salaries, it also caps longevity pay and automatic step increases that go to arbitration. It fast-tracks the arbitration process so cases are settled within 45 days instead of dragging on for months or years and sets a maximum of $7,500 per case for arbitrator fees. Pension and health care costs are not included in the cap, but Christie said last week that those issues would be addressed separately in the new year.

The cap would lapse in three years.

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