TRENTON - Police and firefighters whose contracts expire before Jan. 1 will not be subject to a 2 percent cap on salaries reached through arbitration that was approved by the Legislature on Monday.

That could create a loophole for a significant number of public employee contracts that have expired or will expire before the end of the year, said Assemblyman Declan O'Scanlon (R., Monmouth), a sponsor of the arbitration revision, which was the result of a compromise between Republican Gov. Christie and Democratic legislative leaders.

"A significant percentage of municipalities and property taxpayers will conceivably see no benefit from the 2 percent cap until we're two or three years into the 31/2-year window," O'Scanlon said. "I hope the arbitrators who are going to award these contracts pay attention to the current cap laws and to the dire times municipalities and property taxpayers find themselves in and design reasonable, conservative contracts that don't blow massive holes in municipal budgets."

O'Scanlon introduced a bill Tuesday to make the salary arbitration cap retroactive, but the Christie administration and Assembly Speaker Sheila Oliver (D., Essex) seemed disinclined to act immediately.

"We always welcome ideas from the other party, but the fact is we worked with the governor to hash out a commonsense compromise that will benefit taxpayers throughout this state," Oliver said. "This cap is a big change, and I want to make sure it's done right and respects our police and firefighters. A cap that is instantly rushed into place without proper planning and instruction is a recipe for disaster, and I will not allow that to happen. This is too important and it will be done the right way."

Christie spokesman Kevin Roberts said the administration supported the compromise legislation in its current form.

"There were obviously elements in the final version of the bill that do not contain some of the original reforms we sought that were a product of compromise," Roberts said.

Bill Dressel, executive director of the state League of Municipalities, said he learned late in the game that the compromise legislation would not apply to police and firefighters working under expired contracts.

"Although we expressed concern, it was too late to effectuate a change in the agreement," Dressel said.

Both houses of the Legislature on Monday approved a bill capping salary increases for police and firefighters awarded through arbitration, including salary enhancements such as step increases and longevity bonuses, at 2 percent annually. The legislation would not affect contracts reached through collective bargaining.

If signed into law, as expected, the measure would take effect for any contracts that expire after Jan. 1, 2011, and would sunset April 1, 2014.

Contact staff writer Adrienne Lu at 609-989-8990 or alu@phillynews.com.