TRENTON - Those thinking about ignoring the 2 percent cap on police and firefighter salary increases that would take effect Jan. 1 should think twice, Gov. Christie warned Thursday.

A bill approved by the Legislature that would cap salary increases for police and firefighters in arbitration awards at 2 percent applies only to contracts that expire after Jan. 1, which means an unknown number of expired contracts would be exempt. Hundreds of public employee union contracts expire each year in New Jersey and some unions have worked for years under expired contracts.

Christie, who is expected to sign the bill, said he did not know how many expired contracts would not be included under the cap. He added that it was hard for him "to figure out how we could apply a law that was starting Jan. 1 retroactively and be fair about it."

"I know that it does present some opportunity for mischief," he said.

The bill represents a compromise between Christie, a Republican, and Democratic lawmakers.

Christie had called for a hard 2 percent cap on all economic issues, including pensions and health care, in arbitration awards, but critics argued that would have led to mandatory pay cuts. The compromise bill caps salaries and salary enhancements such as step increases and longevity, and prevents arbitrators from granting economic benefits that did not exist in previous contracts.

The cap, which does not apply to contracts reached through collective bargaining, has a sunset provision in 2014.

"I would caution those municipalities, those unions, and those arbitrators who want to take this as an opportunity to try to blow the cap - I would caution them," he said. "You do not want to become the star of my town hall meetings."

In news conferences and town hall-style meetings across the state, the governor has singled out various individuals as being poster children of government spending run amok.

"It is not a pleasant experience, and we will expose anybody who decides they want to try to violate the spirit and the intent of the executive and legislative branches," Christie said. "Everyone out there who has an expired contract who wants to try to play games with it might wind up with even bigger problems from a public perception perspective."

It is unclear how the administration would determine if towns or unions are deliberately skirting the cap, however, since the arbitration reform bill allows salary increases reached through negotiations to exceed the cap, as long as municipalities adhere to a 2 percent property tax-levy cap, also set to take effect Jan. 1.

Among those concerned about the loophole for expired contracts is Assemblyman Declan O'Scanlon (R., Monmouth), one of the sponsors of the arbitration-reform bill.

O'Scanlon has introduced a bill to make the 2 percent cap apply to contracts that expired before Jan. 1, but Democratic lawmakers have not expressed enthusiasm for the bill.

"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 said. "If we find this is not the case, this legislation will be there ready to go at a moment's notice," he said.

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

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