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Scranton says it's too broke to pay over minimum wage

| Thursday, July 5, 2012, 7:58 p.m.

SCRANTON — Officials in Pennsylvania's sixth-largest city said on Thursday that they are unable to pay employees more than minimum wage despite a judge's order that they fulfill their contract obligations.

Scranton Mayor Chris Doherty's plan to pay nearly 400 employees no more than the $7.25 per-hour minimum wage rate stems from a political stalemate over how to resolve a massive cash shortfall in the city's operating budget.

Doherty told the Times-Tribune of Scranton that he respects the opinion of Lackawanna County Judge Michael Barrasse, but the city simply didn't have the money for the paychecks that it was supposed to hand employees on Friday.

Earlier in the day, Barrasse granted an injunction sought by employee unions against Doherty's minimum-wage plan. A hearing on the case was scheduled for Friday.

John Judge, president of the Scranton firefighters union, said Thursday that some firefighters will have trouble paying their bills. Deductions for things such as life insurance policies won't come out of the checks, and others are canceling family vacations to use the money saved up to pay their bills.

“Some of my guys are going to be having immediate, immediate problems because they don't have that rainy-day fund,” Judge said. “They have four, five kids who are still at home.” Judge also suggested that the city could be held in contempt of court.

“The judge was pretty adamant about his order being followed,” Judge said.

Business administrator Ryan McGowan said Thursday that Scranton had just $5,000 left after setting aside $300,000 to meet payroll at the minimum wage rate.

Normal payroll would be roughly $950,000 to $1.1 million, depending on overtime, McGowan said. But the city is projected to fall short of its $71 million budget by nearly $17 million, or 35 percent of the revenue it expects to receive the rest of the year, he said.

Doherty wants to get bank loans to fill the gap and refinance debt, but city officials say banks are waiting for the City Council to approve Doherty's recovery plan. That plan includes a property tax increase of 78 percent during the next three years and a new garbage collection fee of $22 phased in over two years.

City Council members say that's too much, and they want Doherty to look for alternate revenue sources. Council members have suggested selling or leasing parking garages or seeking higher payments from nonprofit institutions that do not pay property taxes.

This year is Scranton's 20th anniversary of its entry into a state program for financially distressed municipalities. The state agency that oversees the distressed municipalities' program offered last month to sponsor a third-party arbitrator to sit down with the sides. But City Council declined the offer, said Steve Kratz, a spokesman for the state Department of Community and Economic Development.

Last year, the city of 76,000 lost an expensive case in Supreme Court that forced it to pay millions of dollars in arbitration awards. The court ruled that Scranton's status as a distressed city didn't prevent it from having to pay awards determined by an independent arbitrator.

On Thursday, Gov. Tom Corbett signed a new state law in response to the ruling. The law, which takes effect in 60 days, would set limits on arbitration settlements and awards for police and firefighters in cities in the distressed municipalities program.

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