UPDATE 2-Scranton, Penn workers get full pay, at least this week

Wed Jul 18, 2012 7:38pm EDT

Related Topics

* City workers pay was slashed to minimum wage on July 6

* Officials cannot guarantee continued full payroll

* Pennsylvania offers money if city agrees on plan

By Hilary Russ

July 18 (Reuters) - City workers in Scranton, Pennsylvania, whose pay was slashed to minimum wage when the city was low on cash, will get full pay this week, but how much they get in the future is as uncertain as the city's ability to fill its coffers.

In the latest twist of a fiscal saga that has grabbed attention around the world, Scranton officials said on Wednesday that the city was able to make its full payroll of $1.1 million. Checks to nearly 400 employees are due to go out on Friday.

Whether Scranton pays full or lower salaries will depend on how much revenue the city collects, Scranton's business administrator Ryan McGowan said.

"We're hoping the necessary revenue is coming in two weeks that will allow us to meet a payroll" and other obligations, he said in a telephone interview.

Scranton Mayor Christopher Doherty's decision to cut pay to $7.25 an hour on July 6 put the spotlight on the Pennsylvania city of 76,000. Scranton's city leaders cannot agree on how to plug a $16.5 million budget hole for fiscal year 2012, which ends on Dec. 31.

They are also at odds over a longer-term fiscal recovery plan, which is required by the state because Scranton has been operating under state supervision for financially distressed municipalities since 1992.

The state is paying for a mediator and has offered an additional $2.25 million in no-interest loans and grants, but Scranton cannot claim the money unless Doherty and city council members agree on a recovery plan by Aug. 1 and implement it within the following two weeks.

BILLS MOUNT

City council members rejected a budget proposal by Doherty to raise property tax rates by 78 percent over the next three years. They favor $16.5 million in borrowing to fund operations but have yet to secure lenders.

The city has struggled to pay its bills. After making payroll of about $315,000 on July 6 at the reduced rate of $7.25, Scranton had $5,000 left in the bank.

John Judge, president of the local firefighters union, said the higher salaries would provide some relief, but he noted that workers had not received money cut from the previous pay period and were facing uncertainty over future paychecks.

"It's definitely going to be a help for the guys, but it needs to be straightened out for good," he said.

When they received word that Doherty would cut wages, Scranton's public employees' unions sued in local court. A judge ordered Doherty not to cut their pay, but he did anyway, arguing that he did not have the money for full wages.

Doherty, whose pay was also temporarily cut to minimum wage, is due in court next Tuesday for a hearing on whether he could be held in civil contempt. The unions also filed two federal lawsuits after the salary reductions.

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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