President Obama and his entourage are pulling into Scranton, PA for a speech on Friday. In many ways Scranton is the east coast equivalent of Detroit; a former industrial powerhouse reduced to the economic wilderness. The city’s unemployment rate was 9 percent in April 2013. Scranton almost ran out of cash last summer and the mayor reduced everyone to minimum wage to meet payroll.
The city of 76,000 has defaulted on contracts that can lead to loan defaults and is deficit borrowing at extremely high rates. It’s been in the state fiscal distress program for over two decades. The city has finally taken steps to right its fiscal ship. But it had to fight public unions tooth and nail to alter their path (page 14):
The full implementation of the 2002 Recovery Plan was never fully realized due to the opposition from the public safety unions of the City. The public safety unions sought Act 111 binding arbitration proceedings to challenge the 2002 Recovery Plan. After years of legal proceedings relating to the arbitration awards, the Pennsylvania Supreme Court ruled in late 2011 in favor of the public safety unions, overturning prior appellate court decisions.
The unions litigated wage cuts and now the city owes $16 million of back wages. So taxes really have to go up (14):
The approved Act 47 Recovery Plan calls for an aggressive approach to current revenues. The adopted plan calls for 70.32 percent property tax increase from 2013 through 2015. The City of Scranton is proposing that the Pennsylvania State Legislature approve a dedicated 1 percent increase to the current sales tax for imposition within Lackawanna County.