Budget Crisis in Scranton, Pennsylvania

In order to understand the potential ups and downs of a budget process and the serious implications it can have on city operations, I direct your attention to the fiscal crisis that plagued the City of Scranton, Pennsylvania in 2012 – the repercussions of which are still being felt today.

Scranton, which has been losing population since the mid-twentieth century when two of its main industries - anthracite coal mining and garment making - also severely declined, has experienced its share of financial troubles. However, in the summer of 2012, the City’s financial problems escalated to unprecedented levels: it did not have enough money to make payroll for its 400 employees. Mayor Chris Doherty slashed all city employees’ salaries, including his own, to the state minimum wage of $7.25 per hour, in an effort to try to close the budget gap.

In 2012, the City had more than $300 million in debt and a budget deficit of $16 million for that year alone. To offset the City’s cash flow crisis, the Mayor proposed raising taxes; the City Council, however, opposed such a proposal, instead offering the suggestion of borrowing money to cover the gap and failing to enact the Mayor’s proposed budget. Both proposals have their issues, as increasing property taxes may both burden existing residents and dissuade potential residents from relocating to the city, further exacerbating the dwindling tax base. Borrowing money, however, only kicks the can down the road - and may prove an increasingly difficult task, as lenders are hesitant to become involved with the City.  

So, I ask: What can a city in Scranton's position do to significantly improve its financial health?

Whatever the solution may be, it must not simply be short-term. Rather, it must comprehensively address the “underlying issues, including grossly underfunded pension systems, unsustainable debt and excessive collective bargaining contracts” that have significantly hampered budget development. PA Independent

Here’s a short video clip from MSNBC explaining the situation. And here are some additional news articles:

The Economist

National Public Radio

Bloomberg Business