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Scranton Officials May Borrow from Workers’ Compensation Fund to Cover Debt

According to the Scranton Times-Tribune, Scranton officials want to borrow $5 million from its workers’ compensation fund to pay the outstanding balance on a tax anticipation note.
The article published Dec. 20 stated the money would be paid back in 2012, which city officials have said would add to a $3 million deficit expected to come from an $85.3 million budget adopted by city council last week.
State approval is needed to borrow the money to pay the TAN, which is used to pay bills until tax revenue comes in. Scranton business administrator Ryan McGowen said the city must pay back the TAN this year to be eligible for a 2012 TAN.
The article stated the workers’ compensation fund totals about $16 million, which is the level required under state law, and the reason state approval is needed, according to McGowan. A 2001 trust agreement between the state and city requires the asset level of the account to be maintained at 75 percent of the city’s outstanding liability for workers’ compensation.
City officials acknowledged that while borrowing from the fund may be necessary to enable access to future TANs, it could contribute to the city’s financial troubles.
In a letter dated Dec. 20, Fred Reddig, executive director of the Governor’s Center for Local Government Services, blames the city council for failing to act on proposals that could have stemmed a cash flow crisis and also said the city must take steps to receive state approval to borrow the money from the workers’ compensation fund, including that payback be assured and that there is written acknowledgement of the agreement of city leadership, the Times-Tribune reported.
Reddig said the 2012 budget does not address the $5 million. City council said it did not learn of the plan until after the budget was passed.
The newspaper reported Scranton Mayor Chris Doherty said in a memo to city officials that not paying the tax anticipation note would risk the city not being able to pay its employees for at least three pay periods.