Unlike a year ago, the Lackawanna County commissioners introduced a budget Wednesday that doesn’t raise property taxes next year.
They did it unanimously, too.
A year after sharply disagreeing on a 2025 budget that contained a highly controversial 33% tax hike, Commissioner Bill Gaughan, a Democrat, and Commissioner Chris Chermak, a Republican, endorsed a preliminary 2026 budget that calls for $180,691,098 in spending.
Gaughan, who backed the tax hike last year, even praised Chermak, who opposed it. He thanked Chermak, "for his hard work in working with me and assembling a 2026 budget that moves the county "toward stability, predictability and sustainability."
"This doesn't happen by accident," Gaughan said. "It's the product of a solid plan, honest accounting and the hard work of county staff who tighten spending, found savings and kept essential services up and running."
Chermak thanked only county budget officials for their work and "for keeping me in the loop."
"This is going to be a work in progress, so when we get to the final budget, hopefully we can even identify some more savings," he said. "And again, it's a work in progress, but this is certainly a much better meeting than the one we had last year. "
What happened last year
Last year, Gaughan championed the 33% tax increase as the only way to reduce a projected deficit approaching $30 million. He and former Commissioner Matt McGloin, who helped pass the hike only to resign three months later, said the county needed higher taxes because of years of mismanagement and avoiding difficult spending decisions.
Back then, Gaughan interrupted the news conference where Chermak's proposed an alternative 2025 budget with a 6.3% tax hike and labeled his colleague's proposal as "full of lies."
The taxes before reassessment
Preliminarily, the tax rate will remain 89.98 mills. A mill is a $1 tax for every $1,000 of assessed value. With the median value of county real estate about $11,000 at the moment, a property owner with a home valued that much will continue to pay $989.78 in county taxes.
This total does not include school district or city, borough or township property taxes, which the county does not control.
The taxes after reassessment
Starting Jan. 1, the county and other local government property tax rates will drop sharply as new, much higher assessed values take effect because of the county’s first reassessment since the 1960s.
The new values will raise taxes for some, keep taxes the same for others and decrease taxes for others.
By law, the county, at least at first, has to set the lowered tax rate at a level that produces the same projected amount in revenues as this year.
The county — and any other local government — could then raise taxes to a level that produces up to 10% more revenue.
Gaughan said the commissioners won’t do that.
“We don't need to do that because we have balanced the budget,” he said.
The CFO speaks
In a budget briefing for reporters earlier Wednesday, county chief financial officer David Bulzoni said initial figures — based on spending requests from department heads — called for $3,973,245 more in spending than revenues.
According to a county document, the deficit was eliminated with:
- $880,337 in “departmental adjustments.” These include reimbursing the general fund — the county’s main account for day-to-day operations – for county “services rendered” with money from other funds; higher revenues from charging for judicial records based on 2025 revenues; less use of revenue and financial consultants; and more money from housing federal detainees at the county prison.
- $2 million from selling the rights to collect unpaid taxes from 2023 and earlier years.
- $1.1 million refund from its health insurance plan because the plan spent about 6.4% less paying employee health care bills than projected.
Smaller starting deficit this year
The $3.97 million deficit at the outset of the proposed 2026 budget contrasted sharply with the $37 million deficit as talks on the 2025 budget began last year. The tax hike had a lot to do with that.
During the budget unveiling, Bulzoni said he watched that starting point deficit balloon to $37 million from $4 million the year he began the job in 2022.
"It doesn't take the expertise of a strategic management planning program report to understand that adjusting real estate taxes periodically is necessary," he said. "Otherwise, we have $8 million (annual) deficits, $15 million deficits, and then a $37 million budget deficit. And we don't want to go back to that, do we? "
The county's financial consultant recently called for regular, but smaller tax increases when necessary in future years to keep budgets balanced.
Why higher taxes all the time?
Bulzoni said county budgets have trouble staying balanced without tax hikes because the county's property tax base only modestly increases compared to costs.
The property tax base is the total assessed value of all 102,000 parcels of real estate in the county.
This year, for example, the tax base increased about $12.2 million, enough to produce about $1.2 million in additional revenue, he said. The property tax is the only local tax the county can charge.
In recent years, the tax base frequently dropped as people successfully appealed unfair property values. Reassessment is expected to reduce the amount that happens, but Bulzoni said he doesn't expect the tax base to grow enough to avoid future tax hikes.
"We'll see where it's at at the end of next year, as we approach the (20)27 budget, but I don't expect, at least now, that we're going to approach the budget process without a deficit," he said. "If your costs are increasing at X percent and your revenues are increasing at a lower percent, you're going to have a deficit."
The effects of surpluses
In past years, the county has sometimes tapped its fund balance — also called a surplus — to balance budgets. Entering 2024, the unassigned part of its surplus — the part that wasn’t already committed to specific programs — stood at more than $16.7 million, according to the 2023 county audit.
Bulzoni did not immediately have the current surplus available, and the 2024 audit that would show the balance entering 2025 isn’t complete. But earlier this year the commissioners committed to maintaining a surplus equal to 12% of annual spending. Based on the projected 2026 budget, that would require a surplus of about $21.7 million.
Bulzoni said tapping some of the surplus could be an option to balance budgets someday, but the 12% threshold hasn’t been in place long enough to prove a county budget can regularly produce that kind of surplus.
“So you want to see some history where it's going to meet that expectation before you decide you want to start using it a little bit now,” he said. “And even in that case, I don't think it's a best practice to use to any great extent to balance the budget. So we decided not to use any of the fund balance to cover that (initial $3.9) million deficit.”
Lower surpluses bad for business
Declining surpluses don’t make lenders happy anyway.
In May, the credit rating agency Standard & Poor’s downgraded the county’s bond rating for the third time since September 2023. The agency cited the decreasing surpluses.
Lower bond ratings mean higher interest rates when the county borrows money, which makes repayments higher.
Using one-time revenue sources like a surplus to balance a budget in one year also means using money that won’t be available again the next year. The next year will require finding a way to come up with that money from another source.
Another factor could hurt county finances, too - the the lack of a state budget means state money to pay for state-required social services isn't flowing to counties.
"So looking at it in the context of 2025 October, (we're) OK," he said. "November, (it's a) problem. December, absolute disaster if the state does not pass a budget ... Because there is no long term solution to funding if the state doesn't pass a budget."
