Unlike a year ago, the Lackawanna County commissioners introduced a budget Wednesday that doesn’t raise property taxes next year.
A year after 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 the proposed 2026 budget, which calls for $180,691,098 in spending.
“We are still working on it to fine-tune it but so far I'm good,” said Chermak, who voted against the tax-hiking 2025 budget.
Last year, Gaughan championed the big 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 and resigned two months three months later, said the county needed higher taxes because of years of mismanagement and avoiding difficult decisions.
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, 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.
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 the rate 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.
In a budget briefing for reporters, 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 “services rendered” with money from other funds; $1.2 million more expected from charging for judicial records based on 2025; 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.
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.”
Declining surpluses don’t make lenders happy either.
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.
