SCRANTON, Pa. — Lackawanna County’s majority commissioners and chief financial officer on Tuesday disputed rating agency S&P Global’s decision downgrading the government’s bond rating and pointed to pending “major reforms” to the budget process as a reason for confidence.
The agency earlier this month assigned a BBB rating — still investment grade, but more marginal than its previous BBB+ rating — to the county’s existing debt and its new $12.28 million bond issue. It’s the county’s second downgrade in less than a year. The drop may increase the county’s borrowing costs by as much as 0.25%, county Chief Financial Officer David Bulzoni said in a statement.
In its June 3 report, S&P Global took a negative outlook on the county’s finances and said its downgrade reflects the government’s “structural imbalance,” use of one-off cash infusions to cover deficits and lack of a “clear plan” for a consistently balanced budget.
“We believe that there is at least a one-in-three chance that we could lower the rating further if structural balance persists and liquidity and reserves become vulnerable,” read S&P Global’s report.
On Tuesday, the county took issue with the assessment and said the agency failed to consider efforts made since January to “ensure the return of that budgetary balance,” according to a statement.
That included a vote Tuesday to amend Tyler Technology’s existing contract to include software used for budgeting reforms. Tyler Technology is working with the county on its ongoing reassessment of property values.
While crafting a budget, the county now plans to allocate money by evaluating the importance of programs, not just departments. The new process eliminates a long-standing practice of carrying over assumptions from year to year, the county said.
The aim is to save money by better prioritizing taxpayer investment, Commissioner Bill Gaughan said.
“Lackawanna County is in absolutely no position to continue on the way it has been the last few years,” Gaughan said. “We must use every available tool to put us in a stronger position financially.”
Commissioner Chris Chermak agreed with Gaughan but said he was concerned with the associated cost, which Bulzoni put at around $100,000.
“I still don’t see a way around a major, major tax increase,” Chermak said.
Gaughan said budgeting reforms are not a “panacea” but noted the definition of insanity is doing the same thing over and over while expecting a different result.
“It's a different way of doing things,” Gaughan said. “Doing the same thing will put us in the same spot.”
The county’s increasing expenses over the last few years far outpaced the money it takes in.
Between 2022 and 2024, revenue in preliminary budgets increased by 4.8%, according to Bulzoni’s office. In that same time, spending increased by 12%. In each year, the deficit nearly doubled from the previous year. Bulzoni told the commissioners the current model is not sustainable.
Even still, the county officials said investors should not lose confidence.
Bulzoni said the county has never failed to make a bond payment. Tax money designated for debt service flows to Fidelity Bank, an appointed trustee, for payment rather than to the county’s general fund. That eliminates the risk the county will not meet its obligations.
Meanwhile, a financial consultant is crafting a short-term plan for this year and a five-year strategic management plan, the county said.
In a statement, the county also noted it is working to raise revenue by reassessing property values and moving properties from tax abatement programs to tax rolls.
