THROOP, Pa. — Note: The above video is from an earlier story.
With a tax increase now all but certain, Lackawanna County officials on Wednesday said they could enter 2025 with a structural deficit as high as $25 million.
County Commissioner Bill Gaughan's statement about the county's long-term budget deficit came during a public meeting at the Throop Municipal Building on Sanderson Street.
The majority commissioner had been updating the public on the ongoing review of county affairs by financial consulting firm PFM Group, which expects to deliver a long-term projection at the end of September or beginning of October.
The county hired PFM earlier this year to develop a financial plan.
"I know it's not popular for politicians and public officials to talk about raising taxes," Gaughan said. "And I've had people come up to me and say, 'Billy, what are you doing? You're talking about raising taxes months before the budget even comes up..." I want to be honest with people. I can't lie."
How large such a tax increase might be, however, remains an open question. Patrick McKenna, a county spokesman, said the rate increase is a "work in progress" because it isn't yet clear how much impact the mitigation efforts enacted to deal with immediate cash problems will have on the year's bottom line.
"Once that is known, and PFM has weighed in, the tax increase questions will be answered," McKenna said.
The 2025 budget, which has not been unveiled yet, has to be passed by the end of November.
In a cash flow report delivered last month, PFM said the government entered 2024 with $6 million in its general fund — less than one month of typical operating expenses — and $18.5 million in unpaid bills, half of which were more than 30 days past due. As a result, the county expects a cash shortfall at the end of this year between roughly $8 and 11 million.
"In short, the county has 13 months of expenditures this year — 12 months for 2024 plus one month of outstanding bills from 2023 — and the budget only covers 12," according to the report authored by PFM's managing director, Gordon Mann.
The $25 million deficit is driven in large part by the county's surging expenses — particularly in health care costs and the costs to run the jail — and its relatively anemic revenue, said McKenna.
PFM recommended the county enact a hiring freeze, halt discretionary spending and divert a portion of the government's remaining American Rescue Plan Act funds to try and close the immediate cash gap.
At the end of August, the county announced one exception to the freeze and hired 12 full-time and seven part-time correctional officers to try and tamp down soaring overtime costs at the jail driven by a staffing shortage. By the end of July, the prison had already spent 77% of the $2.6 million budgeted this year for overtime, according to public reports issued by the warden, Tim Betti.
Mann recommended the county hire more correctional officers, which officials said they hope will save nearly $340,000 in overtime costs this year and $1.444 million next year.
"The staffing need seems to be acute enough that the operational risks outweigh the savings you would get from leaving positions open, especially if there is more attrition," Mann wrote to the county.
As for the long-term structural deficit, PFM expects in the coming weeks to produce a multi-year projection of the county's financial performance and a report reviewing the operations of its departments, row officers and courts. In it, they will recommend "specific strategies to improve financial or operational performance," PFM said.
Even still, the county is unlikely to address the budget imbalance without raising more tax revenue, officials said.
"The notion that you can cut your way out of this, it doesn't work like that," Gaughan said. "You could take every non-union position in Lackawanna County...and you could them all out. It won't touch the structural deficit."