PFM says Lackawanna County’s finances are improving but ‘better, not fixed’

At a public caucus, county leaders and outside consultants from Public Financial Management (PFM) told residents that Lackawanna County’s finances have improved since a near-crisis last year but remain fragile.

PFM consultant Gordon Mann said the county’s position is “better but not fixed” on cash flow, the budget and structural balance after a 2024 package of measures that included a large real-estate tax increase and spending controls. Mann and colleague Rachel Tesler presented cash-flow scenarios showing the county would end the year with materially different results depending largely on the timing of state reimbursements tied to health and human services.

The presentation reviewed how the county moved from what the consultant called a severe position last year — a structural deficit roughly $37,000,000 and about $19,000,000 in unpaid bills — toward a smaller, more manageable shortfall. Mann said the county’s earlier cash shortfall peaked around $13,000,000 and noted that the county now expects to avoid large emergency borrowing this year, though cash balances remain thin compared with a recommended target.

PFM highlighted three fiscal drivers: reliance on real-estate tax revenue, rising net costs for health-and-human-services operations (which are largely reimbursable by the Commonwealth and federal government), and growing health-insurance costs. The consultants said Lackawanna County budgeted about $101,000,000 in real-estate tax revenue for 2025 after the 2024 millage increase; they warned that even small drops in collection rates could cost roughly $1,000,000 for every percentage point below the assumed 90.3% collection level.

Mann presented two cash scenarios. If the county receives roughly $5,000,000 in anticipated state advance payments on schedule, PFM projects a positive cash balance (about $3,600,000). If those state payments do not arrive within the calendar year, the county could be several million dollars short and would need to delay payments or take other measures. Mann emphasized the county is not unique in this exposure to the timing of Commonwealth payments and that the county must “bridge the gap” if state budget action is delayed.

On the pension plan, Mann said Lackawanna County has increased contributions from earlier years. The county’s annual contribution rose from roughly $4,000,000 to about $8,000,000 in 2024, with plans for incremental increases thereafter to close the gap with the actuarially determined contribution (ADC). Mann warned that underfunding pensions over time makes the eventual catch-up more expensive and cited the city of Chester as an extreme example of consequences when municipal pension obligations were not met.

PFM and county staff noted cost-control steps already taken: a 2024 hiring freeze, reductions in overtime (particularly at the county prison), changes to nonunion health benefits, and the elimination of the county health department and about 90 positions as part of last year’s adjustments. Those steps, together with the tax increase, were credited with materially narrowing projected multiyear deficits. PFM’s updated baseline projection showed a projected 2026 deficit of about $5,400,000 if no further changes are made; the consultants and county leadership said budget actions planned for the coming weeks aim to close much or all of that gap.

Jonas Crass, a local government specialist with the Governor’s Center for Local Government Services at the Department of Community and Economic Development, told the caucus that Lackawanna’s situation “is not unique” across the Commonwealth but results from “multiple years of simply put mismanagement,” and praised the collaboration between the county and consultants.

The county’s chief financial officer, Dave Bolzoni, did not offer additional comments during the presentation. The commissioner who opened the caucus said the tough choices of the prior year were working and expressed confidence that the preliminary 2026 budget to be presented next week would close the projected deficit “and does not include a tax increase.”

The consultants recommended that the county consider structural changes such as moving volatile health-and-human-services operations into a separate operating fund to reduce general-fund exposure to timing risk from Commonwealth reimbursements. They also reiterated the desirability of sustaining headcount and wage controls and negotiating cost-sharing on health insurance to contain a projected 6.5% annual increase in premiums that PFM said could add roughly $2,000,000 to costs each year.

The presentation, PFM said, and the county’s preliminary numbers show notable improvement from last year but stop short of declaring the county financially secure. The county leaders said they will present the preliminary 2026 budget next week and continue to pursue a mix of revenue management, spending controls and structural fixes to stabilize finances over multiple years.