Lackawanna County’s 2024 audit proves a large and controversial 2025 tax hike was necessary to address a pronounced fiscal crisis, Democratic Commissioner Bill Gaughan contends.
He said as much Tuesday during and after a public audit presentation by the firm Zelenkofske Axelrod LLC. The audit provides a point-in-time view of the county’s fiscal situation at the end of 2024, which county Chief Financial Officer David Bulzoni called “as ugly a year as you can possibly imagine.”
It was a year that ended with Gaughan and then-Commissioner Matt McGloin, the county’s Democratic majority commissioners until McGloin resigned early last year, begrudgingly approving a roughly 33% 2025 property tax hike over the objections of Republican Minority Commissioner Chris Chermak. The hike that provided invaluable revenue for the cash-strapped county followed a roughly $11.5 million 2024 borrowing to cover operational costs and a “scoop and toss” debt restructuring that reduced the county’s 2024 debt service obligations to help close a major budget hole.
The scoop and toss, which Chermak also opposed, backloaded debt service payments, leaving the county responsible for higher payments in future years through 2035. Officials at the time described that move and the borrowing as necessary steps to get through the budget year.
“The budget would not have performed at all without those transactions,” Bulzoni said during Tuesday’s audit presentation, which is available online via ECTV’s YouTube channel.
The county entered 2024, the first year of the Gaughan/McGloin majority, having carried over about $18.5 million in unpaid bills from 2023 with just about $6 million in its general fund. Officials risked running out of money as a structural budget deficit driven by escalating expenses and relatively stagnant revenues ballooned.
The audit shows total general fund expenses increased by almost $27.3 million, or 22.3%, from 2023 to 2024, with a higher pension contribution and health care and other cost increases contributing to that overall growth.
Public safety and corrections expenses, for example, increased by 12.4%, “primarily due to increased costs to house prisoners and increased salary and benefit costs for prison employees,” per the audit. It also notes that health and human services costs increased by 31.7% due to an “increase in budgeted costs associated with the Office of Youth and Family Services.”
And while the audit shows total revenue in the county’s general fund increased by almost $26.5 million, or about 20.9%, from 2023 to 2024, that increase includes nonrecurring revenue from the $11.5 million borrowing and the use of federal American Rescue Plan Act funds as a one-time revenue source to help get through the budget year. The revenue situation would have been more dire had the prior board of commissioners not approved in late 2023 a 5.9% property tax hike for 2024.
After the presentation concluded, Gaughan asked what he acknowledged was a “leading question” about the unpopular action he and McGloin took in late 2024 to mitigate the structural deficit problem.
“Would it be accurate to say, based on this audit, that the 2025 … tax increase of 33%, which was painful, was necessary to avoid continued borrowing for operations and a complete financial collapse?” he asked. “This audit clearly shows what we have been saying since I came in here in 2024: major league problems, expenditures outpacing revenues. So my question is, would it be accurate to say that absent a 33% tax increase the county would be in major financial trouble at this point?”
Tim Mirra, a certified public accountant with Zelenkofske Axelrod, said increasing the tax millage rate to “kind of build that funding base going forward … was necessary and should put you guys on the right track.”
Commissioners avoided another tax hike this year, though individual tax bills increased for some unspecified percentage of property owners as a result of the county’s first comprehensive property reassessment since 1968. Other property owners either saw their bills decrease or stay more or less the same.
Having taken considerable heat for his unpopular but arguably necessary 33% tax hike last year, Gaughan feels vindicated by the audit.
“The audit shows that 2024 was a nightmare in terms of the finances of the county, and that’s what I inherited: unpaid obligations, pension underfunding, structural deficits that really could no longer be ignored,” he said in a phone interview. “The decisions that … I had to make, including the difficult decision to increase taxes, were not made lightly, but the 2024 audit proves that there was no other way to go. (The decisions) were made to stop digging and start rebuilding county government, and that was my whole mantra for the last almost three years.”
The 2024 and past audits are available online at lackawannacounty.org.