At the end of a detailed briefing this week, Luzerne County’s outside auditor provided an assessment of 2022 finances welcomed by council members.
“I think the key takeaway with the numbers is the county had a good year,” Adam Hartzel, a senior manager at Baker Tilly told council during its work session Tuesday. “Your financial position improved. You’re stable. I would expect that rating agencies are going to look favorably on your financial statements today as compared with even five years ago.”
Hartzel said this progress required “a lot of hard work.”
“I guess the overall, underlying message with that is don’t stop. You’ve got a good, solid foundation to where you’re at,” Hartzel said. “Now the trick becomes, how do we maintain that stable base?”
The county ended 2022 with a $2.76 million general fund operating budget surplus, meaning spending was below revenue by that dollar amount.
Hartzel attributed this largely to reduced spending on salaries and wages due to unfilled vacancies throughout county government and a budgeted $1.2 million emergency contingency that the county did not touch.
When added to surpluses in recent years, the county ended 2022 carrying an unassigned fund balance of $21.5 million, his report said.
This is still below the approximately $27 million unassigned fund balance recommended by the Government Finance Officers Association, which equates to two months of typical operating budget spending, his report said.
However, Hartzel’s report noted the county’s balance has been steadily increasing in recent years, with his chart showing the fund balance was $5.86 million in 2018.
This growth should be viewed positively by outside evaluators, he said. The county’s Standard and Poor’s credit rating remained stable at A- in 2022 and was subsequently increased to an A rating in February 2023.
Regarding debt, the county repaid $19.2 million in 2022, Hartzel said.
That leaves a balance of $196.4 million — $166.1 million in principal and $30.35 million in interest — to be paid through 2031.
For perspective, the county’s outstanding debt was $421 million when the county switched to a home rule government in 2012.
The county will write its last debt repayment check and be debt-free in 2031 assuming it does not incur more debt, he said.
Councilman Tim McGinley, who chairs council’s Budget, Finance & Audit Committee, emphasized the audit was completed the day before the June 30 deadline.
Charter drafters imposed the deadline because of past delays completing county audits. In the summer of 2007, for example, county officials were just getting ready to start the 2005 audit, even though all other similarly sized counties in the state had long completed their 2005 audits by that time.
“Previous councils and this one have done a really great job in getting the audit done on time and conserving our resources and moving to keep the surplus growing,” McGinley said, encouraging the public to review Baker Tilly’s audit summary report posted with council’s July 25 meeting agenda at luzernecounty.org.
“We’ve gotten to a pretty good point,” McGinley said.
Councilman Brian Thornton said he echoes McGinley’s sentiments.
“This should show the county residents and constituents that Luzerne County is in really good — and maybe great — financial shape and is slowly paying down the enormous debt that was incurred prior to home rule coming in,” Thornton said. “We’re definitely on the right track, and everyone should feel good about that.”
In less upbeat information, the county’s employee pension fund was 68.9% funded at the end of 2022, compared to a more favorable 83% the previous year, Hartzel said.
He attributed this to a volatile investment market in 2022 and updated actuarial mortality assumptions that increased the liability, or projected long-term cost of future pension obligations.
County officials say the fund has increased in value through investment earnings since the audit snapshot reading, which would boost the funded status in the next annual audit if that trend continues.
The county must contribute approximately $12 million in subsidy toward the pension fund this year, with most coming from the general fund budget.