Home Rule Study Commission – Projections Indicate Growing City Deficit if No Action Taken
May 30, 2024
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Home Rule Study Commission
The content below is provided by the Home Rule Study Commission, not the City of Lancaster or the Sorace Administration. Learn more about the Home Rule Study Commission at https://www.cityoflancasterpa.gov/home-rule/.
PFM Consulting Group presented projections to the city of Lancaster Home Rule Study Commission that indicated the city will need to fill a deficit of $10 million in the 2025 budget through revenue increases, expenditure cuts or a combination of both.
If no action is taken, PFM’s baseline projections show:
- Flat revenues, growing from actual $69.7 million in 2023 to an anticipated $71.4 million in 2029.
- Growing expenditures, rising from actual $69.8 million in 2023 to a likely $89.8 million in 2029.
- The biggest driver is personnel costs including salary and wages, health insurance and pension. Certain of these costs are fixed by collective bargaining agreements.
PFM developed three scenarios to close the projected annual gap between revenues and expenditures from 2025 to 2029. The scenarios cover the deficit entirely with property tax increases, earned income tax increases or expenditures cuts.
However, it is likely that the city will use a combination of revenue increases and expenditure cuts rather than using just one option. (Note: The city cannot increase the earned income tax rate unless a Home Rule Charter, currently being drafted by the Commission, is approved at the November General Election.)
Scenarios:
- Real estate tax increases – millage would grow from 12.64 mills in 2024 to 19.46 mills in 2029.
- Earned income tax increases – rate would grow from 0.6 percent in 2024 to 1.54 percent in 2029.
- Expenditure cuts – eliminate 87 positions across all departments for a personnel reduction of 23 percent in 2025 and additional cuts through 2029.
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