This Central Pa. county’s bank account could take $19.7M hit by December with no Pa. budget

• By Tom Lisi | For LNP/LancasterOnline

If the governor and Legislature don’t agree on a budget by the end of the year, Lancaster County government will start 2026 with $19.7 million less than previously expected, according to financial projections presented at a county Investment Board meeting Thursday.

The drop would be a result of the county commissioners’ decision to continue paying social-services providers for the work they perform on behalf of the county, despite the county no longer receiving funding from the state.

Starting Oct. 1, the county will begin to make partial payments to those providers at a 60% rate. The partial rate is meant to protect the county’s financial picture, but still maintain a lifeline for vendors who provide crucial services, many of them small businesses and nonprofits.

On behalf of the state government, counties administer a laundry list of social services, from drug and alcohol treatment to support for toddlers with developmental delays, child protective services and mental health treatment, to name a few.

Federal and state laws mandate the services and counties are tasked with providing them. In turn, federal and state tax dollars go to counties to cover most of the costs.

But the funding spigot shut after June 30, when last year’s state budget expired. With no budget passed into law, state agencies have no authority to keep paying counties for the required services.

If and when the Pennsylvania General Assembly passes a budget, the state would retroactively pay counties for the services already rendered since July 1. But even a temporary drop in cash reserves could hurt counties like Lancaster that have used earned interest from financial investments to cover operating costs.

So far this year, investments in interest-bearing accounts have netted the county $5.2 million, according to a report from the county treasurer’s office. The county’s 2025 budget assumes those investments will cover $6.6 million in expenses this year.

On Thursday, Lancaster County Treasurer Amber Martin said those investments still appear to be on track to meet the county’s projections — even with the drop in cash the county has on hand due to the budget stalemate in Harrisburg.

“We will try to milk as much interest as we can to hit our budget target,” Martin said at the Thursday meeting.

Martin said she will have a better idea of the county’s ability to maintain its investment accounts once the commissioners office releases initial budget projections for 2026 in November.

Inflation and other factors such as higher health insurance premiums for employees have accelerated the increase of general operating expenses. Many local governments across the country have used earned interest to cover those costs in recent years. The millions of dollars in interest they accrued was largely due to an influx of cash from the federal government meant for recovery from the COVID-19 pandemic.

With most of that money now out the door, the opportunity to generate millions from bank deposits will not be available.

The county’s investment accounts are still generating interest at or near the Federal Reserve’s benchmark interest rate, Martin said. The Fed cut that rate last week by a quarter of a percentage point to 4.25%.

“None of our banking relationships have dropped our rates as of yet, based upon that percentage reduction,” Martin said. “I’m sure it is coming.”