Pittsburgh is facing a budget shortfall of up to $40 million this year, Mayor Corey O’Connor revealed Thursday, leaving his young administration scrambling to figure out how to cover costs.
O’Connor blamed inaccurate predictions and “a lot of false assumptions” by the previous administration for the financial predicament he said the city is now in.
“The reality is much worse than we thought,” said O’Connor, whose staff has spent the past several months poring over the spending plan passed at the tail end of last year as well as the city’s unaudited 2025 financial results.
Numbers budgeted under former Mayor Ed Gainey are not projected to cover costs this year, the mayor said.
Even a 20% tax hike City Council approved for this year won’t be enough to keep the city afloat without reopening the budget and trimming expenses, O’Connor told reporters.
That’s exactly what will happen, according to the mayor — though his administration said it is not “not currently considering new taxes, layoffs or cuts to critical city services.”
The city will formally reopen the budget the week after next to begin the process of amending the 2026 spending plan, which will require approval from council.
No easy decisions
As described by O’Connor, the gaping budget hole touches every aspect of city operations, from employee and retiree health care to fuel costs to the city’s reserve fund.
Pittsburgh, which last year ran an $8.6 million budget deficit, had to spend $44 million from its reserve fund to make ends meet. The city outspent its budget on overtime alone by more than $20 million.
O’Connor said predictions estimated the city’s reserves could drop to as low as $84 million over the next five years if current financial trends continued.
The city needs to add $13 million over the next two years to fund employee health care over the next two years — and an additional $6 million this year for retiree healthcare.
About $2.5 million dollars more is needed for emergency bridge maintenance, O’Connor said.
Other areas O’Connor indicated were underbudgeted this year include funding for workers in the Office of Community Health and Safety, fuel costs, pay raises for union workers, vehicle repairs and payments from lawsuits.
O’Connor said the budget also did not plan for potentially costly emergencies, like the massive January snowstorm. The city’s response to the winter weather cost about $2 million, the mayor said.
The 20% property tax increase City Council approved in December aimed to ensure the 2026 budget would balance. But officials on Thursday painted a grim picture of Pittsburgh’s finances, even with that extra revenue.
“It’s not going to be easy, the decisions we have to make,” the mayor said.
The mayor said his administration will look at “each line item” for areas that could be trimmed.
He’s also hoping to convince nonprofit and private partners to contribute more funding to pay for things like the remainder of costs associated with an expensive comprehensive plan currently underway.
In January, UPMC donated $10 million to pay for new ambulances this year and next. The PNC Foundation soon followed with a $2 million contribution for new snowplows.
No overnight fix
O’Connor did not immediately outline specific areas where he intended to make spending cuts but suggested some vacant city positions could be eliminated.
The financial problem, O’Connor said, was not created overnight — and it won’t be fixed overnight either.
Rea Price, the acting director of the Office of Management and Budget, said some 2025 bills had also not yet been paid.
The city has been “sitting on” about $1 million in unpaid invoices for vehicle maintenance costs, she said, as well as invoices totaling several hundred thousand dollars for outside legal help.
Officials in recent years have raised red flags about the city’s budget, with Controller Rachael Heisler and some council members voicing increasingly urgent alarms about whether the city was responsibly budgeting for costs ranging from public safety overtime to utility bills.
The city ended last year with an $8.6 million operating deficit, despite repeated reassurances from the Gainey administration that finances were stable, the budget was realistic and Pittsburgh would end the year with a modest surplus.
Pawlak defends budget
Gainey did not respond to a phone call, but his top lieutenant, Jake Pawlak, who led the Department of Management and Budget, defended the spending plan.
“I stand behind the budget projections included in the 2026 budget,” Pawlak told TribLive minutes after O’Connor began speaking. “I believe they were reasonable and responsible.”
He said there were “philosophical differences” between the Gainey and O’Connor administrations.
“I think that every mayor, that every administration has the prerogative to adjust the budget to match their priorities and to match their agenda,” Pawlak said.
Peter McDevitt, who served as council’s budget director through the 2026 budget process and is now the city’s deputy controller, said the Gainey administration did not provide enough data to council about the city’s finances.
He told TribLive he wasn’t sure how such issues could be remedied moving forward.
“I don’t know there’s anything we can legally do to make sure people don’t lie,” McDevitt said, adding he was not sure whether the Gainey administration was intentionally dishonest.
“I think a lot of it is going to come down to how you want to run your city and if you want to pay your bills on time,” he said.
Council members, unconvinced by the administration’s rosy projections, drastically revised the 2026 budget, tacking on a the tax hike that is expected to generate about $28 million in additional revenue for the city this year.
Council members in December approved a $693 million operating budget and a $110 million capital budget.
As McDevitt listened to O’Connor’s Thursday press conference, he said he was thinking to himself, “I wish I could’ve done more.”
“We could only work off the information we were given,” McDevitt said. “We just didn’t have the full picture.”
Covid catalyst
Heisler on Thursday reiterated that she has been voicing the same concerns since she took office.
“The economic landscape has changed since the covid-19 pandemic,” Heisler said. “We have not adapted to that.”
Heisler predicted the city will end the year with a deficit again, though she could not immediately estimate its size.
Still, she told TribLive she did not believe it was “inevitable” that the city would fall under state financial oversight because of its financial woes.
Councilwoman Erika Strassburger, D-Squirrel Hill, said the covid-19 pandemic was the “catalyst for all of this,” pointing out the pandemic tanked the value of commercial Downtown properties.
She also acknowledged there were “lessons learned” from the way the city spent federal covid-19 relief money.
“Did we spend those dollars appropriately in hindsight? No, we did not,” Strassburger said. “We did not anticipate what we needed to truly grow the city so that we were really on strong footing coming out of that extra infusion of cash.”
She pointed out the city’s debt payments will shrink after this year, meaning the city could be in a “somewhat stronger financial position next year.”