Pittsburgh could be facing a severe budget shortfall of up to $40 million this year, according to projections revealed Thursday by Mayor Corey O’Connor, 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 in.
“The reality is much worse than we thought,” said O’Connor, whose staff has spent the past several months poring over the city’s finances.
Both the budget originally proposed last year by former Mayor Ed Gainey, which City Council rejected, and the spending plan rewritten and passed by council, grossly underestimated this year’s expenses, according to the mayor.
Even the 20% tax hike council approved for this year won’t be enough to keep the city afloat without reopening the budget and trimming expenses, O’Connor said.
That’s exactly what will happen, according to O’Connor — 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.
The mayor said his administration will look at “each line item” for areas that could be trimmed.
O’Connor, however, said his administration is “not currently considering new taxes, layoffs or cuts to critical city services.”
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 said when reached by TribLive. “I believe they were reasonable and responsible.”
No easy decisions
As described by O’Connor, the gaping budget hole, which could range from $30 million to $40 million, 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.
According to the mayor’s presentation, the fund balance is about $159 million.
The city needs to add $13 million over the next two years to fund employee health care, and an additional $6 million this year for retiree health care.
About $2.5 million more is needed for emergency bridge maintenance and emergency boiler and roof repairs, 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 leave much leeway to pay for unexpected, costly emergencies, like the massive January snowstorm. The city’s response to this winter’s weather already has cost about $2 million, the mayor said.
The 20% property tax hike council approved in December was supposed to ensure the 2026 budget would balance. But officials 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,” O’Connor said.
The mayor is hoping to convince nonprofits and the private sector to step up.
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 targets for spending cuts but suggested some vacant government positions could be eliminated.
The city’s financial problems, O’Connor said, were not created overnight — and won’t be fixed overnight either.
Rea Price, acting director of the Office of Management and Budget, said some 2025 bills had 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.
Controller Rachael Heisler and some council members voiced increasingly urgent alarms about whether the city was responsibly budgeting for costs ranging from public safety overtime to utility bills.
The city’s operating deficit last year occurred 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
O’Connor’s dismal view of the city budget contrasted sharply with that of Pawlak, Gainey’s former deputy and the prime architect of the spending plan.
Pawlak 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 about the city’s fiscal picture.
“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,” McDevitt said.
Council’s role
Council members, unconvinced by the administration’s rosy projections, drastically revised the 2026 budget, tacking on the 20% 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 news conference Thursday, 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.”
Councilman Anthony Coghill said he felt council needed access to more thorough financial records.
The Beechview Democrat also said council had to be more vigilant in holding mayors accountable for their spending.
“Perhaps council needs to reevaluate and take a deep look at all our expenses and not assume that any mayor is funding these things,” Coghill said.
Coghill said he realized there were issues with Gainey’s original budget projections, though he knew money was tight.
“I’m a little surprised at the extent of it,” Coghill said.
Coghill could not immediately provide any suggestions about where the city might be able to cut spending to make ends meet this year.
“We’ll dig our way out,” he said. “At least now we have a full picture of where we’re at. I don’t think there will be any more surprises.”
Act 47
Heisler on Thursday reiterated that she has been voicing the same concerns since she took office as controller.
“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.
If the city’s finances would become dire enough, it could trigger state oversight — which the city was under from December 2003 to February 2018. One potential trigger is three consecutive years of an operating deficit.
Heisler told TribLive she did not believe it was “inevitable” that the city would be classified as financially distressed under state Act 47 because of its financial woes.
O’Connor said Act 47 was “always a concern.”
Covid catalyst
Councilwoman Erika Strassburger, D-Squirrel Hill, said the covid pandemic was the “catalyst for all of this,” noting the pandemic tanked the value of commercial Downtown properties.
She 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.”
Councilwoman Kim Salinetro, D-West End, who took office in January, questioned how the city’s fiscal problems remained shrouded.
“I really don’t know how no one was paying attention all those years,” Salinetro said.