Pittsburgh’s $693 million budget is back on the drawing board … again.
Earlier this month, Mayor Corey O’Connor flagged serious concerns about the city’s finances. He said this year’s budget — the plan that finances every facet of city operations — faced a shortfall of up to $40 million.
Crafting a budget always takes time and requires compromise — but the process to hammer out the 2026 spending blueprint has been particularly complex and controversial.
Here’s what you need to know:
What’s the problem?
O’Connor did not have a hand in shaping the budget he inherited when he took office in January.
The 2026 spending plan was initially authored by former Mayor Ed Gainey’s administration and presented to City Council in the fall.
Critics derided the proposed budget as dishonest, sloppy and riddled with omissions. They believed it grossly underfunded numerous critical expenses, though the Gainey administration dismissed those concerns.
Things were so suspect that council decided to rewrite major portions of the dense document just days before the mandated end-of-year deadline.
Council added a 20% property tax increase in order to close the funding gap and then approved the spending plan.
At the time, council thought the adjustments — including setting aside more money to replace deteriorating vehicles and pay for public safety overtime — would suffice. They didn’t.
In his third month in office, having had time to review the city’s finances from the inside, O’Connor announced things were even worse than he thought.
The new administration argued the 2026 budget underestimated costs like health care, legal judgments and fuel.
Officials said the budget relied too heavily on grants and special funds to make ends meet, something that may work in a pinch but could not serve as a long-term strategy.
O’Connor is now asking council to reopen the budget and amend it once again — essentially revising its revisions.
How will the budget change?
The mayor on Tuesday sent council a series of proposed budget amendments adding about $28 million in net new spending.
That figure comes after cost-cutting measures, application of a $15 million surplus that council expected to end this year with, and using money from trust funds to bridge the gap.
If council embraces everything O’Connor wants, this year’s operating budget would swell to $721 million.
The amendments cover a range of expenses already in the budget but which O’Connor felt were underfunded. Included are:
- $8 million would be set aside to cover legal judgments pertaining to the facility usage fee — known as the “jock tax” — on out-of-town professional athletes and performers that the Pennsylvania Supreme Court last year ruled was unconstitutional.
- $7 million to partially restore a fund for voluntary employee benefits, such as life insurance
- $6 million for retiree health care
- $5.75 million for legal judgments against the city
- $3.8 million for bridge maintenance
- $3.7 million for roof and boiler replacements
- $2.2 million to pay overtime and outside contractors who helped remove snow during a January snowstorm
- $2 million for vehicle repairs
- $650,000 for staff at the newly reopened Oliver Bath House
How will O’Connor pay for all that?
The budget approved by council at the end of last year showed a roughly $15 million surplus.
Officials would use that money and $6.5 million from the city’s financial reserves — an emergency fund with about $159 million — to keep the city running this year.
That’s a strategy Controller Rachael Heisler warned should not become a regular practice.
Dan Gilman, O’Connor’s chief of staff, seems to be on board with the philosophy. Gilman said the mayor hopes to avoid using the reserves in future years.
The administration also anticipates taking in $8 million more than initially budgeted in payroll preparation taxes paid by employers. That amount includes taxes from last year that were not collected on time.
O’Connor also is proposing cutting empty jobs, which could save about $2 million, according to legislation introduced to council Tuesday.
Exactly how much is the budget short?
That’s a tricky question to answer.
O’Connor stated the 2026 budget fell short by $30 million to $40 million.
That doesn’t mean, though, that the budget passed by council wasn’t balanced.
Instead, according to the mayor’s office, it means the city needs that much more for its budget to adequately address the city’s needs.
If council doesn’t increase spending, then the mayor will face tough choices: continue draining city reserves to make ends meet; try to increase taxes even more; dramatically cut spending; or some combination of those measures.
So with the new spending proposed by the mayor totaling $28 million, where does O’Connor get $40 million?
The difference reflects expenses O’Connor said should be covered out of what is called the general fund, but aren’t.
The general fund is used to pay for the city’s normal operating expenses, like salaries, overtime and everything else that keeps Pittsburgh afloat on a day-to-day basis. Revenue comes from taxes and fees.
In Pittsburgh, however, the mayor’s office and council for years have used grants and trust funds — pots of money designated for specific uses, some of which are meant to be saved for emergencies — to pay for normal operating costs.
The 2026 budget outlines 19 different special revenue funds. City officials are allowed to use trust funds to cover certain expenses, a longstanding practice.
O’Connor believes the city must shift away from relying on those sources and replace them with traditional revenue streams.
For example, Gilman told TribLive the administration wants to move away from using money collected through the parks tax — which sits in a trust fund — to cover operating costs. The goal of the parks tax, he pointed out, was to fund additional projects within parks — not to pay for basic city operations.
Of the roughly $9 million the parks tax is expected to generate this year, for example, over $6 million will be spent on parks department salaries and employee benefits instead of new projects or upgrades.
The O’Connor administration has not provided a breakdown of all the areas where they feel the city will eventually need to rely less on trust funds and grants.
Is the budget really balanced?
Heisler, the controller, has often expressed concerns about the city’s fiscal health.
On Monday, she said she was glad to see O’Connor fashioning a plan to address the budget’s shortcomings.
But she also issued a warning about a peculiar Pittsburgh budget practice: not counting all the city’s costs as expenses.
Officials refer to some costs — which they don’t count in the operating budget — as “transfers.”
The transfers pay for a variety of things, including some salaries that are effectively operating expenses.
Transfers each year include $10 million for the Housing Opportunity Fund, which works to create affordable housing and help low-income renters avoid eviction.
The Stop the Violence Fund — which funds the Office of Community Health and Safety and offers grants to community groups — typically gets a $10 million transfer, too. This year, that number was reduced to $5 million in the midst of the budget crunch.
For 25 years, the city must spend $2.5 million annually to pay off a bond the Urban Redevelopment Authority took out to support affordable housing initiatives. That, too, is counted as a transfer.
In total, the 2026 budget includes more than $40 million in transfers.
None of these transfers, however, is listed on the expense side of the budget ledger.
Instead, the city draws from any budget surplus and its reserve fund to pay for them.
That allows the city to approve budgets officials say are balanced — but are far from it.
Heisler said transfers should be counted as operating expenses.
“Until they are accounted for appropriately, the budget remains fundamentally unbalanced,” she said.
Jake Pawlak, Gainey’s budget czar, has continued to defend the spending plan he had prepared under the Gainey administration. He chalked up the concerns the O’Connor administration raised this month to “differing philosophy.”
Why is Pittsburgh in such a tight spot?
The city has faced financial pressure on multiple fronts.
Property tax revenue has plummeted, driven in part by decreasing values of Downtown office towers that have seen demand dwindle since the covid-19 pandemic.
When the Pennsylvania Supreme Court struck down the jock tax, it yanked about $4 million from the budget each year.
Federal covid-19 relief money is almost gone.
And inflation has driven costs up, making it harder to stretch the dollars the city brings in.
What’s next?
O’Connor’s amendments were introduced to council Tuesday.
They’ll be discussed this coming Tuesday in a special session. A public hearing will be held before council votes on budget changes.
Council’s budget office and the controller will need to recertify the updated revenue projections, too, to ensure they are realistic.
On Wednesday, council held a public meeting to discuss the city’s finances.
Councilwoman Erika Strassburger, D-Squirrel Hill, has called for quarterly meetings to analyze the city’s financial situation.
And just when they wrap up the 2026 budget — again — it’ll be time to get to work on next year’s spending plan.
The good news?
Officials will have more wiggle room. Pittsburgh will pass what officials call a “debt cliff,” meaning it will pay off about $30 million in debt.
That, experts say, should free up cash for other uses.
