Mayor Corey O’Connor painted a dire picture of Pittsburgh’s financial future on Wednesday, one in which the city would completely run out of money by 2032 if it stays on the current course.
The mayor submitted a 2027 budget proposal to City Council that would draw $26 million from the city’s reserve fund to cover costs next year, even after cutting spending 2% from this year’s level. He proposes cutting trust funds related to violence prevention and affordable housing, though he said in a press release the underlying programs will go on.
The proposal does not include a tax increase, a year after council approved a 20% hike in the property levy for 2026.
He warned that without his proposed changes, the city would face a future without rec centers, pools or parks, with more flooding, litter and blight, and worse public safety services.
Top expenses
- Finance/Pension contributions: $160 million
- Police: $128 million
- Fire: $111 million
Top revenue sources
- Real estate tax: $171 million
- Earned income tax: $150 million
- Payroll prep tax: $72 million
“The alternative to my budget would be massive city staff layoffs, which we know from history affects how we deliver fundamental services, and, in turn, is felt most significantly in our most disadvantaged communities.”
The mayor’s plan for 2027 calls for pulling $26 million out of the reserve fund to meet expenses, while cutting costs in three primary ways:
- Cutting off funding to the Stop The Violence Trust Fund
- Cutting off funding to the Housing Opportunity Fund Trust Fund
- Decreasing the city’s pension contributions.
The city has historically transferred $10 million to each of the two trust funds annually. The budget proposal also decreases pension contributions from $112 million to $105 million.
O’Connor referred to the trust funds as an accounting “gimmick” used by past mayors to avoid counting the expenses against the city’s revenues when balancing the budget. He said the funds’ present cash reserves “will allow us to continue to invest in the critical work paid through these trust funds without the transfers.”
The 179-page operating budget document shows the mayor is adding 63 jobs to the Department of Public Safety that previously were part of the Stop The Violence fund. The budget does not make it immediately clear how the Housing Opportunity Fund programs would continue.
Spending down the bank account
The five-year plan released Wednesday predicts an annual deficit of more than $25 million from 2028 to 2031, plunging the fund balance below the legally-required threshold of 10% of operating expenses — and emptying the fund completely before 2031 ends.
O’Connor is also proposing to cut the amount of money the city spends out of pocket on infrastructure and capital projects next year. While the total capital budget would increase next year, from $112 million to $145 million, the amount that comes from the city’s general fund would decrease from $21 million to $9 million. The rest comes from bond borrowing and federal and state sources.
The release of a preliminary operating budget starts a process which continues with a formal introduction in early November; a late autumn of City Council meetings, public hearings and amendments; and ultimately votes by year’s end.
No tax hike, flat revenues
The proposed five-year plan, required by law to accompany the budget each year, shows annual revenue growth of barely more than 1% — a figure below typical increases in the cost of labor, fuel and other expenses. The plan foresees an overall decline in real estate tax revenue — still the city’s biggest source of income — over the five years.
In an interview before O’Connor’s plan was released, Council budget Chair Erika Strassburger said the city is faced with difficult choices to regain its footing, and ruled out another tax hike.
“I think we have to be very careful that we do not burden our middle class and lower income residents with additional costs,” Strassburger said. “That means raising taxes has to be out of the question.”
She said trimming staff is difficult because of union negotiations and potential impacts to core services, leaving the trust funds as one of the only areas where the city can cut costs significantly. But she said council members will be in discussions about how to preserve some of the programs around housing and violence prevention.
“We want to stand up for those who are cost burdened and can’t afford another tax [hike] and for those who have the least and benefit the most from those types of programs,” she said. “Those are conversations that council members are going to have to have with one another.”
The roots of a budget reckoning
The city has been on shaky financial footing ever since federal pandemic relief funds dried up two years ago. The city had used the funds since 2021 to backfill revenue lost due to economic shocks emanating from the pandemic, but revenue never fully caught up with expenses. Since 2025 the city has been raiding its reserve fund to balance its budget, but now the once-hefty fund is dwindling.
O’Connor, Controller Rachael Heisler and some City Council members have accused former Mayor Ed Gainey of putting forward faulty budget estimates in the past, culminating in a dramatic budget cycle last year. Council rejected Gainey’s budget a year ago and passed its own, with a tax hike to make up for what they called structural flaws in Gainey’s plan.
O’Connor took office this January and soon announced that the city’s fiscal problems ran even deeper than the public knew last year. He said, though, that he would seek to avoid another tax hike or cuts to core city services.
“After years of mismanagement, we inherited a misleading budget that was missing hundreds of millions of dollars from the five year plan,” O’Connor said Wednesday. “With deceptive and irresponsible budgeting gimmicks from small line items to large expenses, the structure of the budget was unsustainable and created a false picture of our financial situation.”
In a letter to City Council on Tuesday, Heisler said an array of external economic pressures will continue to threaten Pittsburgh’s bottom line next year. Changes to Medicaid and a potential work stoppage in Major League Baseball could hit the city’s revenue, while the continuing war with Iran could push costs higher.
Heisler also supported cutting off money to the Stop The Violence and Housing Opportunity trust funds.
“Our office has been vocal about the precipitous impact of transfers to the Housing Opportunity Fund and the Stop The Violence Fund on an already-dwindling fund balance,” Heisler said.
The Stop The Violence fund has been near the center of an investigation by District Attorney Stephen Zappala, which has been probing former Mayor Ed Gainey’s use of no-bid contracts. Details of allegations made to DA investigators spilled into the open when a search warrant affidavit was unsealed last week. Strassburger called the unsealed allegations “riddled with inaccuracies,” and said they should have no impact on funding decisions for the trust fund.
“It gets names wrong, it gets amounts wrong,” she said of the affidavit. “It doesn’t have and shouldn’t have any implications on the budget process that we go through this year.”
Charlie Wolfson is the local government reporter for Pittsburgh’s Public Source. He can be reached at charlie@publicsource.org.
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