Pittsburgh increased spending since COVID, while revenue issues brewed

Pittsburgh’s city government has increased its spending each year since 2021, while pandemic-induced revenue problems brewed beneath the surface and formed what now amounts to a threat to the city’s financial stability.

From 2019 through 2023, under two different mayors, the city increased its operational spending by about 12%. That figure is well below the inflation-tracking Consumer Price Index’s increase over that time, and tracks with the fiscal behavior of other mid-sized American cities.

During that time, two of Pittsburgh’s neighbors to the west, Detroit and Cincinnati, increased spending by 13% and 15% respectively. From 2019 through 2022, a period for which more data was available, Pittsburgh’s spending increased less than Louisville, Kentucky and St. Paul, Minnesota, which has an almost identical population to Pittsburgh.

Meanwhile, the pandemic dealt a direct hit to the city’s parking and amusement tax streams, and an indirect (but potentially colossal) hit to its property tax revenue. The latter is only being felt today, as a lawsuit and thousands of property assessment appeals — including many in the Downtown commercial core — threaten the tax base.

The steady spending increase, despite unsteady revenue collection, was made possible in large part by federal relief money from the American Rescue Plan Act [ARPA]. The city received $335 million from the 2021 law championed by President Joe Biden and congressional Democrats.

But that money is set to run out by the end of this year, and there is uncertainty about whether the city can maintain its spending trend without it.

“There’s a lot we’re spending money on this year that we won’t be able to spend money on next year,” said Peter McDevitt, City Council’s budget director.

City hall chatter ranges from dire warnings from City Controller Rachael Heisler to measured caution on City Council and calm optimism in the office of Mayor Ed Gainey.

Jake Pawlak, Gainey’s deputy mayor and the director of the Office of Management and Budget, said the city has long planned for “lean” years in 2025 and 2026 and expects to make it through with a healthy reserve fund and no cuts to service.

Gainey convened a task force in April, including all three branches of city government, to address the city’s finances.

The range of reactions come as 2025 local elections lurk over the horizon; Gainey is expected to seek a second term in a May primary.

City Council Finance Chair Erika Strassburger said she suspects there will be cuts to the city’s operating budget next year, but does not expect layoffs.

“I don’t suspect that [cuts] will be in the form of cutting positions,” Strassburger said.

McDevitt predicted that future cuts could come in areas like facility maintenance. The administration has already predicted slimmer capital budgets in the years ahead, with fewer new projects starting and a steep decline in money set aside for street paving.

Steady increase since 2019

Spending increased in almost every city department between 2019 and 2023, and some of the biggest changes reflect major city events. The Law Department’s spending increased by 66%, from $6.4 million to $10.6 million. That’s due in part to an $8 million settlement between the city and the estate of Jim Rogers, a man who died after being tased by Pittsburgh police officers in 2021.

The Department of Mobility and Infrastructure increased its spending by 43% over five years, reflecting Gainey’s push to assess and repair city bridges after the Fern Hollow Bridge collapsed just days into his tenure as mayor.

And the budget for the mayor’s office itself more than doubled since 2019, tracking a new mayor’s move to reorganize city hall and pull some formerly separate functions under his direct watch while beefing up his own staff.

Most of the increase in the last five budget years occurred from 2022 to 2023 — the first budget cycle with Gainey fully in control, and the first with the ARPA dollars fully accumulated in city coffers.

In that year alone, city spending increased 6%.

McDevitt said increasing spending made sense given the ARPA windfall, even if there was trouble brewing in some revenue streams.

“It is appropriate to increase spending whenever you have increased revenue like that,” McDevitt said. “I know City Council has been very thoughtful about how that’s been done.”

While most of the ARPA money went toward capital and other non-personnel costs, some 40% was earmarked for personnel costs — preventing layoffs, giving modest raises to non-union employees and restoring vacant positions.

Strassburger said that any suggestions that the city has spent “recklessly” has been overblown, but that the city could have exercised a little more restraint in recent years.

“I certainly think had we been a little bit more cautious on our spending it wouldn’t have hurt,” Strassburger said. “Especially with regard to hiring of staff, it could have buffered us a little bit better.”

The city hired more than three hundred employees in each of 2022 and 2023, causing a net increase in active city workers in both years. But newly created positions in recent years proved hard to fill and were offset by vacancies in existing roles. The city had 3,227 full-time employees at the end of 2019, a number that dipped during the pandemic to 3,103 at the end of 2021 and then rose to 3,171 at the end of 2023.

Pawlak said the city is still rebuilding its workforce after state financial oversight, from 2003 through 2018, saw a few departments and many positions eliminated. But he said the city will be much more restrained over the next two years when it comes to adding new positions.

“I think we will slow down, particularly for the next two years, which we’ve long characterized as a point of financial limitations,” Pawlak said.

Heisler, who was elected controller last fall after serving as deputy controller since 2021, said the spending increases were expected because of the end of a COVID-era hiring freeze, but she is concerned about Gainey’s spending plans for the next couple years.

“The administration’s own budget projects operating deficits in 2025 and 2026,” Heisler said, adding that she projects the city to have an operating deficit this year as well. She called that “very concerning.”

The administration does not count a handful of annual payments, like multimillion-dollar ones to the Housing Opportunity Fund and the Stop The Violence Fund, as operating costs, meaning the city is headed for a positive operating result during the next two years, Pawlak said.

But both Pawlak and Heisler agree that after factoring in those outlays the city would effectively lose money each year, shrinking the reserve fund from $154 million to $99 million by the end of 2026.

Pawlak defended the reserve drawdown, saying the fund is still far higher than it was before COVID and that it’s better to spend the money on city services than to stockpile cash far above the required minimum amount, which is 10% of budgeted operating expenses.

“The reserve fund is very healthy,” Pawlak said. “... I think it’s prudent not to reduce the levels of service that we’re providing residents to meet a somewhat artificial accounting statement that has little real world effect and that we know is going to be countered once the debt payments are paid off [in 2026].”

No cuts, says mayor

Gainey’s staff asserts that it does not foresee any operating budget cuts heading into next year.

“What the numbers tell me is that there’s no reason to make cuts, either across the board or surgically,” Pawlak said. “I don’t anticipate needing to do any kind of hiring freeze either.”

He said the city will look for places to improve “efficiency of the use of our resources” to create savings, rather than making broad cuts.

Strassburger, who as finance chair will lead council in hammering out a budget plan with the mayor in the fall, said that while she expects cuts, she understands why Gainey and his team are saying otherwise.

“No employer would want to make any employee feel worried about their job,” Strassburger said. “What I don’t think any of us are talking about currently is cutting positions. I don’t blame the mayor at all for speaking in a way that brings comfort to employees that their positions are safe.”

Charlie Wolfson is PublicSource's local government reporter. He can be reached at charlie@publicsource.org.

This story was fact-checked by Laura Turbay.

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