Mayor Corey O’Connor’s draft 2027 budget plan, released Wednesday, includes no tax increases or layoffs — but predicts a dark financial future ahead for the city without a major increase in revenue. And it makes changes to anti-violence and affordable housing initiatives that have attracted considerable political interest.

The $728 million operating budget, O’Connor’s first as mayor, and a companion $145 million capital budget amount to nearly $13 million less in expenditures when compared to the current year. The plan cuts 27 vacant positions, and reduces the amount that the city puts towards its pension fund by roughly $7 million a year.

While the plan is technically balanced, it covers costs by withdrawing $26.5 million from the city’s savings account – a strategy that, if continued along current trends, would all but deplete the fund within five years.

At a media gaggle Wednesday afternoon, O’Connor admitted the future looked “bleak.” He emphasized a need for the city to grow and bring in more revenue, and looked to the possibility of additional support from outside organizations and federal and state sources.

“We’re not gonna grow that fast to fix this problem, but we know with a growth strategy and creating new opportunities and new partners … we can cut that deficit,” he said. “We do not want to have to go into our savings account every time we have to turn the lights on. Right now, unfortunately, this is the card that we’re dealt.”

O’Connor emphasized that he did not want to cut into core city services, even at a difficult financial moment.

‘If we didn’t do what we’re doing right now, you’re looking at rec centers being closed, pools being closed. We can’t raise families if we don’t have those amenities, and we’re not gonna stoop to that level,” O’Connor said.

The city has already weathered a slew of financial disappointments and stressors of late. O’Connor made changes to 2026’s city budget this spring, citing a mix of differing priorities and inaccurate estimates of how expensive things would be.

The shifts amounted to withdrawing an additional $6.5 million from the city’s coffers and halving the amount of money put towards an ongoing food justice program, among other revisions. And while many officials remained enthusiastic about the possible public-relations exposure granted by hosting the NFL Draft in April, the city overestimated how much revenue it would receive from parking fees during the event, contributing to an increase in the anticipated deficit.

A dim financial future

Despite the modest changes in this year’s budget, O’Connor acknowledged that a reckoning was due.

“While this preliminary budget is balanced for 2027 using money from the rainy day fund, it clearly shows that the City’s budget is structurally unbalanced,” he said in a statement. “Throughout the five-year projections, the rainy day fund will be depleted and the City will ultimately run out of money.”

The city’s savings account is expected to dip below 10 percent of its total expenditures — a legal threshold and key metric of fiscal health — in 2029, after barely clearing the bar the year before. The account will have just over $7 million on hand in 2031, the last year of the five-year forecast, assuming deficits of between $25 million and $36.4 million each year after 2027.

City Controller Rachael Heisler, who has voiced concern about the city’s financial direction for several years, gave O’Connor points for honesty — but said the city’s fiscal problems were on display for all to see.

“I appreciate the administration’s willingness to offer an honest, realistic preliminary budget and to propose the kinds of difficult spending decisions required to improve the City’s financial situation,” she said in a statement. But while she laid much of the blame at the feet of former Mayor Ed Gainey — “the failure to proactively address these known challenges over the previous two years has only made our problems worse,” she said — she had misgivings going forward.

Blowing through the 10 percent barrier, she warned, “should only be done as a last resort and with extreme caution,” and with a plan to restore the fund down the road.

Heisler had also sought to head off a reduction to the city’s pension fund reimbursement, though prior to Wednesday’s release officials said that made a tempting target. The city has been making extra pension payments since a funding crisis more than a decade ago. It is now considered healthy.

Trust fund changes

The budget makes major changes to how the city handles two major trust funds: the Stop the Violence fund, which targets violence from a public-health perspective, and the Housing Opportunity Fund, which fuels initiatives meant to help lower-income residents obtain and keep housing.

Funding from the HOF, created in 2016, has contributed to a host of affordable developments in recent years. Those include: the first residential development at Hazelwood Green, the former steel mill site being redeveloped in the city’s Hazelwood neighborhood; a portion of the Bedford Dwellings redevelopment in the Hill District; the renovation of the former Centre Avenue YMCA to preserve 74 units of single room occupancy housing; redevelopment of the Bethlehem Haven building in Uptown; and the Mosaic Apartments in Oakland, 48 affordable units meant to welcoming to LGBTQ+ seniors.

The Stop the Violence fund, created in 2020, splits its money between city departments, such as the city’s Office of Community Health and Safety, and community organizations that address violence, inequality and poverty in city neighborhoods. It supports initiatives that help prevent evictions, engage youths in after-school activities, provide food in underserved areas, and more.

In prior years, the city put $10 million annually into those initiatives. O’Connor, however, proposes no new housing money and clawing back $12 million from Stop the Violence.

The impact of the moves is hard to gauge, since the budget envisions anti-violence initiatives being shifted to other offices. Chief of Staff Dan Gilman argued that the changes didn’t amount to an end to the services the funds support, but rather a change in how they are accounted for.

Under Gainey, the funds appeared in a separate line from regular operating expenditures, even though money from the fund helped cover the city’s costs. That led to accusations that Gainey was masking the scope of the city’s fiscal challenges. O’Connor, by contrast, campaigned on a pledge to be more transparent about finances — a promise Gilman said the city was fulfilling.

“The jobs aren’t eliminated, the work is not eliminated,” Gilman said Wednesday. “It’s putting it on the actual operating budget, rather than these fake budget gimmicks.”

In a statement, O’Connor said his goal was not to cease providing housing or violence prevention services, but to be more open about their cost.

“Instead of the transfers, we will put the programs and positions currently in these trust funds into the operating budget, so that the important work will continue while being transparent with the City’s finances,” he said.

“I believe the core services and missions of both of those funds, we are still going to be supporting.”

On Tuesday, Heisler had suggested the city rethink funding the programs, noting that they had unspent cash from previous years’ allocations. But supporters of those programs worry about the impact.

City Council President Dan Lavelle, who also serves as vice-chair of the Urban Redevelopment Authority board, said before the budget was revealed that “the vast majority” of money in the housing fund is already pledged to projects.

“There’s not just liquid cash sitting there,” he said: As a result, not refilling its coffers would amount to cutting the programs it supports.

And Alex Wallach Hanson, executive director of advocacy group Pittsburgh United, sounded a tone of alarm on the changes.

“As families are experiencing a deepening affordability crisis, the Mayor is proposing to eliminate funding programs like the HOF for the next five years,” he said. “If the Mayor follows through on eliminating the programs within the HOF that have supported thousands of Pittsburgh families, we need to understand his alternate plans to meet the needs of poor and working families and keep Pittsburgh an affordable home for all.”

Both funds have been hot political topics in recent years. While each was created before his tenure, they were championed by Gainey who characterized them as essential ways for the city to help under-resourced communities.

Some City Councilors have questioned the allocations, and the Stop the Violence spending in particular has been a focus of a search warrant filed earlier this year by the office of District Attorney Stephen A. Zappala Jr.

Critics of Gainey have suggested money from the violence-prevention fund was funneled to political allies. Last year, Council halved funding for Stop the Violence from $10 million to $5 million, citing unspent money in the fund’s account. Earlier in 2025, controversy spiked as Councilors sought to make changes to how the fund disbursed money.

Erika Strassburger, who chairs council’s law and finance committee, said the city faced “real and serious” challenges, but expressed concern about the fate of anti-violence and housing initiatives.

In a statement, she called the commitments to affordable housing and violence prevention “essential,” and praised Stop the Violence for “creating programs to support violence interruption, mediating conflict in schools, and assisting those neighbors experiencing homelessness.

“The budget process is a give-and-take, and Council will carefully review and modify the Administration’s proposal as needed in the coming weeks,” she said.

Christ Potter and Kate Giammarise contributed to this story.