A new report by the Allegheny County Controller’s office suggests that the county’s expenditures increased in the first six months of 2024, even as revenues dwindled. And with the county on track to end the year $60 million in the hole, Controller Corey O’Connor warns that tough choices could lie ahead.
County leaders, he warned, are “going to have to make some very difficult decisions in the next couple of years in order to stay afloat” without dipping into county savings.
An interim report covering the first six months of 2024 released by O’Connor’s office Tuesday cautions local leaders to take note of these “concerning trends” in county finances and reverse course.
In the first six months of the year, revenues have lagged their 2023 performance, and are on track to fall about $20 million short of this year’s projections. The shortfall is mostly due to major drops in the assessed values of properties, particularly commercial buildings Downtown, and lower-than-projected sales tax, drink tax, and federal revenues.
At the same time, the county’s year-over-year expenditures have increased by $57 million, with rising occupancy at the county’s Kane Community Living Centers boosting operating costs partly to blame. An increased reliance on contract nursing agencies at Kane Centers and the Allegheny County Jail have also contributed to the rising cost of running the county; they’re expected to represent roughly half of the county’s deficit spending for the year.
Unless revenues exceed projections, the county deficit is expected to reach $60 million this year. That’s roughly 6 percent of the county’s $1 billion spending plan, and it’s up from the roughly $40 million deficit disclosed in last year’s annual report.
In the near term, the gap can be filled by federal emergency aid from COVID pandemic relief funds. But that money must be allocated by the end of 2024 and spent by the end of 2026. Unless revenues see a meaningful increase, the county could be forced to dip into its “rainy day fund” — money set aside to cover costs during downturns.
“That would be like ... every time you go grocery shopping to bring groceries, you're going into your savings account. Eventually you're going to be depleted,” O’Connor said.
A $60 million deficit would amount to roughly half the money currently in the fund.
O’Connor said some changes, such as hiring more county-employed nurses, rather than relying on contracted agencies, could help bring costs down and shore up the pension fund. But he also emphasized the need for a plan to grow revenues.
“If we are going to manage decline, that's not going to help anybody,” O’Connor said. “I think the conversation now has to turn to growth, expansion, opportunities for individuals now that we have so much vacant land and vacant property in this region.
“Let's have the conversation about entrepreneurs, startup companies, businesses that already exist, how we allow them to expand and what we can do to move things forward, especially when it comes down to bringing more residents into the region.”
County spokesperson Abigail Gardner said administration officials “look forward to reviewing” O’Connor’s report. She did not respond to questions about whether County Executive Sara Innamorato is considering budget cuts, or tax increases.
Innamorato is slated to present her 2025 budget proposal to County Council on Oct. 8.
