Allegheny County Controller Corey O’Connor, in the second Annual Report of his tenure, called the past year an ‘inflection point’ for the County, noting that it spent more than it took in for the first time since 2011 and that minimal growth in Property Tax revenues and the impending exhaustion of federal emergency aid present signal challenges for its finances.
“While our current reserves should allow us to weather the immediate storm, long-term changes in our fiscal outlook and how we approach our challenges and obligations are likely,” O’Connor wrote in an introduction to his Popular Annual Financial Report (PAFR).
The County spent over $921 million in General and Debt Service funds in 2023, the year the report covers, $76 million more than in 2022 and over $23 million more than it took in. Health and Welfare costs led areas of greater spending with an increase of $35 million, the majority of this in Children, Youth and Families (CYF) programming including initial spending of $3.6 million toward the reopening of the Shuman Juvenile Detention Center.
Another significant driver of cost increases under Health and Welfare was spending on the Kane Regional Centers, which increased by $12 million due largely to reliance on contracted nursing agencies amid short staffing. However, revenue from the Kanes increased by $16 million thanks to growth in average daily occupancy, though at 54 percent of capacity occupancy remained historically low. The Kanes’ operating deficit fell to $15.6 million after being over $19.5 million each of the previous two years, but this deficit stood at under $4 million as recently as 2018.
The cost of running the County Jail increased by $10.6 million, of which nearly $3 million was from increased reliance on contracted nursing agencies.
The largest driver of total Revenue growth of $46.8 million was a $12.9 million increase in interest income due to favorable rates and the fact that the County held a daily average of $144 million in federal emergency aid funds. These funds must be spent by the end of 2026, meaning decreased interest income in coming years.
Proceeds from the County’s share of the additional 1 percent sales tax increased by $4.8 million.
Property Tax, which accounts for over 40 percent of County revenue, grew by only $500,000 in 2023. This continues a concerning trend of reduced growth in the County’s primary revenue source, after an $11 million increase between 2020 and 2021 slowed to just $1 million the following year. The total assessed value of properties in the County fell by over $720 million during 2023, exceeding a similar decrease the previous year, due to assessment appeals by the owners of valuable commercial properties following a court-ordered change in valuation methodology. With lower values becoming locked in through appeals, more property owners likely to appeal this year, and post-pandemic declines in office building occupancy continuing, this trend may not be reversed.
The status of the County’s pension fund remains a critical concern. The fund’s percentage of assets to projected future liabilities fell to 31 percent from 33 percent last year despite favorable interest rates. The number of active employees contributing to the plan remains below pre-pandemic levels, and current projections show the fund becoming insolvent in 2037.
The unassigned portion of the County’s General and Debt Service Fund balance remained unchanged at $56.1 million, while the combined General and Debt Service Funds fell for the first time in recent years, by $5.2 million. Federal emergency aid prevented depletion of the fund balance from occurring sooner. The unassigned portion represents 6.7 percent of General Fund revenue, with 5 percent considered healthy by rating agencies.
Nearly a third of federal aid grant funds received by the County ($85 million) have been devoted to Health, Human Services and Children’s initiatives. With these funds running out even while significant challenges continue for local communities including industrial pollution, lack of affordable housing, addiction and high rates of incarceration, O’Connor warned that new financial challenges cannot be solved by cutting supports for the most vulnerable and marginalized communities.
“I have focused my own office’s efforts on examining some of the ways the County impacts these populations through our Auditing function. Last year, we issued a review of how we assist children with family members in the County Jail and called for expanding access to these supports. Recently, we looked at how the County disburses funds for projects intended to benefit communities affected by industrial pollution, and reviews of programs to prevent homelessness and provide legal representation to indigent defendants are underway,” O’Connor wrote. “We cannot allow emerging fiscal challenges to permit our commitments to these communities to falter.”
The Popular Annual Financial Report (PAFR) is an easily understandable presentation of the County’s financial and economic standing. The full report, and interactive versions of many of its charts and graphs, can be viewed here: https://alleghenycontroller.com/2023pafr/
The Annual Comprehensive Financial Report (ACFR) is the complete, audited accounting of the County’s funds and component units. This report can be found here: https://alleghenycontroller.com/reports-audits/2023acfr/
