The deficit of revenues to expenditures which occurred in Allegheny County government for the first time in over a decade last year is on track to grow significantly in 2024, an Interim Report by County Controller Corey O’Connor found. The report covers the first six months of 2024.
Revenues are short of budgeted projections by about $20 million and are below the same period last year. Meanwhile, expenditures increased year-over-year by $57 million. Unless second half revenues exceed projections, the County is likely to run a deficit of about $60 million to be replaced federal emergency aid, up from close to $40 million last year.
The combined General and Debt Service Fund balance—which decreased last year for the first time in recent years—is likely to continue to fall, O’Connor said.
“The Rainy Day Fund has kept our heads above water, but it’s still coming down,” O’Connor said. “Combined with the pending expiration of emergency federal aid, the revenue decreases we see are highly concerning. We’ll be monitoring closely moving forward to ensure that the fund balance maintains healthy levels.”
Refunds resulting from property tax assessment appeals were $8 million during the first half, nearly double the amount budgeted for the entire year. These funds will have to be reassigned from reserves held for other purposes or from unassigned funds.
“The unprecedented levels of property tax appeals and refunds resulting from court-ordered valuation changes are unlikely to abate soon. Just recently, we saw one of the largest commercial properties Downtown receive an assessment reduction of more than $90 million,” O’Connor said. “Our tax base is eroding and reassessment alone won’t solve the problem. We need to be singularly focused—across levels of government, municipal, and public-private lines—on encouraging development and returning vacant and disused properties to the tax rolls, which can also help to address the critical issues of housing costs and homelessness.”
Sales Tax, Drink Tax, and Federal revenues were each below budgeted projections, but could make up ground in the second half. Conversely, interest earnings appear likely to exceed projections, standing at 86 percent of the amount projected for the entire year.
Occupancy and revenues at the Kane Regional Centers each increased year-over-year in the first half of the year. However, it is likely that increased costs for contracted agency nurses in the Kane Centers and Jail will represent roughly half of the County’s deficit spending for the year, O’Connor said.
“The County must reduce reliance on contracted workers by finding ways to bring these jobs in-house with County employees. I encourage partnerships with education and training entities that can help to fill some of these roles. This is also a critical step to addressing the severe crisis facing our pension system, which is currently projected to become insolvent in 2040,” O’Connor said. “The independent financial oversight provided by my office is essential to helping our officials make crucial decisions in an uncertain period for our government, and to continue to provide essential services to our communities and residents. I will continue to provide regular updates on these areas of concern.”