With ARPA aid gone, 2025 closed with a $44.6 million deficit.

As Pittsburgh spends the last of its American Rescue Plan Act (ARPA) dollars, the reckoning of the effect of inflation on the city’s financial health — and spending priorities — is now.

During a 2.5-hour post agenda meeting on June 24, Controller Rachael Heisler and Acting Director of the Office of Management and Budget (OMB) Rea Price presented the city’s finances for 2025 and the first quarter of 2026.

Heisler discussed the 2025 Annual Comprehensive Financial Report, which shows the actual cost of running the city as opposed to the budget, which is only a plan. The report showed an operating deficit in 2025 of $44.6 million. It was the first year since 2020, without ARPA funds to transfer. In comparison, the city used $46.5 million in ARPA funds and had a $7.1 million gain for the year in 2024.

“We have cautioned repeatedly that ARPA dollars mask the city spending problems, and the mask is off,” Heisler said. The problem, she added, is nation-wide. “[ARPA] allowed us to ignore inflation for four years, and now this is the outcome.”

Heisler said they withdrew $33.8 million from the city’s rainy-day savings to cover the difference.  

Deputy Controller Pete McDevitt said the account balance will likely drop below best practice guidelines by the end of this year. Price estimated it could reach the lowest to meet city code as soon as the end of 2027.

The city was hit with high costs of fleet maintenance, its first full water bill and public safety overtime pay. The Department of Public Safety accounted for 44.6% of the city’s 2025 expenditures. 

“The city did quite well with revenue generally last year and outperformed budget on most major taxes,” she said. Real estate and earned income taxes made up the largest share of revenue. 

Because of state law, the city has limited options for increasing revenue. For instance, it is beholden to the county for property tax reassessments, which were last done in 2012. (Allegheny County is the largest county in the country without regular reassessments.)

Heisler said voluntary payments from tax-exempt nonprofits such as the University of Pittsburgh Medical Center and Highmark will likely be the most significant revenue increase for 2026 and 2027.