City needs five-year revenue forecast, not just one
Legislation that would require the Pittsburgh City Controller to certify figures for the entire five-year budget forecast, as opposed to only the upcoming budget year as is now the case, should get quick approval by City Council — after it gets tweaked.
The bill, proposed by Councilman Bob Charland, should refer only to revenue figures, and not expenditures. Revenue is largely a matter of financial and economic modeling and within the Controller’s Office’s competence. Judgments about expenditures are largely policy and political matters that should remain with Council.
With that change, the proposed ordinance would be a common-sense goodgovernment reform, giving the city a policy it should have had all along. If it had, the city’s slide toward fiscal disaster might have been arrested.
Pittsburgh’s “Collaborative Budgeting Process” ordinance was designed as part of emerging from Act 47 state oversight, and is meant to ensure several independent authorities participate in the producing the city’s annual financial plan. This begins in late summer, when the Office of Management and Budget meets with the Council Budget Office and the Controller “to review and agree on revenue forecasts for the formulation of the proposed budget and five-year plan.”
The Controller only has to “certify” — that is, formally approve by signature — the revenues for the next year. The purpose of this certification is to ensure the foundation of the budget — the revenues — are approved by a competent independent authority.
While the budget figures are only binding on the next fiscal year, the five-year projection is an integral part of the official budget, also mandated in the reformed city code. The plan demonstrates the suitability of the next-year budget by showing that spending levels are sustainable.
The revenues in the second through fifth years, however, are not certified by the Controller, and are therefore subject to manipulation. In theory, City Council should push back against unrealistic revenue projections, but those figures are based on technical calculations, and councilors generally defer to the Controller.
This problem has been illustrated by the 2024 budget of Mayor Ed Gainey, which offers unrealistic future revenues that justify imprudent current and future spending. The most egregious example, which a competent controller would have declined to certify, is assuming nearly $16 million in interest income annually through 2028, which will be impossible as reserves (including federal ARPA funds) and interest rates decline. The Office of Controller Rachael Heisler has said that this overestimates revenues by at least $50 million over the five-year projection window.
The success of the proposed ordinance, of course, will depend on the Controller’s willingness not to certify the figures. Former Controller Michael Lamb raised concerns about the 2024 revenues in his official budget meeting with Council, but didn’t withhold his signature. Ms. Heisler, and her successors, must ensure the certification power is more than a rubber stamp.
But first, Mr. Charland’s bill must be amended, then passed, so the Controller’s Office can truly act as the watchdog it is meant to be.