Pittsburgh’s Climate Budget

How Steel City identified $41M to repurpose for climate, equity, and economic recovery — without raising taxes

As part of the American Cities Climate Challenge — and in keeping with its years-long commitment to emissions reductions — Pittsburgh established big climate goals. Then, like so many cities, they had to figure out how to fund them.

Grant Ervin, Pittsburgh’s Chief Resilience Officer, recalls a conversation with colleagues on the budget and finance side in a joint conference of CFOs, CROs, and CSOs in 2017 “We were so excited about what we wanted to do, and they kept calling our projects ‘unicorn projects,’” recalls Ervin. “They spoke a whole different language: budget cycles and bond ratings. I realized we needed common terms, and synchronized timing. We needed a climate budget to meet our climate targets.”

Katherine Hanlon- Unsplash

Pittsburgh isn’t the only city working through a disconnect between elected officials; sustainability, resilience, and equity offices; and budget and finance leaders. Many local governments are dealing with a broader disconnect between emerging priorities and legacy budgeting systems. As cities turn their sights to racial equity, greener transportation, economic recovery, and more, they often find themselves working within a decades-old budget process — one that was established long before governments were actively working towards better climate and equity outcomes.

“The issues and challenges facing local government have changed — but in many cases, our budgeting processes are the same,” says Ervin. “We need to continuously modernize the way we run governments in order to keep delivering on our goals.”

So what would it take to fund priority work?

Like many cities, Pittsburgh found inspiration in the work of its peers. Ervin participated in a 10-city Energy and Circular Economy Exchange, sponsored by the Swedish Embassy, where Stockholm shared examples of integrating climate work with the city budget process. Later, the city of Oslo shared ideas through the Global Lead Cities Network for Procurement. These conversations reinforced what Ervin had heard from his colleagues from the finance team; they also aligned with work he’d been doing with partners at the Natural Resources Defense Council (NRDC) as part of Pittsburgh’s participation in the American Cities Climate Challenge. Weaving all these threads together, it became clear that Pittsburgh needed a Climate Budget.

To build a Climate Budget, Pittsburgh worked with ResourceX, an organization that specializes in priority-based budgeting (PBB). At its highest level, PBB is what it sounds like: Reorienting budgets to make sure they support priorities. In practice, PBB represents a shift in how cities understand and evaluate their spending. While it’s not the only framework for modernizing a city budget, PBB has gained traction in cities across the U.S, earning recognition from the Government Finance Officers Association (GFOA), International City / County Management Association (ICMA), and the Alliance for Innovation (AFI).

From line items to better alignment: How is PBB different from traditional budgeting?

Traditional budgets track line items, such as postage and paper, across departments, such as Parks and Public Works. But they don’t organize line items by program or activity, making it difficult to understand where, specifically, each line item goes.

PBB creates an inventory of distinct programs, services, and activities — such as snow plowing, pothole repair, and trail maintenance — and groups costs and revenue under each.

For example: A line item budget might show that a city spends nearly $1M on postage every year — but it won’t show how that $1M breaks down across specific programs and activities. If you’re a CRO trying to fund climate change, and wondering if you can dip into the postage budget, you’ll have a hard time making that decision without more context. Is $1M too much to spend on postage? What is the impact internally and for residents if you cut that budget?

In contrast, a priorities-based budget translates the $1M into very specific activities: $500K mailing utility bills to residents; $50K mailing parks and recreation catalogues to residents; etc. Now, rather than ask a vague question, “Is $1M too much for postage?,” the city can ask a specific, contextualized question: “What happens if we move at least half of our utility billing to online/paperless billing?” The answer? Doing so could save upwards of $250K/year, which can be reallocated for priority work — without raising taxes or interrupting resident services.

“Line item budgeting can be desensitizing and hard to translate to outcomes,” says Chris Fabian, co-founder and CEO of ResourceX. “Our favorite is ‘Miscellaneous.’ How do you make decisions around a line item — often multi-million dollars in value — labeled ‘miscellaneous’?”

Freeing up resources for priority work

On average, a city’s first pass at a priority-based budget frees up 10–15% of an existing budget for pressing work. Pittsburgh freed up $23M from its existing budget, and identified $18M in revenue opportunities for a total of $41M.

First, Pittsburgh created its programs inventory, identifying 186 discrete programs, services, and activities. ResourceX helped speed up this process by leveraging experience with similar cities. “80% of what cities do is similar across the board; another 10% or so is similar across regions,” says Fabian. “There are always programs unique to any given city, but we can get most cities a big head start on their program inventory using the templates we have.”

Having established its program inventory, Pittsburgh assigned costs and revenues to each, ultimately landing on a price tag for every specific service they provide. From there, they used a scorecard system to evaluate the impact of each program on the city’s priority work, finding opportunities to save — and reallocate — resources.

For example, the sudden move to remote work in the COVID-19 pandemic had reduced paper costs by 70%. They used their PBB process to see how they could sustain at least a large portion of their savings, and found that despite a large upfront cost, investing in an enterprise document management / docusign system would pay for itself quickly; they also found that by changing city code, they could phase out paper pay stubs.

Aligning costs by program gives city leaders insight and context for budgetary decisions. In the end, most cities find they can do more than they think with the resources they have.

A closer look: Where do cities find resources in their budgets?

There are a few main ways cities find funds for priority work in the PBB process:

1. They identify obsolete or outdated programs, such as line items for beauty pageants, UFO landing strips, or maintaining county fairgrounds — despite not having had a county fair in over 2 decades. (All of these are real examples.)
   “Cities are busy,” says Fabian. “They do what anyone might do, which is copy and paste the previous year’s budget and go from there. It’s easy for things to get buried in those budgets, even when they are no longer relevant to the city or its residents.”
2. They identify key opportunities for efficiencies, such as moving utility billing online, sunsetting paper pay stubs, or investing in enterprise document management systems.
3. They find partners to share costs for some programs. For example, pet spaying, while important, doesn’t support climate work directly; meantime, several nonprofit organizations run their own pet spaying programs, presenting opportunities for cost-sharing partnerships. Another key example is sports camps. Cities with professional sports teams can find sponsorship for youth sports camps.
4. They find new revenue opportunities, often through fees or charges for programs where they make sense.
5. They find opportunities to invest wisely. When Denver set out to pursue equity as a key goal, their PBB process revealed that a small increase in snow removal services would clear city sidewalks for residents who didn’t own cars, and rely on public transportation. Clearing city sidewalks isn’t typically something the city takes on, but in certain neighborhoods, it means the difference between reliable access to public transportation — and by proxy, schools, jobs, and services — and being stranded or susceptible to injury on the walk.

In short, priorities based budgeting doesn’t just save money — it’s a tool and a touchstone for better decision making overall. It also gives CROs, CSOs, and other offices insight into and influence over the central functions of a city, and a real opportunity to align spend with values.

A close inventory of the budget is especially important for cities and counties thinking about how they make the most of ARP funds. Reframing budget around programs and services can help local governments disburse funds wisely, generating ROI on the initial investment while creating a platform for ongoing growth.

Conditions for Success: How to make PBB work in your city.

For cities looking to modernize their own budget — whether through PBB or otherwise — Ervin shares a few key lessons from the Pittsburgh process:

1. Timing. Budget cycles are fixed, and CROs/CSOs who want to work with budget offices have to understand their timing. “Figuring out how to jump into the budget cycle is kind of like jumping onto a ferris wheel. It’s hard to do while the wheel is moving,” says Ervin. Prime times include right before the budget process begins, or right after the budget goes through city council. Cities should allow themselves at least 3 months for the programs, price tags, and priorities process outlined above.
2. Teams. It’s all about having the right people in the room. Executive leadership is fundamental to success — in some cities, that’s the Mayor, and in others with a council-manager structure, that’s the city manager. You also need the CFO, Budget Director, Operating Budget Director, procurement, legal counsel, and leaders of departments who can help identify programs and services. Pittsburgh included representatives from all 23 departments, generating key insights — and broad consensus — throughout the process.
3. Terminology. Budget teams have their own goals — balanced budget, debt-to-service ratios, bond cycles — and it’s important to speak their language. This might mean bringing in a partner with the tools and vocabulary to really speak to the financial aspects of things.

Ervin underscores the importance of that common language with the finance department, including the language of risk. “If cities are not budgeting for climate, are they creating a ‘material’ risk for investors and residents? From a climate lens, consider the impact of extreme weather events: not only do we have to spend $25M of un-budgeted funds on landslide and flood cleanup, but we also have to consider the impact of disruptions in service to residents, which more often than not disproportionately affects our most vulnerable residents.”

The concept of climate risk — especially disproportionate climate risk to vulnerable residents — is one Ervin wants to integrate more fully with other organizations in the city finance ecosystem, such as the GFOA and bond ratings agencies.

Having completed PBB in FY2021, Ervin and his colleagues across the city will integrate the new process into their FY2022 budget as well, working not only with the city’s operating budget, but also its capital budget.

“This has really fundamentally shifted the way we think about the budget process,” says Ervin. “It’s a matter of process engineering — constantly modernizing the way governments work, so we can respond to what our residents need.”

For cities on the front lines of climate, equity, and economic mobility, government innovation means rethinking legacy operational structures to support modern goals. In the case of Pittsburgh’s Climate Budget, the benefits go beyond the additional funding for climate work — the city has created a budget process that allows for continuous alignment between the budget and their values.

The American Cities Climate Challenge, funded and supported by Bloomberg Philanthropies, is a collaboration between 25 U.S. cities, NRDC, Delivery Associates, and national and local partners. To learn more, click here.

Delivery Associates is a public sector consulting firm helping government leaders and social impact organizations turn big ideas into everyday impact. We are always asking: What would it take?