READING — Reading may need to pull about $24 million from its reserves over two years to balance its budget, raising worries it could again become financially distressed.
Mayor Eddie Morán presented his administration’s 2027 budget proposal to City Council on Oct. 5. The $129 million plan maintains his administration’s investment in public safety and cuts overall operating costs.
Morán noted that the city asked taxpayers to “shoulder” a 6% property tax increase in the current budget, but because of “shared sacrifice and strict discipline,” the new proposal does not raise taxes.
“Last year, we proved what we can achieve together,” Morán said. “Wasn't easy, but it got done. This year, we keep a foot on that gas. I look forward to working hand in hand with City Council and the members of our community, who are just as important, to pass a responsible budget that builds a future block by block.”
However, Reading is likely to end 2026 with a $12 million deficit and face a similar shortfall in 2027, according to the city’s finance chief. Morán did not speak about the deficit in his public remarks.
Reading has predicted steep deficits in previous years, though the actual losses came in significantly lower than projected because of higher-than-expected and one-time revenues. That trend is not expected to continue this year or into the future, officials said. Still, they defended using reserve funds to close budget gaps in the short term as they focus on cutting costs and building the local tax base without sacrificing resident services.
The mayor proposes the budget annually, followed by several weeks of public City Council meetings where residents can tell officials what they want prioritized, and hear what their elected leaders’ plans are. These talks also offer a view into the health of a municipality’s finances.
Jack Gombach, Reading’s managing director, said the 2027 budget prioritizes funding the essential functions of police, fire, and emergency services. The administration wants to do more community projects, but also is focused on the future, he added.
“This is a very straightforward budget,” Gombach said. “No new spending. It holds the line on deficit growth from last year” while “really focusing in on, like the mayor said, living within our means as we tend to grow the tax base. So stay tuned.”
Reading participated in the Pennsylvania financial recovery plan, known as Act 47, from 2018 to 2022. It exited that status through a combination of substantial cost-cutting, salary stagnation, and growing its general fund reserves (the city’s primary savings account). The unrestricted portion of that fund balance is required to stay at 20% of the city’s overall general fund budget or $22 million, whichever amount is higher.
That means the unrestricted balance has to be at least $25.8 million for 2027, according to the city’s charter. Reading’s outside auditors told City Council in 2025 that the end-of-year audit from 2024 showed a healthy balance with around $36 million unrestricted — but continued use could put it at risk. Gombach was unable to provide the current balance when asked by Spotlight PA.
Reading has taken steps to improve its financial position. The proposed budget would cut overall operating costs, and projects that earned income tax and non-property tax revenue will increase by more than $1 million. Multiple departments expect to spend less on employees due to eliminated positions, even as salaries increase.
But that isn’t enough to offset rising costs associated with salaries, overtime, pensions, and other benefits. Even with fewer budgeted positions, around 70% of all general fund spending is on personnel, and city officials are negotiating to avoid a 19% increase to their healthcare costs.
To produce more revenue in the long term, the city is focused on executing of the Act 47 exit plan to expand the tax base through special projects, Gombach said. He added that lowering the deficit, or at least keeping it stagnant while also bringing larger economic projects to the city, should help it “grow at an appropriate pace.”
“We're in a very delicate position financially,” Gombach said. “Just because we are out of Act 47 doesn't mean that everything's fine. We now have to manage the building of the foundation.”
Why old fixes won’t work this time
The city avoided a deficit for five years, until officials supplemented the general fund budget with $1.9 million from reserves in 2024. They faced a similar shortfall in 2025.
However, those deficits were much lower than what was presented in the original budget documents: $8.3 million and $9.7 million, respectively.
In 2025, former Finance Director Jamar Kelly described the numbers written in the budgets as “hypothetical,” with the expectation that revenues would be higher — the city just did not know by how much. The possibility of a balanced budget, without use of reserve funds, also stemmed from an expectation of high employee vacancies (by budgeting for positions that aren’t filled, it’s counted as a roundabout cost savings at the end of the year).
Kelly warned the city could not count on those revenue trends in the long term without finding new ways of making money.
The new finance director, Joe Famiglietti, told Spotlight PA that prior issues with delayed emergency services billing gave a one-time boost in revenue for 2025. Plus, those formerly vacant positions, especially in the police and fire departments, were filled.
“It's a double-edged sword,” Famiglietti said. “We want to make sure, especially with police and fire, that the public is getting the benefit that that's there.”
Police and fire services also regularly go above their budgeted overtime amounts. Firefighters in 2026 were budgeted for $950,000 in overtime costs, but have already surpassed $1.3 million. Those costs in part stem from understaffing in the city’s emergency services positions, Gombach said.
The fire department is not fully staffed, but it fills in for EMS when needed at firefighter salary rates. To hire more EMS workers, however, Gombach said the city will have to raise salaries to be more competitive.
Moving forward
The Morán administration originally proposed a 9% tax increase last year, which City Council cut to 6%. The difference would not have been substantial enough to offset the full deficit.
At the time, officials planned to offer retirement buyouts to eligible employees to cut costs. They did not follow through because those positions would have needed to be filled to keep resident services running smoothly, which would not have fixed the financial issue, Famiglietti said.
They did, however, eliminate between 16 and 19 longtime vacant positions across departments for the 2027 budget, Gombach said, including the yearslong empty job of zoning administrator.
The goal is to avoid layoffs in the new year, Famiglietti said.
“I would like to not reduce the workforce any further than where we are,” Famiglietti told Spotlight PA. “I think that the real savings is in the reduction of our operating costs.”
Famiglietti worked with departments to reduce year-over-year operating costs in 2027 by $1.4 million, which included charges for subscriptions, consulting services, office supplies, conference travel, and more.
In the bigger picture, those savings will cover a different expense. Healthcare costs across the country are getting more expensive, and the city’s insurance provider said to expect an increase of up to 19%, Famiglietti told City Council. The human resources director is in negotiations with the provider, and the budget currently reflects a 13.5% (about $2.5 million) increase, he said.
Famiglietti said he will work with departments to raise various user fees instead of raising taxes, though Gombach separately said they had not decided on the exact increases. The budget team will meet with department heads over the coming year to decide.
“We have to be able to justify if we raise the rates, that it's tied to the actual cost of delivering the service,” Gombach said. “And if we feel that we can't make that justification, then we're not going to raise the rates.”
Maria Rodriguez, the recently retired city auditor, suggested last year that Reading adopt regular, incremental tax increases, rather than large, unexpected ones. Normally, the auditor can provide City Council with a differing opinion than the administration, but the position is vacant this budget season.
City Council may take another route in the short term.
President Donna Reed told Spotlight PA that because of her involvement in getting Reading out of financial distress, she feels pressure to ensure it does not slip backward. As the council reviews the budget in the coming weeks, she said she will look for ways to cut costs and may consider proposing a small property tax increase.
Reed said that if necessary, the council would ask the controller or a third-party auditor the city already employs for an outside perspective. Budget review meetings began Oct. 14 and are open to the public. Meetings are normally on Mondays and Wednesdays, and the schedule is available on the city’s website.
“Sooner or later, you're thinking, ‘Holy cow, how did we get here yet again?’ Or, ‘Why are we on the precipice again?’” she said.