Public Works: Ten U.S. Cities Most Likely to Face Fiscal Challenges in 2026

New York, Chicago, LA, DC, SF, Philly, Pittsburgh, Minneapolis, St. Paul, New Orleans top the list.

PHILADELPHIA, PA, UNITED STATES, December 22, 2025 /EINPresswire.com/ -- Cities across the United States are heading into 2026 with mounting fiscal pressure as federal pandemic aid expires, revenue growth slows and the cost of core public services continues to rise.

A review by Public Works (www.public-works.org), based on publicly available budget documents, fiscal office reports and local news coverage, identifies 10 cities most likely to face significant budget gaps or structural deficits in 2026 (https://public-works.org/efficiency/). In many cases, city leaders are weighing tax increases, service cuts or reserve spending to close projected shortfalls. But Public Works President Eric Schnurer says that, in most cases, “these steps alone will not be enough, as state and city governments need to address fundamental shifts in federal funding for essential programs and services.”

Cities Facing the Greatest Fiscal Stress, According to Public Works:

• New York City, New York — Facing a projected $2 billion-plus budget gap in 2026.
New York State is also confronting a structural deficit of more than $1 billion for FY 2026 and beyond, limiting its ability to provide additional aid.
• Chicago, Illinois — Projecting a $1.1–$1.2 billion deficit, driven largely by pension obligations and expiring one-time revenues. Illinois faces its own projected $700 million to $1.2 billion deficit and long-term pension pressures.
• Los Angeles, California — Anticipating a $900 million to $1 billion shortfall, prompting layoffs and departmental reductions. This is at a time when the State of California faces its own shortfall, estimated to be between $15-$20 billion.
• Washington, D.C. — Facing potentially hundreds of millions to nearly $1 billion in budget disruption tied to federal action – and uniquely vulnerable to congressional decisions.
• San Francisco, California — Reporting a $300–$400 million annual deficit, with larger multiyear gaps projected. Help from the state is going to be harder than usual to come by given its own considerable deficit.
• Philadelphia, Pennsylvania — City officials project a $400–$500 million operating deficit in 2026, further complicated by a projected Pennsylvania deficit of $3 to $3.5 billion.
• Pittsburgh, Pennsylvania — Grappling with an estimated $20–$30 million budget gap, fueling debate over tax increases and service cuts, just as the State faces its own shortfall.
• Minneapolis and St. Paul, Minnesota – both are facing future deficits that are estimated to be in the tens of millions of dollars while Minnesota deals with a state deficit likely in excess of $2 billion.
• New Orleans, Louisiana — Planning for a budget gap near $100 million while Louisiana, having already taken steps to address its budget issues, expects a budget that is either balanced or slightly negative.

A Broader National Pattern

Public Works’ review reflects a wider national trend. Surveys of municipal finance officers show that most large U.S. cities are facing potential budget gaps for 2026, even if they are not yet declaring that in public comments.

“Many cities are relying on short-term fixes while longer-term structural imbalances remain unresolved,” said Schnurer. “There is a radical realignment taking place of the federal government’s relationship with the states and the traditional solutions are likely to be insufficient to cope with new challenges.

“The federal government is cutting funding for programs that citizens need and that states and cities still must provide. That means creating new funding and operational models for disaster recovery, healthcare and SNAP programs, education, environmental enforcement, and many others.

“Government entities at all levels are going to need to conduct top to bottom reviews and find ways to operate more efficiently – and realign limited resources with future needs,” Schnurer continued.

About Public Works
Public Works is a public-interest consulting firm that advises governments on financial, operational and policy challenges. More at www.public-works.org.

Steven Alschuler
Alschuler Communications
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