Here's another fine article by Dejan Kovacevic asking where the Pirates' money is.
There are three problems with the Pirates' recent payroll increase. Kovacevic addresses the first two, which are 1) that the Pirates might still be pocketing loads of money while still fielding a very low-payroll team and 2) that the Pirates are still fielding a very low-payroll team. Their 2006 payroll will, as Kovacevic points out, likely be lower than that of any other team in the NL Central, even with two other teams (Cincinnati and Milwaukee) that seem to be dealing with similar circumstances.
But the worst problem with the Pirates' payroll increase is much nastier, and it's also much simpler than poring through a bunch of financial documents. The biggest problem with the payroll increase is that the Pirates chose to spend over $15 million on Sean Casey, Jeromy Burnitz, Joe Randa and Roberto Hernandez. None of those players is much of an upgrade on what the Pirates already had. Burnitz is actively worse than the player he'll be replacing. If you're going to spend $15 million, great - but spend it wisely. I can't say specifically what the Pirates should have done, but what do you think Billy Beane would have been able to do with $15 million if he were running the Pirates? Payroll increases are great, but what the Pirates really need is an increase in smarts.