LATROBE City Council’s budget has a $465,000 shortfall following a multi-million dollar Federal Government financial assistance grants correction.
Distributed through the Victorian Grants Commission, council’s funding blow is part of a $24.4 million technical correction to Victorian council’s funding assistance.
Council financed for the assistance grant in the 2012-2013 budget which was adopted in July.
Latrobe City chief executive Paul Buckley said the loss of revenue announcement post-budget adoption was “frustrating”.
“What we will do is consider the figure as part of our mid-year budget review and take into account the financial result for the 2011-12 financial year,” Mr Buckley said.
“If at the year end of June 2012 was better than budgeted, we would use that adjustment to offset the impact of this grant.”
Mr Buckley did not shed light on possible council cuts resulting from budget amendments, but said Latrobe City would “look at the options” early next year.
“During the mid-year budget review process, we will look at all the options to adjust the budget to reflect the $465,000,” he said.
Financial assistance grants are indexed using movements in Consumer Price Index and population, which Mr Buckley said was not reflective of costs local governments incur.
“Councils don’t deliver a common basket of household goods and services,” Mr Buckley said, adding these costs were not reflected in CPI movements.
Echoing similar frustrations was Municipal Association of Victoria president Bill McArthur, who said reform was needed.
“Councils remain frustrated by governments’ reliance on formulas that use consumer price movements, rather than the cost drivers facing local government,” Cr McArthur said.
“Reform is needed to better match core funding to local government cost movements so councils don’t have to go cap-in-hand to ratepayers every time grants decline and service demands rise.”
Reductions facing councils are about $13.6 million for 2011 to 2012 and $10.8 million for 2012 to 2013, but both amounts will be deducted from this year’s grant payments.
As the announcement was post-budget adoption, Cr McArthur said it would be difficult for councils to deliver budgeted capital works and community services for the year.
He said the funding reduction was believed to be the result of relatively neutral inflation in the year to March 2012, and a technical correction to Victoria’s population figures following the 2011 Census.
“Future revisions to financial assistance grants should also be timed to provide councils with adequate notice of any reduction, so it can be factored into budget processes and options discussed with communities,” he said.
Core financial assistance through Federal Government tax distribution to local government has declined from 1.2 per cent of revenue in 1993 to 1994 to 0.62 per cent in 2011 to 2012.