SOUTH Gippsland Shire Council is among scores of municipalities across Australia hit hard by the Abbott government’s freeze on indexation of the Federal Financial Assistance Grants.
With the first quarterly payments arriving this week, councils are just starting to get a taste of the impact of the freeze, which was announced in the Federal budget in May.
Based on Commonwealth budget estimates, a total of $139 million will be ripped from councils statewide over three years. Twenty-four million dollars will be cut from the first quarter’s payment of grants to councils nationwide.
The freeze in indexation means that South Gippsland will have around $1.5 million less to spend over five years and $3.9 million less over ten years.
The mayor, Cr Jim Fawcett, said that the cuts will start to take effect in next year’s shire budget, which will have to be planned accordingly.
“For rural councils, in particular, it’s very harsh and unjust. The amount will compound each year. It’s the short notice which is the real killer,” he added.
The Municipal Association of Victoria president, Cr Bill McArthur, said many councils would be shocked when they discovered the reality of the freeze this week.
“We have known since May that these cuts were coming, and some councils have had to take extreme measures, like scaling back road maintenance and other council services, to make up for the shortfall. In rural areas the grants provide up to 31 per cent of total funding, so rural communities will suffer a massive blow.”
In South Gippsland the federal grants constitute between 12 and 15 per cent of total operating income.
“Councils are responsible for $73 billion worth of infrastructure, and Financial Assistance Grants have boosted councils’ capabilities to fund this vital infrastructure, maintain 85 per cent of the state’s road network, and pay for crucial community services like libraries, swimming pools, and parks,” said Cr McArthur.
“These cuts will force councils to reassess their budget options. Some councils may increase rates, but regardless this funding loss leaves communities vulnerable to scaled back services, and potentially deteriorating infrastructure.
“This year’s Community Satisfaction Survey showed that communities were split when it came to cutting back services or increasing rates to raise revenue.
“At a time when we know the asset renewal gap has reached $225 million, confirmed in February by the Auditor General, it’s a shame that these funds have been stripped from councils by the Federal Government.
“The MAV has been working hard with councils to actively voice our opposition against the freeze, and last month we established a Financial Assistance Grants taskforce. The taskforce includes councillors and officers from rural and metropolitan councils, and aims to guide the MAV’s response to the cuts.
“All 79 councils in Victoria have banded together against the freeze, with councils agreeing to lobby the Commonwealth to seek a reversal of the decision, and join the Australian Local Government Association’s national campaign against the cuts, as voted on at our May State Council meeting.
“The MAV will continue a push against the freeze, in the hope that it will be revoked,” Cr McArthur said.