Rural Councils of Victoria tells federal government concerns about LGA funding pressures

WELLINGTON Shire Council supports concerns raised by Rural Councils Victoria (RCV) at a federal inquiry about the financial pressures facing rural councils and the potential for loss of important community services if local government funding is not overhauled.

In a submission to the inquiry into local government sustainability, RCV told the federal government that many small rural councils are on the financial brink and rural communities face losing essential community services and the only leisure facilities some communities have. RCV represents Victoria’s 34 rural Local government areas.

RCV said communities across Australia were facing hard decisions about whether to close swimming pools, shutter libraries, curb the use of sports facilities, abandon playgrounds, and severely cut or close aged care and childcare.

“We are at a point where we have to make some hard decisions,” said RCV chair, Mary-Ann Brown.

“Councils only have two reliable sources of income, rates – which are capped – and grants, which have been declining in real terms for years. Small rural communities are resilient and self-reliant but rural councils are being hit from many directions all at once.

“In recent years there have been successive natural disasters, a cost of living crisis, community expectations have changed and the system for financing councils and council services has not kept up.

“Put simply, councils need more resources, and we need federal and state governments to help us keep up with inflation. The best and easiest thing that the federal government could do for the sustainability of local government and small rural communities across Australia would be to increase the amount of the financial assistance grants.”

Wellington Shire Mayor, Ian Bye, said there was a critical need for increased financial assistance from both federal and state governments to ensure the sustainability of local government services in rural and regional communities.

“As highlighted in Rural Council Victoria’s submission to the federal inquiry, councils like Wellington Shire that are spread over a large geographical area are at a turning point. We are being squeezed from multiple directions with rising costs, capped revenue sources, and increasing responsibilities without corresponding funding,” Cr Bye said.

“Our community relies on essential services and facilities such as swimming pools, libraries, recreation, sporting facilities, and infrastructure for early years. These are not luxuries but necessities that contribute to the wellbeing and quality of life of our residents. The thought of having to reduce these services due to financial constraints is worrying.

“In response to these challenges, our 2024/25 budget reflects a year of restraint, prioritising core services and critical infrastructure amidst rising costs and limited revenue, made more challenging through a rate cap of just 2.75 per cent for the next financial year.

“While our council remains financially secure, the reality is that councils right across the board need more support from higher levels of government.”

Cr Brown said that with communities and families across the country facing their own cost of living pressures, the option to raise revenue directly from communities was not a feasible one.

“Governments have all been guilty of ‘cost shifting’, forcing local government to take extra responsibilities without providing adequate funding, as well as cutting support for local government in real terms,” Cr Brown said.

“RCV has surveyed member councils, and the survey results show that councils are being squeezed on both expenditure and revenue sides. The soaring costs of providing and maintaining infrastructure, such as roads and road maintenance, is being exacerbated by limits on rural councils’ revenue sources, including the rate cap in Victoria.

“Without intervention, this problem will only get worse. If councils are not able to raise more money, they will not be able to meet the infrastructure and service delivery needs of their communities.”

Cr Bye said that grant programs must be increased to reflect the growing needs and costs faced by rural and regional councils.

“Without this support, we risk failing our communities,” he said.

“Council echoes RCV’s concerns about cost shifting, where responsibilities are transferred to local governments without adequate funding. This practice strains already limited resources and places an unfair burden on local councils and ratepayers. We are committed and continue to call for fairer funding arrangements, working collaboratively with state and federal governments to find workable solutions.”

According to RCV, the largest source of operating grants for councils is from the Commonwealth Government through the Financial Assistance Grants program under the Local Government (Financial Assistance) Act 1995.

“Disappointingly, as a percentage of total Commonwealth government taxation revenue (excluding GST), the amount of financial assistance grants made available to local government across Australia has decreased from 0.76 per cent to 0.57 per cent from 2011/12 to 2021/22,” Cr Brown said.

“While the Commonwealth Government and the Victorian Government is able to earn uncapped taxation revenue that increases with economic and population growth, enabling increased living standards, the local government sector is reliant upon insufficient rate revenue to meet cost escalation and Financial Assistance Grants that have not increased in real terms on a per capita basis since 1995.”

The RCV submission to The House of Representatives Standing Committee on Regional Development, Infrastructure and Transport warned that unless further revenue can be raised by councils, they would be forced to review the services they offer and the infrastructure they build and maintain.

With finances stretched, councils were making the difficult decision to pull out of services they do not see as core to their role in the community, the submission said.

The RCV survey of member councils found that about one-third of councils had outsourced services in a bid to save money, with about a quarter saying they had also looked at raising fees and charges. The survey showed that many councils have already cut jobs and extended plant replacement schedules.