Financial Assistance Grants are an important source of funding provided by the Australian Government to help local councils deliver essential services, maintain infrastructure and meet the needs of their communities.
 

The Australian Government determines the total funding available and how much each state receives. In NSW, the Local Government Grants Commission recommends how this funding is distributed among individual councils.
 

The grants comprise two components: general purpose funding, which helps councils meet their broader service delivery responsibilities, and local roads funding, which recognises the costs associated with maintaining road networks. Both are untied, meaning councils can allocate the funding according to local priorities.
 

Why does the funding formula matter?

The distribution of general purpose funding is guided by a principle known as Horizontal Fiscal Equalisation. Put simply, this means recognising that councils have different financial circumstances and ensuring those with a limited ability to raise revenue, or higher costs of delivering services, receive additional support.
 

For Dungog Shire, this is particularly important.

Our small population and limited ratepayer base must support an extensive road network, essential community infrastructure and services across a large rural area. Our roads also support agriculture, freight, tourism and critical State infrastructure, including water catchments that supply much of the Lower Hunter's drinking water.

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These responsibilities place significant demands on Council's finances, yet Council believes they are not adequately recognised through the current funding allocation model.

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What needs to change?

While Financial Assistance Grants are intended to recognise differences between councils, the current methodology does not, in Council's view, sufficiently account for the financial challenges facing smaller rural communities.

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A requirement to distribute a minimum proportion of general purpose funding on a population basis also limits the extent to which grants can be allocated according to financial need.

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Dungog Shire Council is asking the State Government to:

• Better recognises councils with small populations, limited rate bases and significant infrastructure responsibilities.

• Apply Horizontal Fiscal Equalisation principles more effectively so funding reflects each council's financial capacity and service delivery costs.

• Recognise the additional responsibilities of councils supporting regionally significant infrastructure, freight networks and water security assets.

• Ensure the NSW Local Government Grants Commission's review of its funding methodology delivers more equitable outcomes for smaller rural councils.

• Support an increase in the overall Financial Assistance Grants funding available from the Australian Government.

 

Fair funding is not about giving every council the same amount. It's about ensuring every community has a fair opportunity to access the infrastructure and services it needs, regardless of its size or location.