• Future planning
  • Strategic Planning
  • Community
  • Advocacy and partnerships

Calling for fair funding to keep everyday services strong

Published 5 March 2026
I want to
Local Government continues to be impacted by the cost‑shifting methods from the State and Federal Governments. We’re being asked to do more with less. If we want thriving neighbourhoods, the State and Federal governments have to fix a broken funding model.

Why this matters

Every day, councils deliver the things Victorians rely on - waste and recycling, libraries, parks and open space, safer streets, maternal and child health, and community facilities. But the funding settings that underpin these services haven’t kept pace with what the State and Commonwealth expect local government to deliver.

Over the past five years, the rate cap rose 11.8% while Melbourne inflation climbed 20.3%, creating an estimated revenue shortfall of more than $17 million for the City of Port Phillip alone. That gap would be even larger if construction cost pressures - one of Council’s biggest drivers - were used instead of CPI.

At the same time, new State levies and service mandates - particularly in waste and circular economy reforms - add costs that councils can’t fully pass on. 

What have we told the Federal Parliamentary inquiry?

Council has lodged a submission to the Federal Parliamentary Inquiry into Local Government Funding and Fiscal Sustainability, calling for a coordinated fix that recognises today’s service mix and tomorrow’s risks. Our key points include: 

  • Lift untied Federal Assistance Grants to local government to reflect the vastly expanded role councils now play. (FAGs are about 8% of local government revenue nationally and just 1.2% at Port Phillip - $3.5 million in 2025/26. A 25% increase would add $0.88 million in ongoing funding here.

  • Reform rate capping so that, if it’s retained, it’s indexed to a Local Government Cost Index that reflects real inputs like wages, construction and contracted services - not CPI.

  • Require State Government “Local Government Impact Assessments” for new or amended policies, with any identified costs transparently funded and indexed. (Example: Build‑to‑Rent settings forego up to $10 million in open space contributions in Port Phillip despite additional demand.)

  • Restore fair State co‑funding for shared services (Example: Libraries, Maternal and Child Health) and index to service costs so the funding share doesn’t keep sliding. (Library funding has fallen from an initial 50% State share to roughly 15% of Port Phillip’s service costs.)

  • Back long‑term climate resilience with a dedicated, ongoing Commonwealth/State partnership to protect community and coastal assets. (Port Phillip manages $3.6 billion in assets, including 11 km of foreshore; doing nothing could cost $9.2 billion by 2040.)

Councils are central to delivering housing‑enabling infrastructure, safer streets, climate resilience, public health and community wellbeing - but the current funding framework is structurally misaligned with these responsibilities.

Without change, growing service expectations and ageing assets will widen the gap between what communities need and what councils can sustainably fund. 

What we’re asking for?

  • Restore fair co‑funding: We need the Victorian Government to reinstate equitable, indexed contributions for shared services like libraries and Maternal and Child Health, aligned to real service costs. 

  • Invest in climate resilience: We need the State to partner on a long‑term resilience program for coastal and community infrastructure, backed by dedicated, ongoing funding.

  • Fix rate capping: We need rate capping reform so revenue can keep pace with the actual cost of delivering essential services and renewing critical assets.

We’re ready to keep delivering and to innovate, but we need the settings fixed so the funding model matches the job we’re asked to do.