The ACT government will lose almost $12.5 million in federal grant funding over the next three years as a direct result of the Hockey "horror" budget.
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This is in addition to the $150 million hit to territory revenues reported on Wednesday.
"We estimate the impact on the ACT (of the "indexation pause" on Financial Assistance Grants to Local Government) as a loss of $12.3 million over the three years compared with what was forecast at MYEFO," a spokesman for ACT Treasurer Andrew Barr said.
"It is disappointing. These just add to the significant cuts to the public service and health and education funding."
According to the budget papers the "indexation pause" will save $950 million in projected expenditure between now and 2017-18.
This figure has been disputed by ACT Treasury officials who say the pause ends in 2017 and that the budget document overstates the savings.
"The MYEFO (midyear economic and financial outlook) figures for Financial Assistance Grants for these three years (2014-15 to 2016-17) total $7.388 billion," the spokesman said. "The 2014 budget figures total $6.86 billion; the difference is $528 million, not $950 million."
Whatever the amount, ACT Treasury is anticipating a big hit and planning for the worst.
"The ACT government is currently considering all the implications of the Commonwealth budget and will respond accordingly through the ACT budget on June 3," the spokesman said.
Money provided to the ACT government under the FAGS program comes in two streams; general purposes (GP) and local roads.
The 2013-14 allocation totalled $48,304,663 of which $25,954,612 was for general purposes and $22,350,051 was for local roads.
GP funds partly underwrite the cost of municipal services across the ACT.
Canberra’s neighbouring NSW councils are also gearing up for a big reduction in their grant revenue over the next four years.
Palerang Council Mayor Cr Pete Harrison said the budget was simply pushing unpopular decisions down the line to local government.
"The indexation pause is not something we are going to welcome," he said.
"We have other road funding that hasn’t been indexed in 12 years and its value has been seriously eroded. We are in the same position as most rural councils; a huge amount of infrastructure to look after and a low rate base. This means we are critically dependent on state and federal government grants."
Cr Harrison said while he "did not want to sound like a whinger" services had to be provided and roads had to be maintained.
"The money has to come from somewhere and it comes down to the ratepayers – either through income taxes, the GST or rates."
Council’s ability to generate extra rate revenue is limited by a complex rate cap mechanism set by the NSW government.
Applications for exemptions soak up a lot of time and resources, are rarely granted and, when they are, only for two or three years at a time.
After recording a net operating deficit of $679,118 in 2012-13, Palerang is planning for a $2 million surplus in the current fiscal year.
A merger between Palerang and Queanbeyan was mooted in a Local Government Review Panel discussion paper released in April, 2013.
Queanbeyan City Council declined to comment on the likely impact of the reduction in grant funding, referring Fairfax Media instead to a statement by Local Government Association of NSW president Cr Keith Rhoades.
"NSW councils now face a four-year projected shortfall of $287.7 million," he said.
"The freeze on these vital grants will have a significant impact on the lives of everyday Australians. Communities hardest hit will be those in rural and regional council areas which rely more heavily on FAGs due to their small rate bases and extensive road networks."