Super blow hurts councils

Some councils expressed anger and surprise yesterday after receiving news of the hit, which will put further pressure on rates and services.

They must contribute the money to meet a shortfall in a "defined benefit" scheme for staff that was closed to new members in 1993.

For individual Victorian councils, the shortfalls range from around $20 million down to "very low" figures, the chief executive of the Municipal Association of Victoria, Rob Spence, told The Age.

Across the state, the total shortfall for councils is $396.9 million, while the figure for all state authorities is $453 million. But the impost rises beyond half a billion dollars when a 15 per cent contributions tax is factored in.

Councils and other agencies are facing the costs because under Commonwealth legislation the scheme known as the Local Authorities Superannuation Fund Defined Benefit Plan must be "fully funded".

Mr Spence said legislation required the scheme "to hold enough funds to meet the retirement benefits owed to members now and into the future. If current assets fall below what's needed to pay current and future benefits, then employers are required to make top-up payments."

Mr Spence called for legislative change, saying that while the federal government had an "unfunded defined benefit liability of around $61 billion", the local government scheme had to be fully funded.

The City of Greater Bendigo faces a hit of $10.3 million, including $1.5 million in contributions tax. Mayor Alec Sandner urged state and federal governments to shield ratepayers from the cost.

"On the ratepayers it is not fair, because they're the ones that have to pay it. And then it's also not fair on the people if we start cutting services," he said.