The Department of Housing has released details to the Advertiser on how the government allocates funding to local authorities amid controversy over Galway County Council’s finances.
The move comes after Minister of State Seán Canney described the funding system as a “mystery” and accused the government of lacking transparency when speaking to this publication this month.
The matter has been the source of much controversy locally, as Galway County Council’s expenditure per head of population remains the lowest of any local authority in the state.
The council’s total budget for 2026 amounts to €203.3 million, or €1,051 per person, compared to a national average of €1,680 per person.
Despite securing a meeting with the Minister for Housing last month to raise concerns over Galway County Council’s financing, Minister Canney recently told this publication that the government had not been “forthcoming” in providing him with details on the system used to calculate funding given to local authorities.
The Advertiser was, however, able to obtain details from the Department of Housing regarding how this funding is allocated.
So how are local authorities funded?
Local authorities derive their income from a range of sources, including local property tax (LPT ), commercial rates, charges for goods and services provided, and grants from various government departments and state agencies.
To alleviate regional imbalances, the government allocates financial support – known as Equalisation Funding – to councils that face difficulties raising a sufficient amount of revenue to cover their costs.
The amount of funding each council gets through this system is dependent on a number known as the “baseline”, which refers to the minimum amount of funding every local authority is entitled to, regardless of how much money is raised locally via LPT.
If the amount of LPT revenue is lower than the baseline allocated to a particular local authority, the government provides the difference.
The formula used to calculate the baseline for each council – often referred to as the “matrix” – has been the subject of much speculation and controversy in Galway due to a widespread suspicion among councillors that it is the main contributory factor to the financial pressures facing the county.
The current baseline system was implemented in 2024 following a review the previous year, in what the government said was an attempt to update it and “reflect the differing expenditure needs and income-raising abilities of local authorities.”
The five factors
The formula provided to the Advertiser by the Department of Housing takes into account five factors for each local authority, which are given a specific weighting as follows: population (10% ), area (35% ), income (27.5% ), deprivation (20% ) and performance in relation to national policy priorities (7.5% ).
For 2026, it was decided that all local authorities would have a combined baseline of approximately €470 million. In line with the formula’s weightings, 10 per cent of this money (€47 million ) is allocated across local authorities in proportion to their respective populations, and the same method is followed for the other factors.
The income factor in the formula is based on the difference between the income per capita raised from goods, services and commercial rates by a given local authority and that of the local authority with the highest income per capita from these sources.
As such, funding based on “income” is actually distributed proportionately to how low a council’s income is rather than by how high it is.
Political pragmatism
Despite the new formula, it was decided at the time of implementation that it would not be politically prudent to force councils that had benefited under the old system to lose money under the new system.
To account for this, it was decided that the overall baseline for all local authorities would be increased by €75.4 million in 2024, and that the final allocation of baselines to each council would be adjusted after the formula was implemented to ensure that the baseline for each authority would increase by at least €1.5 million.
What impact does this have on Galway?
At first glance, County Galway should be among the best-performing counties under the new system. The most significant weighting under the baseline formula is for geographical area, with Galway County Council having the second-largest area of any local authority in Ireland.
County Galway is also far from the bottom of the national list in terms of population, deprivation and performance in relation to national policy priorities.
Furthermore, Galway County Council was entitled to the highest proportion of funding of any local authority in the state that is allocated on the basis of income, according to the most recent statistics available in the public domain.
This means that County Galway’s ability to raise money from goods, services and commercial rates is the lowest in the state on a per-capita basis – and likely points to serious financial issues that are far more deep-rooted than the amount of money allocated through Equalisation Funding.
It is notable that the local authority with the highest proportion of funding from goods, services and commercial rates, according to the same statistics, was Galway City Council. This likely demonstrates a phenomenon whereby the city benefits and the county loses, because residents of the county are more likely to shop, work, park and pay for various council services in the city.
It is also possible that several years of underfunding have impacted the county council’s ability to invest money in services or infrastructure that could have generated revenue on a long-term basis.
Furthermore, Equalisation Funding is based on the difference between the baseline and money raised from LPT, not from goods, services and rates. As such, it could be argued that low revenues from these other sources are not sufficiently taken into consideration in the system.
Performance under the new system
The implementation of a new funding system in 2024 did increase the amount of money available to Galway County Council, although critics may argue that its effects were insufficient because the council is presently the lowest-income local authority in the state.
The older system for calculating the baseline was (and remains ) far more opaque than the current system, with many alleging – including Minister Canney – that it was designed to favour certain localities. However, Galway County Council is generally considered to have been one of the worst-performing local authorities under the last system.
Under the old system in 2023, County Galway received Equalisation Funding of €155,561 – the lowest of any of the 20 councils entitled to receive such a payment.
Since 2024, the county’s Equalisation Funding each year has been between €4.4 million and just over €5 million. While this is an improvement compared to previous years, it still makes up a relatively marginal proportion of the council’s overall budget.
Equalisation Funding makes up just 2.2 per cent of Galway County Council’s budget this year, whereas the average local authority budget remains 59.85 per cent higher than it when adjusted for population.
Furthermore, the 21 local authorities in receipt of such funding received an average payment of €6.78 million this year, whereas County Galway received Equalisation Funding of €4.4 million for 2026.
Impact of historical adjustments
The fact that the new system is adjusted to prevent councils from receiving less money than they did under the old system also means that County Galway receives less money than it would have had this provision not been included.
If the formula was implemented without this adjustment, Galway County Council’s baseline this year would be €27 million, equating to 5.75 per cent of the overall national baseline.
Under the current system, however, the council’s baseline is €21.6 million, equating to 4.59 per cent of the overall national baseline.
As such, the implementation of this adjustment resulted in County Galway’s Equalisation Funding being €5.45 million less than what it otherwise would have been this year.
Housing and amenities
It is notable that Galway County Council’s expenditure on housing, recreation and amenities – funding which is largely reimbursed by government departments outside of Equalisation Funding – is significantly below the national average and likely explains budgetary shortfalls.
Galway County Council’s spending per person on housing for 2026 is €172.66, compared to a national average of €672.45.
The council’s spending per person on recreation and amenities for 2026 is €72.00, compared to a national average of €144.34.
Local Property Tax
All local authorities have the power to adjust the basic level of LPT by plus or minus 15 per cent under a mechanism known as the Local Adjustment Factor.
In County Galway, LPT is currently adjusted upwards by a maximum of 15 per cent. However, this adjustment is discretionary and is not counted when the baseline and Equalisation Funding are calculated.
This is notable, as many councillors in Galway – when contacted as part of research for this article – expressed concerns that this adjustment may have an impact on the Equalisation Funding available to the county.
