City of Newcastle will commission an independent review into how much cost-shifting by the state and federal governments is costing Newcastle ratepayers.
Councillors unanimously backed a lord mayoral minute at this week's meeting to launch the investigation.
Cost-shifting happens when higher levels of government transfer financial or service responsibilities to councils without providing enough money to pay for them.
In local government, it forces councils to use ratepayer funds to cover shortfalls.
On Tuesday, independent lord mayor Gavin Morris said the council's finances were being squeezed by a "failing" local government funding system, rising costs and increasing cost-shifting from the state government.
"Newcastle residents may not realise that the rates they pay only cover 43 per cent of our operating budget," Cr Morris said.
"Thanks to astute financial decisions over past years, we have diversified our income, but we still rely on funding from other levels of government to deliver services and infrastructure."
Cr Morris said that since 1996, the amount of Commonwealth funding flowing to councils has dropped by more than 50 per cent.
"My lord mayoral minute is about more than how much we are funded by the Commonwealth, it's also about our financial relationship with the state government," he said.
"I believe that we need to take leadership on this issue and I would like our neighbouring councils to have the benefit of participating in this research."
The cost of commissioning the review is yet to be determined. Chief executive Jeremy Bath said a similar study by the University of Newcastle cost about $10,000.
The push comes after the Australian Local Government Association's (ALGA) National General Assembly backed an emergency motion calling for Financial Assistance Grants to be restored to one per cent of Commonwealth taxation revenue.
ALGA argues councils were increasingly being forced to deliver services without matching funding, placing growing pressure on local government finances.
A 2025 Local Government NSW (LGNSW) report estimated the state's 128 councils absorbed about $1.5 billion in cost-shifting during 2023-24, equivalent to about $497 per ratepayer annually. The cumulative cost over the past decade has been estimated at more than $11.3 billion.
Greens councillor Joel Pringle said Newcastle needed its own data.
"We can't rely on that piece of work to understand the impacts on the City of Newcastle, and that's why this piece of work is so important," Cr Pringle said.
Labor councillors Peta Winney-Baartz and Declan Clausen questioned whether the review could be used to justify a future special rate variation, which Cr Morris rejected.
Liberal councillor Callum Pull was not convinced the study would have sway with decision-makers in Sydney.
"We already have research that demonstrates the impact across NSW and those impacts, unless there is a Newcastle-specific or Hunter-specific element in cost-shifting, I don't know why we would go alone," Cr Pull said.
While he voted in favour of the study, Cr Pull said he felt it would benefit from a more defined and concise scope.
Cr Morris will invite neighbouring councils to join the review to build a regional picture of how cost-shifting is affecting the Hunter.
