Wagga City Council has dodged an $80,000 hole in its budget after the state government granted a 12-month stay on its fire levy hike.
The government in May informed councils across the state that they would have to pay a higher share of a levy to fund firefighter cancer compensation claims from paid and volunteer services.
Wagga mayor Greg Conkey said the council had taken part in "intensive lobbying" on the issue.
"We support the emergency services people, however this was just thrown on us at the last minute before the budget," Cr Conkey said.
"We asked for 12 months to prepare and to budget for the increase, and that has come through and it is welcome.
"I thank the government for taking on board our lobbying; I lobbied the Deputy Premier and the Local Government Minister about it and we sent letters as well."
Council corporate service director Natalie Te Pohe previously told The Daily Advertiser that the council had "budgeted approximately $581,000 for the Emergency Services Levy in 2019-20" prior to any increase.
Cr Conkey said the government's decision to fund the increase with its own money would save Wagga council from having to shift money from other areas.
Deputy Premier John Barilaro said on Tuesday that the state's 128 councils would not have to pay the combined additional $13.6 million this financial year.
"The NSW government acknowledges that this additional cost presented challenges for councils, particularly those in regional and rural areas badly affected by the drought," Mr Barilaro said.
"That's why the government will fund the $13.6 million to cover the additional levy costs to support firefighters who develop cancer, to alleviate the immediate pressure on local councils.
"Our emergency services have long been funded through a cost sharing arrangement between insurers, councils and the government. It's important that this continues and we look after the health and wellbeing of our frontline firefighters."
Opposition treasury spokesman Walt Secord accused the government of "bowing to pressure" while failing to come up with a long-term solution for the fire levy.
"This is a crafty and cruel hoax on local government with the Berejiklian government just kicking the can down the road for another year," Mr Secord said.
"This is not a fix. It is not a long-term plan."