Defeated on a series of amendments tabled by opposition parties, Labour, together with some Conservative support, managed to defeat the revised motion.
The proposed new funding system drew criticism from all parties during the national assembly debate. But it was defended by local government secretary Peter Law, who described it as 'a fine piece of work'.
'I'm disappointed that some have been so negative. If we reject this formula then we need to have proposals for an alternative,' he said.
There were claims that the higher costs of providing services in rural areas had not adequately been taken into account, resulting in the weighting in the formula given to sparsity falling from 8% to 6%.