The Executive's response to the commission's radical package of 30 recommendations on the reform of Scottish local government also disappointed councils with its lukewarm reaction to giving councils a statutory power of general competence.
Alan Campbell, chair of Society of Local Authority Chief Executives Scotland, said: 'I now feel that the reality and rhetoric don't quite match up. It was a pretty short-lived honeymoon.'
Norman Murray, president of the Convention of Scottish Local Authorities, immediately spoke of his 'extreme disappointment'. He said he would be taking up the issue of local government finance with Wendy Alexander, minister for communities, and finance minister Jack McConnell.
On finance, Ms Alexander made clear that the Executive would be looking at issues such as the distribution of grants and the revaluation of business rates.
Mr Campbell said the apparent failure to tackle finance issues could harm local government's relationship with Parliament: 'If the joint conference of local authorities and MSPs is going to work, some of these fundamentals need to be discussed and debated. Otherwise the feeling will be that a lot of the strings are being pulled by the Treasury and Westminster.'