The Member for Murray said the ICAC and Other Independent Commissions Legislation Amendment would have created a system to independently fund the corruption watchdog.

Mrs Dalton said it would mean the ICAC's work wouldn't be threatened by government's seeking budget savings.

The bill would also have created a parliamentary oversight committee for the ICAC, the Law Enforcement Conduct Commission, NSW Ombudsman and NSW Electoral Commission.

After first being introduced into by the Shooters, Fishers and Farmers Party in the Upper House, Mrs Dalton brought the bill into the lower house.

However the bill was voted down 46-40 on Thursdsay.

"The NSW Government has cut funding for ICAC at a time corruption is rampant across NSW," Mrs Dalton said

"This bill would have taken ICAC funding decisions away from the government executive and given it to an independent body.

"It would protected and strengthened funding for our oversight bodies.

"A Premier should not be able to cut funding for a watchdog investigating her boyfriend or her ministers."

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During the debate on the floor of the parliament one government MP said decisions had to be made about whether there was money to fund schools or the anti-corruption watchdog.

"The executive have to make hard decisions ... sometimes those hard decisions are: will we provide $5 million for a school in the seat of Orange or the seat of Murray ... or will we give an extra $5 million to the ICAC?" Liberal MP Alister Henskens said.

Mrs Dalton labelled the argument "ridiculous".

"Schools in need would get more money if there wasn't so much corruption and pork barrelling," she said.

Mrs Dalton said she had reported a number of issues to the ICAC in the past two years.

"ICAC and other watchdogs can't do their job properly, they're really struggling," Mrs Dalton said

"I've reported a number of serious matters to ICAC and the NSW Ombudsman this past two years.

"But they consistently refuse to investigate. They just don't have enough resources."

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