The loss of half its councillors standing for election and the loss of control of major cities like Newcastle-upon-Tyne, Sheffield and Hull will almost certainly be followed by further reductions in funding.
They also did badly in Manchester and Liverpool, losing all but two of the 24 seats they were defending in the two cities.
All councillors are expected to contribute to a levy to the party, mainly raised through their allowances, but with a national loss of 748 seats, half the councillors who were contributing will no longer be there.
On top of that, some of its council leaders who give substantial sums to the party, such as David Faulkner, the former leader of Newcastle-upon-Tyne, will see their allowances cut now they are out of office.
Mr Faulkner gave £1,200 in the last quarter of the year, according to the Electoral Commission.
The losses come on top of a decline in donations to the party which, unlike Labour and the Conservatives, relies overwhelmingly on individual Liberal Democrat activists to raise cash.
An analysis by the Electoral Commission shows the party had an 8 per cent share of all donations given to political parties in 2010. By the last quarter of the year, this had fallen to 7 per cent, well before the election rout.
The party also lost its share of the Short money when it went into coalition – and in the last quarter received £26,067 from the state to help its role in the Scottish Parliament.
A lot of the losses will not be recorded by the Commission since no one has to declare any donation below £7,500 in one year to the national party and £1,500 to local accounting units.
The only bright spot for the Lib Dems is that two of their three best funded local accounting units – Bath and Westmoreland, where they did much better – should not be affected.
