Part 2: Payments for Specific Purposes
Local government services
The Commonwealth provides a financial contribution in respect of the provision of local government services to the community. In 2009‑10, payments for local government services will total $1.4 billion.
Table 2.134: Payments to support local government
Financial assistance grants
The Commonwealth has provided general purpose assistance to local governments since 1974‑75.
State grants commissions determine the intra‑State distribution of the financial assistance grants between local governments. This funding is untied and can be spent according to each local government's own priorities. From 1988‑89, the ACT has also been included in these grants, reflecting its combined responsibility for both state and local government functions.
General purpose assistance is the larger of the two components of the financial assistance grants for local government and is distributed between the States on a per capita basis.
In 1991‑92, payments made to local government for roads became untied funding and were added to the financial assistance grants. Although the untied local roads grants are no longer required to be spent on roads, they are distributed between the States using fixed state allocations, based on the interstate road shares which were calculated before the funding became untied.
The financial assistance grants are increased annually, based on an escalation factor that the Treasurer determines with reference to population growth and the consumer price index.
The Commonwealth has decided to make the first quarter payment for 2009‑10 in the 2008‑09 financial year. The net effect will be an additional payment of $479.7 million in 2008‑09 with a corresponding reduction in 2009‑10. Accelerating the provision of funding to local government will assist the Government's strategy of supporting economic growth and jobs. Local governments will be able to bring forward their delivery of some services into 2008‑09 or early 2009‑10, when they may otherwise have been provided later in 2009 or in 2010.
Distribution of financial assistance grants
State shares of financial assistance grants for 2008‑09 and 2009‑10 are shown in Table 3.12 on a cash basis. The cash totals vary from the accrual totals shown in Table 3.1 due to adjustments for any overpayment or underpayment from the previous year. These adjustments arise because the Treasurer determines the escalation factors in the June prior to the end of each financial year, and the adjustment in the following financial year ensures that local governments receive their correct entitlement using a final escalation factor.
Table 2.135: Financial assistance grants to local government (cash basis)
- The 2008‑09 estimate takes into account an underpayment in 2007‑08. The Treasurer will determine the final 2008‑09 escalation factor in June 2009. The 2008‑09 escalation factor is currently estimated to be 1.0425.
- The 2009‑10 escalation factor is currently estimated to be 1.0392. Financial assistance grants in 2009‑10 will be paid on the basis of the escalation factor that the Treasurer will estimate in June 2009. The Treasurer will determine the final escalation factor for 2009‑10 in June 2010. The 2009‑10 estimate includes the estimated adjustment for the difference between the 2008‑09 escalation factor estimated in June 2008 (used to calculate payments in 2008‑09) and the final factor for 2008‑09 (to be determined in June 2009). Using current estimates, this adjustment will be an increase of $12.8 million.
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