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Part 2: Payments for Specific Purposes

Overview of payments

The Commonwealth provides payments to the States for specific purposes to pursue important national policy objectives in areas administered by the States. These payments cover most functional areas of state and local government activity including: health; education; skills and workforce development; community services; housing; Indigenous reform; infrastructure; and environment.

The Commonwealth provides the following types of specific purpose payments to the States:

• National Specific Purpose Payments (National SPPs) in respect of key service delivery sectors;
• National Health Reform funding from 1 July 2012; and
• National Partnership payments — facilitation payments, project payments and reward payments.

The Intergovernmental Agreement on Federal Financial Relations (Intergovernmental Agreement) provides that all payments for National SPPs and National Partnerships will be paid by the Commonwealth Treasury to each State Treasury on the 7^th day of each month.

From 1 July 2012, a new national funding pool will be established into which the Commonwealth will provide National Health Reform funding as its contribution to public hospital services under the National Health Reform arrangements. Funding within the national funding pool will be administered by a National Administrator through an independent and jointly governed national funding body distinct from Commonwealth and State departments. Further detail on the new National Health Reform arrangements is set out in Part 1 of this Budget Paper.

National SPPs

The Commonwealth supports the States' efforts in delivering services in the major service delivery sectors though National SPPs. The Commonwealth currently makes payments under five National SPPs:

• National Healthcare SPP;
• National Schools SPP;
• National Skills and Workforce Development SPP;
• National Disability Services SPP; and
• National Affordable Housing SPP.

The States are required to spend each National SPP in the relevant sector.

The Intergovernmental Agreement specifies that each National SPP is ongoing and will be indexed on 1 July 2010 and each year thereafter by a growth factor that is specified in the Intergovernmental Agreement.

Payments made throughout the year for National SPPs are made in advance, based on Commonwealth estimates of the growth factors. A balancing adjustment is made after the end of the financial year once outcome data become available.

The National SPPs are distributed among the States in accordance with population shares based on the Australian Statistician's determination of States' population shares as at 31 December of that year. In recognition that an immediate shift to equal per capita shares may have implications for State allocations, an equal per capita distribution is being phased in over five years from 2009‑10.

In the case of the government schools component of the National Schools SPP, the relevant population is each State's share of full‑time equivalent student enrolments in government schools.

From 1 July 2012, the National Healthcare SPP will be replaced by National Health Reform funding which will comprise base funding equivalent to the National Healthcare SPP and, from 1 July 2014, efficient growth funding.

Further details of the new National Health Reform arrangements are set out in Part 1 of this Budget Paper.

National Partnership payments

The Commonwealth recognises the need to support the States to undertake priority national reforms or collaborative projects.

Under the Intergovernmental Agreement, National Partnership payments to the States are the key vehicle to support the delivery of specified projects, facilitate reforms, or reward those jurisdictions that deliver on nationally significant reforms.

There are three types of National Partnership payments: project; facilitation; and reward.

National Partnership project payments are a financial contribution to the States to deliver specific projects, including to improve the quality or quantity of service delivery, or projects which support national objectives. To the fullest extent possible, project payments are aligned with the achievement of project milestones and are made after the States have achieved the outcomes or outputs specified in the relevant National Partnership.

When a reform is agreed as a national priority, National Partnership facilitation payments may be paid in advance of the States implementing reforms, in recognition of the administrative and other costs associated with undertaking reform.

National Partnership reward payments can be used to reward those States that deliver on nationally significant reform or continuous improvement in service delivery. National Partnership agreements with reward payments set out clear, mutually agreed and ambitious performance benchmarks that encourage the achievement of reforms or continuous improvement in service delivery.

For reward payments, the COAG Reform Council assesses and publicly reports on the achievement of agreed performance benchmarks. The Commonwealth considers the COAG Reform Council assessments when determining reward payments to the States.

National Partnerships are typically entered into for a fixed period of time, reflecting the nature of the project or reform involved.

Some payments for specific purposes under the previous federal financial arrangements have become National Partnership project payments.

National Partnership agreements are publicly available at:
www.federalfinancialrelations.gov.au

Total payments for specific purposes

In 2012‑13, payments for specific purposes are estimated to total $41.0 billion, down from $49.4 billion in 2011‑12 (a decrease of 17.1 per cent). Total payments to the States for specific purposes constitute a significant proportion of Commonwealth expenditure and are estimated to represent 10.9 per cent of total Commonwealth expenditure in 2012‑13.

Total payments for specific purposes, including National SPPs and National Partnership payments are shown in Table 2.1.

Table 2.1: Total payments for specific purposes by category, 2011‑12 to 2015‑16

$million	NSW	VIC	QLD	WA	SA	TAS	ACT	NT	Total(a)
2011-12
National Specific Purpose Payments	8,970	6,812	5,623	2,858	2,138	634	446	372	27,852
National Health Reform funding	-	-	-	-	-	-	-	-	-
National Partnership payments(b)	6,148	4,270	5,173	2,169	2,084	568	263	881	21,590
Total payments for specific purposes	15,117	11,081	10,796	5,028	4,222	1,202	709	1,253	49,442
2012-13
National Specific Purpose Payments	5,080	3,961	3,309	1,671	1,215	370	282	218	16,105
National Health Reform funding	4,381	3,322	2,724	1,407	1,028	298	204	153	13,518
National Partnership payments(b)	3,090	2,589	2,361	1,448	893	308	112	523	11,365
Total payments for specific purposes	12,551	9,872	8,394	4,526	3,136	977	598	894	40,989
2013-14
National Specific Purpose Payments	5,348	4,240	3,585	1,817	1,264	383	300	224	17,160
National Health Reform funding	4,608	3,584	2,929	1,522	1,041	319	234	146	14,383
National Partnership payments(b)	3,399	3,312	2,515	1,629	688	272	154	301	12,836
Total payments for specific purposes	13,355	11,136	9,029	4,968	2,993	974	687	670	44,379
2014-15
National Specific Purpose Payments	5,673	4,538	3,866	1,960	1,339	403	319	227	18,325
National Health Reform funding	5,080	3,961	3,268	1,691	1,157	349	268	170	15,944
National Partnership payments(b)	2,426	2,338	1,667	1,008	508	202	179	215	9,918
Total payments for specific purposes	13,178	10,837	8,801	4,659	3,004	954	767	612	44,187
2015-16
National Specific Purpose Payments	6,037	4,842	4,130	2,114	1,427	427	342	242	19,561
National Health Reform funding	5,590	4,373	3,635	1,876	1,282	382	306	195	17,639
National Partnership payments(b)	2,208	2,150	1,610	908	744	250	131	221	10,072
Total payments for specific purposes	13,834	11,365	9,376	4,898	3,453	1,059	779	659	47,273

(a) State allocations are not yet finalised for several National Partnership payments; unallocated payments are not included in State totals.

(b) Includes financial assistance grants for local government.

Total payments for specific purposes by sector, including National SPPs and National Partnership payments, are shown in Table 2.2.

Table 2.2: Total payments for specific purposes by sector, 2011‑12 to 2015‑16

$million	2011-12	2012-13	2013-14	2014-15	2015-16
Health	15,403	15,460	16,469	17,285	18,730
Education	13,778	13,851	13,636	14,744	16,360
Skills and workforce development	1,890	1,706	1,766	1,857	1,848
Community Services	3,268	2,224	2,291	1,840	1,930
Affordable Housing	2,387	1,793	1,864	1,798	1,705
Infrastructure	7,691	3,659	5,359	3,671	3,672
Environment	922	572	340	326	304
Contingent	828	114	106	41	1
Other(a)	3,274	1,610	2,547	2,625	2,723
Total payments for specific purposes	49,442	40,989	44,379	44,187	47,273

(a) Includes financial assistance grants for local government.

Total payments for specific purposes by sector and category, including National SPPs and National Partnership payments, are shown in Table 2.3.

Table 2.3: Total payments for specific purposes by sector and category, 2011‑12 to 2015‑16

$million	2011-12	2012-13	2013-14	2014-15	2015-16
Health
National Healthcare SPP	12,698	-	-	-	-
National Health Reform funding	-	13,518	14,383	15,944	17,639
National Partnerships	2,705	1,941	2,086	1,341	1,090
Total health payments	15,403	15,460	16,469	17,285	18,730
Education
National Schools SPP	11,344	12,188	13,125	14,161	15,269
National Partnerships	2,435	1,664	512	583	1,090
Total education payments	13,778	13,851	13,636	14,744	16,360
Skills and workforce development
National Skills and Workforce Development SPP	1,363	1,389	1,415	1,443	1,471
National Partnerships	527	317	351	415	377
Total Skills and workforce development payments	1,890	1,706	1,766	1,857	1,848
Community services
National Disability SPP(a)	1,205	1,264	1,332	1,410	1,484
National Partnerships	2,063	960	959	430	446
Total community services payments	3,268	2,224	2,291	1,840	1,930
Affordable housing
National Affordable Housing SPP	1,243	1,265	1,288	1,312	1,337
National Partnerships	1,144	528	576	486	368
Total affordable housing payments	2,387	1,793	1,864	1,798	1,705
Infrastructure
National Partnerships	7,691	3,659	5,359	3,671	3,672
Environment
National Partnerships	922	572	340	326	304
Contingent payments
National Partnerships	828	114	106	41	1
Other
National Partnerships(b)	3,274	1,610	2,547	2,625	2,723
Total payments for specific purposes	49,442	40,989	44,379	44,187	47,273

(a) Includes adjustment to the National Disability SPP to achieve budget neutrality under National Health Reform (see footnote to Table 2.7 in this Part for details).

(b) Includes financial assistance grants for local government.

Further information on these payments is in this Part. Total payments for specific purposes categorised by Government Finance Statistics function are set out in Appendix C.

Categories of payments for specific purposes

Chart 2.1 shows the breakdown of payments for specific purposes by category. It illustrates that National SPPs (and National Health Reform funding) are becoming the primary source of specific purpose funding to the States.

Chart 2.1: Composition of payments for specific purposes^(a)(b)

(a) Infrastructure, Environment, Contingent, Other and Local government payments are provided solely through National Partnership payments and are not included in Chart 2.1.

(b) Information for 2009‑10 and 2010‑11 is taken from the Final Budget Outcomes.

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