Australian Government, 2012‑13 Budget
Budget

Part 2: Payments for Specific Purposes

The Commonwealth provides substantial financial support to the States to assist in specific state services through National Specific Purpose Payments, National Partnership payments and, from 1 July 2012, National Health Reform payments. This Part provides an outline of these payments across the forward estimates.

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 7th 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)

Chart 2.1: Composition of payments for specific purposes

(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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