Australian Government, 2013-14 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, National Health Reform funding, and from 1 January 2014, National Education Reform funding. 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 the 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;
  • National Education Reform funding from 1 January 2014; and
  • National Partnership payments — facilitation, project and reward payments.

The Intergovernmental Agreement on Federal Financial Relations (Intergovernmental Agreement) provides that all National SPPs and National Partnership payments will be paid by the Commonwealth Treasury to each State Treasury on the 7th day of each month. These payment arrangements will also apply for National Education Reform funding.

From 1 July 2012, a national funding pool was established to facilitate payment of the Commonwealth's contribution to National Health Reform funding, which supports the provision of public hospital services under the National Health Reform arrangements. Funding within the national funding pool is administered by the National Health Funding Pool Administrator through an independent and jointly governed national funding body.

National SPPs

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

  • 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 National SPPs are ongoing and are indexed each year by growth factors specified in the Intergovernmental Agreement.

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

The National SPPs are distributed among the States in accordance with population shares based on the Australian Statistician's determination as at 31 December of that year. In recognition that an immediate shift to equal per capita shares may have had 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 was replaced by National Health Reform funding which comprises base funding equivalent to the National Healthcare SPP and, from 1 July 2014, efficient growth funding.

From 1 January 2014, the National Schools SPP will be replaced by National Education Reform funding. Further details of the new school funding 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 facilitate reforms, reward those jurisdictions that deliver on nationally significant reforms or support the delivery of specified projects.

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

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.

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.

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 on the Standing Council on Federal Financial Relations website.

Total payments for specific purposes

In 2013‑14, payments for specific purposes are estimated to total $44.1 billion, up from $43.0 billion in 2012‑13 (an increase of 2.4 per cent). Total payments to the States for specific purposes represent 11.1 per cent of total Commonwealth expenditure in 2013‑14.

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, 2012‑13 to 2016‑17
$million NSW VIC QLD WA SA TAS ACT NT Total(a)
2012‑13                  
National Specific Purpose Payments 5,033 3,913 3,220 1,622 1,192 348 275 202 15,805
National Health Reform funding 4,299 3,257 2,661 1,405 1,010 294 203 152 13,280
National Partnership payments(b) 3,439 2,975 4,149 1,449 852 428 138 505 13,936
Total payments for specific purposes 12,772 10,145 10,030 4,476 3,055 1,070 615 858 43,021
2013‑14                  
National Specific Purpose Payments(c) 3,328 2,603 2,163 1,108 715 206 184 112 10,420
National Health Reform funding 4,485 3,487 2,831 1,535 1,014 310 233 144 14,040
National Education Reform funding(d) 2,082 1,688 1,434 707 511 165 118 118 6,824
National Partnership payments(b) 3,677 3,115 2,553 1,515 719 312 166 571 12,783
Total payments for specific purposes 13,573 10,892 8,982 4,865 2,960 993 701 946 44,067
2014‑15                  
National Specific Purpose Payments 1,322 1,032 847 460 229 66 71 25 4,052
National Health Reform funding 4,927 3,846 3,130 1,724 1,126 339 271 168 15,531
National Education Reform funding(d) 4,335 3,544 3,049 1,497 1,057 342 244 247 14,314
National Partnership payments(b) 3,576 2,585 3,116 1,215 670 291 195 472 12,120
Total payments for specific purposes 14,160 11,006 10,143 4,895 3,082 1,039 781 912 46,018
2015‑16                  
National Specific Purpose Payments 1,354 1,062 873 478 233 66 74 25 4,164
National Health Reform funding 5,410 4,240 3,457 1,933 1,248 370 312 195 17,164
National Education Reform funding(d) 4,672 3,886 3,404 1,645 1,127 370 258 268 15,630
National Partnership payments(b) 3,157 2,354 2,397 1,200 917 342 137 443 10,947
Total payments for specific purposes 14,593 11,543 10,130 5,256 3,524 1,148 780 931 47,906
2016‑17                  
National Specific Purpose Payments 1,387 1,094 899 498 237 67 76 25 4,283
National Health Reform funding 5,939 4,673 3,816 2,163 1,382 403 357 223 18,956
National Education Reform funding(d) 5,112 4,258 3,776 1,786 1,201 400 273 293 17,099
National Partnership payments(b) 2,663 2,056 2,525 1,442 761 303 157 655 10,562
Total payments for specific purposes 15,101 12,081 11,016 5,888 3,581 1,172 863 1,196 50,899

(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.

(c) Includes National Schools SPP funding which ceases on 31 December 2013.

(d) National Education Reform funding commences from 1 January 2014. As the Commonwealth's offer to States under the National Education Reform Agreement is open until 30 June 2013, the Budget makes provision for National Education Reform funding for all States from 1 January 2014.

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

Table 2.2: Total payments for specific purposes by sector, 2012‑13 to 2016‑17
$million 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
Health 15,007 16,077 17,041 18,472 20,030
Education(a)(b) 13,546 14,471 14,823 15,868 17,537
Skills and workforce development 1,717 1,761 1,851 1,840 2,006
Community Services 2,235 2,395 1,966 2,163 2,412
Affordable Housing 1,788 2,080 1,848 1,751 1,812
Infrastructure 3,642 5,026 5,177 4,669 3,959
Environment 545 562 567 420 332
Contingent 1,894 148 97 23 ..
Other(c) 2,647 1,547 2,647 2,700 2,810
Total payments for specific purposes 43,021 44,067 46,018 47,906 50,899

(a) Includes National Schools SPP funding which ceases on 31 December 2013.

(b) Includes National Education Reform funding which commences from 1 January 2014. As the Commonwealth's offer to States under the National Education Reform Agreement is open until 30 June 2013, the Budget makes provision for National Education Reform funding for all States from 1 January 2014.

(c) 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, 2012‑13 to 2016‑17
$million 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
Health          
National Health Reform funding 13,280 14,040 15,531 17,164 18,956
National Partnerships 1,726 2,037 1,510 1,308 1,074
Total health payments 15,007 16,077 17,041 18,472 20,030
Education          
National Schools SPP(a) 11,910 6,491 - - -
National Education Reform funding(b) - 6,824 14,314 15,630 17,099
National Partnerships 1,636 1,156 509 238 439
Total education payments 13,546 14,471 14,823 15,868 17,537
Skills and workforce development          
National Skills and Workforce          
Development SPP 1,388 1,409 1,436 1,463 1,490
National Partnerships 330 352 414 377 516
Total Skills and workforce development payments 1,717 1,761 1,851 1,840 2,006
Community services          
National Disability SPP(c) 1,244 1,238 1,309 1,371 1,438
National Partnerships 991 1,158 657 792 974
Total community services payments 2,235 2,395 1,966 2,163 2,412
Affordable housing          
National Affordable Housing SPP 1,264 1,283 1,307 1,331 1,355
National Partnerships 525 797 541 420 458
Total affordable housing payments 1,788 2,080 1,848 1,751 1,812
Infrastructure          
National Partnerships 3,642 5,026 5,177 4,669 3,959
Environment          
National Partnerships 545 562 567 420 332
Contingent payments          
National Partnerships 1,894 148 97 23 ..
Other          
National Partnerships(d) 2,647 1,547 2,647 2,700 2,810
Total payments for specific purposes 43,021 44,067 46,018 47,906 50,899

(a) National Schools SPP funding ceases on 31 December 2013.

(b) National Education Reform funding commences from 1 January 2014. As the Commonwealth's offer to States under the National Education Reform Agreement is open until 30 June 2013, the Budget makes provision for National Education Reform funding for all States from 1 January 2014.

(c) 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).

(d) 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 B.

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/National Education Reform funding) are 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)(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, 2010‑11 and 2011‑12 is taken from the Final Budget Outcomes.

(c) Includes National Schools SPP funding which ceases on 31 December 2013.

(d) Includes National Education Reform funding which commences from 1 January 2014. As the Commonwealth's offer to States under the National Education Reform Agreement is open until 30 June 2013, the Budget makes provision for National Education Reform funding for all States from 1 January 2014.

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