Towards a functioning Federation
The Government's new funding arrangements will ensure that States are more accountable for their schools and public hospital systems
State Governments have primary responsibility for running and funding public hospitals and schools. The extent of existing Commonwealth funding to public hospitals and schools blurs these accountabilities and is unaffordable.
Reforming unsustainable or ineffective agreements with the States
The Government is addressing this unsustainable situation by moving to more realistic funding arrangements.
In this Budget the Government is adopting sensible indexation arrangements for schools from 2018, and hospitals from 2017‑18, and removing funding guarantees for public hospitals. These measures will achieve cumulative savings of over $80 billion by 2024‑25.
The Government will also reduce or terminate some Commonwealth payments that are ineffective or duplicate state responsibilities.
These include National Partnership Agreements on Preventive Health, Improving Public Hospital Services and Certain Concessions for Pensioners and Seniors Card Holders.
The States will be expected to continue contributing to these arrangements at their expense.
The changes in this Budget provide a platform to consider longer-term arrangements in the context of the White Paper on the Reform of the Federation and the White Paper on the Reform of Australia's Tax System.
The White Papers, to be completed by the end of 2015, will consider the spending and taxation roles and responsibilities of the different levels of government in Australia to ensure that, as far as possible, the States are sovereign in their own sphere.
More sustainable spending arrangements for schools and public hospitals