General purpose assistance is provided to local government authorities under the Local Government (Financial Assistance) Act 1995. The Act provides for local government FAGs and local government road funds to be increased each year in accordance with an escalation factor which is determined by the Treasurer in line with the underlying movement in general revenue assistance provided to the States. The escalation factor reflects the percentage increase in FAGs and pool funded special revenue assistance to be paid to the States in the current year compared to those paid to the States in the previous year.
In 1996-97, the Commonwealth will provide $1,216.4 million in local government general purpose assistance. Payments in 1996-97 have been based upon the estimated escalation factor of 4.0 per cent determined by the Treasurer in June 1996. The final entitlement for 1996-97 will be determined by the Treasurer in June 1997 on the basis of actual payments made to the States in 1996-97.
General purpose assistance to local government will be increased in line with the CPI in 1997-98. This level of funding will be more commensurate with trends in payments to the States, taking into account the fiscal contributions which the States are making to the Commonwealth. On this basis, the Treasurer has determined an estimated escalation factor of 0.77 per cent for 1997-98 which will result in the Commonwealth providing $1,205.2 million in local government general purpose assistance in 1997-98. The final entitlement will be dependent upon the Treasurer's determination of the final escalation factor, which will be made in June 1998 on the basis of the actual payments made to the States in 1997-98.
Table 18 sets out the payments of general purpose assistance to local government in 1996-97 and 1997-98.
As in the past, the interstate distribution of local government FAGs for 1997-98 will be on an equal per capita basis, using the State populations at 31 December in the previous financial year. Untied local government road funding is to be distributed between the States on the basis of the criteria established under the Australian Land Transport Development Act 1988. In both cases, the intrastate distribution of these payments to local governments is determined by State Grants Commissions on the basis of fiscal equalisation.
Table 18: General Purpose Assistance for Local Government, 1996-97 and 1997-98, ($million, estimated)
(a) Total general purpose assistance is the actual cash payment that the State receives on behalf of local government in the given year. It is equal to the estimated entitlement for the given year adjusted for an over or under payment from the previous year.
