Financial Assistance Grants to local government
The Australian Government provides financial assistance to local government for roads and other local government services. Assistance is paid in the form of general purpose assistance and untied local road funding. Local governments can spend both forms of funding according to their own priorities.
The Australian Government is providing a total of $1.5 billion in FAGs to local government in 2004-05 and an estimated $1.6 billion in 2005-06 (Table 16). The annual increase in funding is based on an escalation factor, which the Treasurer determines with reference to population growth and the Consumer Price Index.
This financial assistance is paid to the states as an SPP, on condition that all the funds are passed on to local government. In 2005-06, as in previous years, the general purpose component of local government assistance will be distributed between the states on an equal per capita basis and untied local road funding will be distributed on the basis of historical shares. State grants commissions determine the intra-state distribution of the grants to local governments.
Table 16: Financial Assistance Grants to local government in 2004-05 and 2005-06 (estimated)(a)
- Total Financial Assistance Grants are the cash payments that the state receives on behalf of local government. They are equal to the estimated entitlement for a given year adjusted for any overpayment or underpayment from the previous year.
- The 2004-05 figure takes into account an overpayment of $7.4 million in 2003-04. The Treasurer will determine the final 2004-05 escalation factor in June 2005; currently the 2004-05 escalation factor is estimated to be 1.0374.
- The 2005-06 figure includes an estimate of the amount necessary to adjust for the difference between the 2004-05 escalation factor estimated in June 2004 and used to calculate payments in 2004-05 and the final factor for 2004-05 to be determined in June 2005. On the basis of the current estimate of the 2004-05 escalation factor, this adjustment is estimated to be an increase of $9.6 million. The 2005-06 escalation factor is currently estimated to be 1.0385. Financial Assistance Grants in 2005-06 will be paid on the basis of the escalation factor that the Treasurer will estimate in June 2005. The Treasurer will determine the final escalation factor for 2005-06 in June 2006.