Part 2: Payments for Specific Purposes (Continued)
Local government services
The Commonwealth provides a financial contribution for the provision of local government services to the community. In 2010‑11, payments for local government services will total $1.5 billion.
Table 2.11: Payments to support local government
Financial assistance grants
The Commonwealth has provided general purpose assistance to local governments since 1974‑75.
State grants commissions determine the intra‑State distribution of the financial assistance grants between local governments. This funding is untied and can be spent according to each local government's own priorities. From 1988‑89, the ACT has also been included in these grants, reflecting its combined responsibility for both state and local government functions.
Financial assistance grants are made up of general purpose assistance and untied local roads grants. General purpose assistance is the larger of the two components of the financial assistance grants for local government and is distributed between the States on a per capita basis.
In 1991‑92, payments made to local government for roads became untied funding and were added to the financial assistance grants. Although the untied local roads grants are no longer required to be spent on roads, they are distributed between the States using fixed state allocations, based on the interstate road shares which were calculated before the funding became untied.
The financial assistance grants are increased annually, based on an escalation factor that the Treasurer determines with reference to population growth and the consumer price index.
In the 2009‑10 Budget the Commonwealth decided to make the first quarter payment for 2009‑10 in the 2008‑09 financial year. This resulted in an additional payment of $479.7 million in 2008‑09 with a corresponding reduction in 2009‑10. A similar decision has been taken in this Budget, with an additional payment of $511.6 million in 2009‑10, with a corresponding reduction in 2010‑11, which explains the lower payment in 2010‑11. This will ensure that local governments have immediate use of these funds ensuring they are able to take maximum advantage of the global recovery and to prepare for future challenges.
Distribution of financial assistance grants
State shares of financial assistance grants for 2009‑10 and 2010‑11 are shown in Table 2.11.1 on a cash basis. The cash totals vary from the accrual totals shown in Table 2.11 due to adjustments for any overpayment or underpayment from the previous year. These adjustments arise because the Treasurer determines the escalation factors in the June prior to the end of each financial year, and the adjustment in the following financial year ensures that local governments receive their correct entitlement using a final escalation factor.
Table 2.11.1: Financial assistance grants to local government (cash basis)
- The 2009‑10 estimate takes into account an underpayment in 2008‑09. The Treasurer will determine the final 2009‑10 escalation factor in June 2010. The 2009-11 escalation factor is currently estimated to be 0.8504.
- The 2010‑11 escalation factor is currently estimated to be 0.7710. Financial assistance grants in 2010‑11 will be paid on the basis of the escalation factor that the Treasurer will estimate in June 2010. The Treasurer will determine the final escalation factor for 2010‑11 in June 2011. The 2009‑10 estimate includes a $25.3 million overpayment that is due to the use of an estimated escalation factor. A final cash amount will be deducted from the 2010‑11 cash payment upon determination of the final escalation factor for 2009‑10.
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