NSW council’s financial woes: will state and feds own the problem?

Local state MP Don Page and federal MP Justine Elliot have defended claims of cost-shifting from state and federal governments to local government by the Local Government and Shires Associations of NSW (LGSA).

It comes after the LGSA released findings that they say cost NSW councils nearly $500 million in the 2010/11 financial year.

President of the Shires AssociationofNSW,CrRayDonald, said it equates to 5.72 per cent of the total income of local government in NSW, before capital amounts. ‘Findings of the LGSA’s cost-shifting survey for 2010/11 are consistent with results of the last five surveys carried out over the previous five financial years, highlighting the continual moves by the state and federal governments to palm their responsibilities on to local government without the corresponding funding.

‘The LGSA has asked the same 23 questions in the past five surveys, with an additional two questions added to the 2009/10 survey and again in collecting the 2010/11 data.

‘If we include those two additional questions, which relate to revenue-raising restrictions on council-managed Crown lands and the shortfall of cost recovery as a result of fee regulation when assessing development applications, cost shifting is estimated at 6.37 per cent of local government’s total income before capital amounts – or $555 million.

‘This survey confirms that cost shifting continues to be a burden on the financial situation of NSW councils and is impeding local government’s ability to deliver services and maintain infrastructure.’
Don Page, minister for local government and north coast, told The Echo, ‘I believe councils have experienced cost shifting in the past by both state and federal governments. ‘The survey results for 2010/11 only include three months (April, May, June 2011) of the state Liberal National government, prior to that being the previous Labor administration. ‘As the minister for local government I am keen to reduce or eliminate cost shifting to local government and am in the process of discussing with the LGSA a new intergovernmental agreement (IGA) designed to improve communications and consultation between state and local government and to reduce cost shifting. ‘By the way, cost shifting occurs from federal to state governments as well – for example, older people who should be in a nursing home (federally funded) are being cared for in our hospital system (state funded). I was pleased to hear the president of the Shires Association say at a local government conference last year (2012) that he was pleased with the lack of cost shifting that had happened since the new state government had been elected in 2011.

‘This was an encouraging comment and I hope it can be kept that way, although of course cost shifting typically happens beyond the local government portfolio. I have also ordered a review of the Local Government Act, part of which will clarify local government responsibilities, which should in turn reduce cost shifting.’

Richmond Labor Justine Elliot told The Echo, ‘In 2011–12, local governments across the nation received directly from the federal government $2.74 billion in general financial assistance grants. ‘This is in addition to other funding councils receive from the federal government for specific purposes such as black-spot funding or regional development funding.

State to blame: Elliot

‘The NSW ALGA report relates to general cost shifting they consider has occurred as a consequence of the transfer of functions and assets to local government. The bulk of transfers in functions relate to state government activities transferred to local government as identified in the recent productivity commission’s review on regulatory issues.

‘The major transfer of assets from the Commonwealth to local government was the transfer of airports to local government, which the Commonwealth would argue was fully funded.

Other matters relating to Commonwealth activity are the regulatory costs associated with EPBC and other requirements associated with land, which the Commonwealth would not necessarily agree to classify as cost shifting.’

Essential services

But president of the Local Government Association of NSW, Cr Keith Rhoades AFSM, says, ‘Some of the major cost-shifting items identified in the survey include mandatory contributions to Fire and Rescue NSW, NSW Rural Fire Services and NSW State Emergency Service, inadequate funding for public libraries and the NSW government’s failure to reimburse councils for mandatory pensioner rebates for rates,’ said Cr Rhoades.

‘From controlling noxious weeds and managing contaminated land to enforcing the Companion Animals Act NSW (1998) – councils are constantly carrying out activities and regulatory functions for the state and federal governments without sufficient financial resources.

‘This is on top of the financial restrictions placed on the 152 councils across the state, courtesy of the NSW government’s rate-pegging system.

‘It’s not surprising the 2010/11 cost shifting amount of $499 million is equal to the estimated annual infrastructure renewal gap of $500 million per annum, as found in the Percy Allan Report.

‘While the NSW government says that councils are often best placed to provide these cost shifted services to communities, councils do not have the means to keep taking on new jobs without adequate resourcing.’

To view the full survey report, visit: http://www.lgsa.org. au/policy/fin.