Credit: C Slack
If there’s one thing that’s the bane of local government’s existence, it’s cost-shifting.
Councils have often faced this nagging problem where state and federal governments move their responsibilities like health, education and transport to their doorsteps, but often with no way to pay for it because of their limited budgets.
Now the Local Government Association of Queensland (LGAQ) has put a spotlight on the issue in a new discussion paper that examines issues surrounding the Abbott government’s review of Australia’s tax system.
This discussion paper found that Queensland councils are taking up the slack by funding hospitals and helping to pay for teacher salaries in response to federal and state government cutbacks.
According to the discussion paper, other so-called “non-traditional” services that councils are forced to fund include student hostels, school bus services and community housing.
It’s a deep and troubling issue that councils face because their frontline services are at risk of disappearing if they can’t find alternative revenue streams in the absence of traditional financial assistance.
So LGAQ’s discussion paper looked to the federal government’s possible reforms to the Federation and taxation for a possible way to pay for additional services when state and federal government throw them in their direction.
LGAQ President Margaret de Wit said one crucial reform was allowing councils guaranteed access to a funding stream from a growth tax.
“The narrowness of the rate base as the major source of local government revenue has always been a concern for us,’’ she said.
“In some overseas countries, local government is assigned an agreed proportion of taxation revenue which gives those councils a broader revenue base,” Ms de Wit said.
“Given that councils are increasingly seen as a provider of last resort for services like education and health that are supposed to be the responsibility of other levels of government, it is vital that local government puts its view on how those services should be paid for in the future.”
These forms of cost-shifting come at a significantly heavy cost to local governments that have been struggling to source alternate revenue streams to simply pay for their own traditional services.
It has especially become difficult for councils across Australia following the freeze on indexation of the federal government’s Financial Assistance Grants (FAGs), which has been a program crucial to helping councils fund their services without having to resort to unpopular rate hikes.
Although a rate hike may be possible but unlikely in Queensland, it’s been impossible for councils in New South Wales to impose because of rate pegging.
And NSW councils have had their own problems with cost-shifting as it was revealed by Local Government NSW that they were slugged with a total bill of $521 million in the 2011/12 financial year.
