Document 1

TREASURY  EXECUTIVE MINUTE

Minute No.

12 September 2012

Deputy Prime Minister and Treasurer

FEDERAL FINANCIAL RELATIONS ACT 2009- NATIONAL SPECIFIC PURPOSE PAYMENT DETERMINATION 2011-12

Timing:   The Determination needs to be signed prior to publication of the 2011-12 Final Budget
Outcome. Recommendation/Issue:

"	That you sign the attached Federal Financial Relations Act 2009- National Specific Purpose
Payment Determination 2011-12.

Signed/Not Signed

KEY POINTS

Signature: ....................................... 	...../...../2012

• 		Part 3 ofthe  Federal Financial Relations Act 2009 (the Act) requires you, through a written Determination, to determine the growth, total amount and the manner in which the amount is to be divided between the States and Territories (the States) for each National Specific Purpose Payment (National SPP).

• 	The Act stipulates that total funding for each National SPP available to the States will be the total amount of the preceding financial year indexed by the growth factor for the financial year for which the Determination is made.

• 	The Act requires you to have regard to the Intergovernmental Agreement on Federal Financial
Relations (the IGA) when making a Determination.

The IGA identifies the manner in which funding under the National SPPs is to be grown and distributed between the States (See Attachment A).

The Determination of the growth factors and the distribution between the States is consistent with the terms and conditions contained in the IGA.

The total amount ofthe  Determination for 2011-12 is $20.1 billion.  Advance payments of
$20.3 billion were made throughout the 2011-12 financial year based on estimates of each States' entitlement. Residual adjustments totaling $149.7 million, to account for the difference in advances and the determined amounts required as a result of this Determination, are
detailed in Attachment B.

These residual adjustments will be deducted from the 2012-13 National SPP payments and arise as a result of changes in the underlying growth factor, due to lower growth in population weighted for hospital utilisation.

There was no impact on the total funding pool for the National Skills and Workforce Development, Disability and Affordable Housing SPPs as parameters determining the growth factors remain unchanged since the 2012-13 Budget.  These National SPPs were

only affected by population data updated in accordance with the Australian Statistician's Determination of State population shares as at 31 December 2011. Changes to this parameter have resulted in a redistribution of State allocations only.

There were no changes to the National Schools SPP.  All parameters, including full-time equivalent student enrolments that determine State allocations remain unchanged since the 2012-13 Budget.

Residual adjustments will be made in 2012-13 following signing of this
Determination.

• 	Upon making, this Determination becomes a legislative instrument which is subject to disallowance.

To accord with section 17 of the Legislative Instruments Act 2003, a discussion on consultation with the States on matters relating to the National SPPs is included in the Explanatory Statement to this Determination.

• 		The IGA requires States to spend each National SPP in the service sector relevant to the payment.  However, States have full budget flexibility to allocate funds within that sector as they see fit to achieve any mutually agreed objectives for that sector.  In order to demonstrate compliance with this requirement each State provides a report within six months of the end of a financial year disclosing amounts that have been spent in the relevant sector.

• 	The Australian Government Solicitor has been consulted in the preparation of this
Determination.

Manager
Commonwealth-State  Relations Division

Contact Officer:	Ext:

ATTACHMENT  A

GROWTH FACTORS OUTLINED IN THE INTERGOVERNMENTAL AGREEMENT ON FEDERAL FINANCIAL RELATIONS

The growth factor outlined in the Intergovernmental Agreement on Federal Financial Relations for each National  SPP is as follows:

Healthcare - the product of:

" 	a health specific cost index (a five year average of the Australian Institute  of Health and
Welfare health price index growth rate);

• 	growth in population  estimates  weighted for hospital utilisation; and

• 	a technology factor (Productivity Commission derived index of technology growth).

Schools (government component) -the product of:

" 	growth in average government  schools recurrent cost; and

" 	growth in full-time equivalent  enrolments  in government schools.

Skills and Workforce Development -the sum of:

• 	85 per cent Wage Cost Index 1 (comprising  safety net wage adjustment  weighted  by 75 per cent and all groups CPI weighted  by 25 per cent); and

• 		15 per cent Wage Cost Index 6 (comprising  safety net wage adjustment  weighted  by 40 per cent and all groups CPI weighted  by 60 per cent).

Disability Services -a rolling five year average of nominal Gross Domestic Product year-on-year growth.   In recognition that the disability  services specific purpose payment  incorporates  funding amounts  for the former Disabilities Assistance  Package (DAP) which already included  a growth rate the DAP component  is excluded from this indexation.

Affordable Housing- Wage Cost Index 1 (comprising  safety net wage adjustment weighted  by 75 per cent and all groups CPI weighted by 25 per cent).

Changes due to National Health Reform Funding

a 	From 1 July 2012, the National  Healthcare  SPP was replaced by National  Health Reform funding.   The Treasury will continue to calculate estimated amounts for the National Healthcare SPP until2019-20 to ensure that:

For 2012.:13 and 2013-14, the Commonwealth will provide National  Health Reform funding equivalent  to the amount that would otherwise have been payable through  the National  Healthcare  SPP (in accordance  with the National Health Reform Agreement); and

National  Health Reform funding provided between 2014-15 and 2019-20  is at least
$16.4 billion more than what would otherwise have been payable through the National
Healthcare  SPP (also in accordance  with the National Health Reform Agreement).

ATTACHMENT B RESIDUAL ADJUSTMENTS REQUIRED AS A RESULT OF THIS DETERMINATION
The following residual adjustments are required as a result of this Determination.  These adjustments will be made in 2012-13 following the signing of the Determination and will be included as an accrual for the 2011-12 financial year.

Table 1: Residual adjustment for the National Healthcare SPP, 2011-12

r 2011-12	Residual adjustment

State 	Payments made in 2011-12	Final outcome fo -------------------------

New South  Wales	$4,137,770,883.61	$4,088,870,973.50	-$48,899,910.11	
Victoria	$3,099,413,744.57	$3,059,703,898.98	-$39,709,845.59	
Queensland	$2,545,427,988.56	$2,505,276,286.59	-$40,151,701.97	
Western Australia	$1,311,719,774.56	$1,305,377,723.48	-$6,342,051.08	
South  Australia	$989,052,525.36	$978,087,805.74	-$10,964,719.62	
Tasmania	$279,571,245.06	$277,619,940.12	-$1,951,304.94	
Australian Capital Territory	$183,591,392.64	$182,991,296.65	-$600,095.99	
Northern  Territory 	 	$151,255,955.78 	$150,203,654.95	-$1,052,300.83
 Total 	$12,697,803,510.13 	$12,548,131,580.01 	-$149,671,930.13

Table  2: Residual adjustment for the National Schools SPP (government schools), 2011-12
 State 	Payments  made in 2011-12     Final outcome for 2011-12 	Residual adjustment 	
New South  Wales	$1,245,220,720.46	$1,245,220,720.46	
Victoria	$876,104,515.30	$876,104,515.30	
Queensland	$759,953,054.23	$759,953,054.23	
Western Australia	$378,437,929.70	$378,437,929.70	
South  Australia	$280,421,878.59	$280,421,878.59	
Tasmania	$99,856,328.08	$99,856,328.08	
Australian Capital Territory	$56,180,889.48	$56,180,889.48	
Northern  Territory	$59,625,143.51	$59,625,143.51	
 Total 	$3,755,800,459.34 	$3,755,800,459.34 	

Table 3: Residual adjustment for the National Skills and Workforce Development SPP,
2011-12

State		Pa ents made in 2011-12	Final outcome for 2011-12		Residual adjustment	
New South  Wales		$448,010,904.74	$447,997,102.67		-$13,802.06	
Victoria		$338,044,663.40	$337,699,610.05		-$345,053.35	
Queensland		$268,787,373.10	$267,684,955.79		-$1,102,417.31	
Western Australia		$138,636,642.89	$139,627,313.95		$990,671.06	
South  Australia		$101,350,259.33	$101,425,592.54		$75,333.21	
Tasmania		$31,415,137.98	$31,561,146.88		$146,008.90	
Australian Capital Territory		$22,824,167.54	$22,994,061.67		$169,894.13	
Northern  Territory		$14,062,857.64	$14,142,223.06		$79,365.42	
Total		$1,363,132,006.61	$1,363,132,006.61			

Table  4: Residual adjustment for the National  Disability SPP, 2011-12
 State 	PaY!!!.ents  made in 2011-12     Final outcome for 2011-12 	Residual  adjustment 	

New South  Wales Victoria Queensland Western Australia South  Australia Tasmania
Australian Capital Territory
Northern  Territory

$396,773,533.61	$396,761,295.33	-$12,238.28
$284,736,243.86	$284,430,285.47	-$305,958.39
$237,270,274.75	$236,292,762.66	-$977,512.09
$110,260,205.29	$111,138,632.12	$878,426.83
$114,063,141.11	$114,129,938.98	$66,797.87
$35,012,161.46	$35,141,627.38	$129,465.92
$17,990,728.03	$18,141,372.95	$150,644.92
$12,581,201.46c 	$,;_1_2,'-6_51..:...,5_7_4. 68 	..;_$7_0"-,3-73 .22•

 Total 	.  $1,208,687,489.58 	$1,208,687,489.58 	

Table 5: Residual adjustment for the National  Affordable Housing SPP, 2011-12 ------
 State 	Payments  made in 2011-12     Final outcome for 2011-12 	Residual adjustment 	

New South Wales Victoria Queensland Western Australia South Australia Tasmania
Australian Capital Territory
Northern Territory

$395,848,806.89
$288,309,820.21
$246,129,587.22
$129,332,919.10
$95,139,894.83
$32,554,561.87
$24,255,746.14
$31,031,238.21

$395,836,225.21
$287,995,276.81
$245,124,646.70
$130,235,994.08
$95,208,567.01
$32,687,660.53
$24,410,618.07
 	$31,103,586.06 	

-$12,581.68
-$314,543.40
-$1,004,940.52
$903,074.98
$68,672.18
$133,098.66
$154,871.93
$72,347.85

 Total 	$1,242,602,574.48 	$1,242,602,574.48 	

Table 6: Total Res dual Adjustment by State and Territory, 20V-1._2

-:------

State	Schools	Skills	Disability	Housing	Subtotal	Healthcare	Total	
New South Wales		-$13,802.06	-$12,238.28	-$12,581.68	-$38,622.02	-$48,899,910.11	-$48,938,532.13	
Victoria	-    -$345,053.35 -$305,958.39	-$314,543.40	-$965,555.14	-$39,709,845.59	-$40,675,400.73	
Queensland 	-  -$1,102,417.31 -$977,512.09 -$1,004,940.52	-$3,084,869.92	-$40,151,701.97	-$43,236,571.89	
Western Australia			$990,671.06	$878,426.83	$903,074.98	$2,772,172.87	-$6,342,051.08	-$3,569,878.21	
South Australia			$75,333.21	$66,797.87	$68,672.18	$210,803.26	-$10,964,719.62	-$10,753,916.36	
Tasmania			$146,008.90	$129,465.92	$133,098.66	$408,573.48	-$1,951,304.94	-$1,542,731.46	
Australian Capital Territory			$169,894.13	$150,644.92	$154,871.93	$475,410.98	-$600,095.99	-$124,685.01	
Northern Territory	 	$79,365.42    $70,373.22 	$72,347.85 	$222,086.49 	-$1,052,300.83 	-$830,214.34
Total 	-  -$149,671,930.13 -$149,671,930.13