Garnaut Fitzgerald Review of Commonwealth-State Funding

Chapter 5: Specific Purpose Payments and Overall Payments to the States
Most SPP arrangements involve the Commonwealth contributing funding to what
effectively becomes a joint program. SPPs typically have conditions attached to their
use and are often considerably smaller than the amounts the States spend on the
relevant services. SPPs finance approximately 35 per cent of States’ expenditure on
health and 27 per cent of States’ expenditure on education. 3
5.2 Scope and make-up of specific
purpose payments
There are currently around 120 individual SPPs. In addition, many contain sub-programs
that effectively operate as SPPs in their own right, with terms and conditions separate
from the main SPP.
SPPs are distributed in two ways. Most SPP funding (73 per cent or $15.8 billion in
2002–03) is to the States. States administer SPPs ‘to’ the States in areas of direct State
responsibility, but pass on SPPs ‘through’ the States to the final recipients (primarily
local governments and private schools). The Commonwealth provides some funds
directly to local governments through SPPs.
Most Commonwealth SPPs cover the annual operating costs of particular programs
(known as recurrent funding – 85 per cent in 2001–02). The remainder cover
construction and maintenance of fixed assets (capital funding). A few SPPs have
elements of both recurrent and capital funding (e.g. the Government Schools SPP).
While SPPs cover almost all government functions, most funding is concentrated in
health, education, vocational training, local government and roads. SPPs for health and
education comprise about 71 per cent of total SPP funding, although they make up only
a minority of the number of programs (18 per cent). The largest number of SPPs and the
greatest amount of SPP funding are for the provision of health services (Table 5.1).
3
Commonwealth payments to higher education institutions are made directly, and not part of SPPs ‘to’ or ‘through’
the States.
FINAL REPORT [61]