2012-13 Government Mid-year Financial Projections Statement

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2012-13 Government Mid-year Financial Projections Statementredeployment of staff from the OSS to line agencies.This mid-year review includes additional funding of $30 million over the forwardestimates period to assist agencies with the decommissioning process.Funding for SchoolsIn February 2012, the Commonwealth Government released the final report of the Reviewof Funding for Schooling (also known as the ‘Gonski review’). The Commonwealthintroduced legislation regarding Australian school funding in November 2012, but thelegislation did not contain any financial implications or a funding model. Therefore, thefuture impact on both government and non-government primary and secondary schoolfunding, and on State finances more broadly, cannot be quantified at this time.As a result of uncertainty with Commonwealth funding relationships, it is also notpossible to accurately forecast the full financial impact of the transition of Year 7 studentsto secondary settings in Western Australian government schools in 2015. Some recurrentexpenditure that is required prior to 2015, such as retraining of primary school teachers,was approved in the 2012-13 Budget process, but other recurrent expenses, such asteacher costs, were deferred to the 2014-15 Budget process when greater certainty aboutthe funding model will be available. The 2012-13 Budget included total funding(both recurrent and capital) of $341 million to progress implementation of this keyGovernment initiative.Student Enrolment GrowthStudent enrolment growth in government schools of more than 3% in 2012 wassignificant, compared to total growth of 3.8% over the five years from 2007 to 2011,with much of the growth driven by increased international and interstate migration.Funding for additional enrolment growth in 2013 has been provided in this mid-yearreview, however if a repeat of 2012’s significant growth occurs, funding will need to berevisited during the 2013-14 Budget process once the actual Semester 1 enrolments areknown.Skills ReformUnder the National Partnership Agreement on Skills Reform signed by theCommonwealth and States on 13 April 2012, the State has committed to implementing(in 2014) an entitlement to a government subsidised training place to a minimum of aperson’s first Certificate III qualification (subject to State-based criteria). The entitlementwould be a student-centred and demand-driven approach to allocating skills trainingfunding. There is significant uncertainty over the demand for training under anentitlement model, which could put pressure on the State’s finances over the forwardestimates. The design of the entitlement model may need to incorporate measures tomanage demand, including adjusting the scope of the entitlement and the level ofcontribution that students make to the cost of training.38
Financial ProjectionsGovernment Trading EnterprisesElectricity PricingThe Government decides electricity tariffs for the upcoming budget year as part of theannual budget process with assumptions also made regarding prices across the forwardestimates. Accordingly, the assumptions made for electricity tariffs in this mid-yearreview may differ to those subsequently decided by the Government. Any suchdifferences will have an impact on the operating subsidy paid to Synergy and HorizonPower, and will also impact the general government operating balance and total publicsector net debt.Western Power – Economic Regulation Authority Further Final DecisionThe Economic Regulation Authority (ERA) released its final decision onWestern Power’s Access Arrangement in September 2012. The non-discretionaryfinancial impacts of the Final Decision (totalling $451 million in net debt terms to30 June 2016) have been incorporated in this mid-year review, but the incrementalimpacts of the ERA’s Further Final Decision have not been reflected due to the delayeddelivery of the decision by the ERA and the time required to undertake robust modelling.It is anticipated that the financial impacts of the Further Final Decision will be included inthe Pre-election Financial Projections Statement. These impacts are likely to bedetrimental to the general government operating balance, with preliminary assessmentssuggesting these could be in the order of $30 million per year.Additional Capital Expenditure for Western PowerIn its decision on Western Power's Access Arrangement, the ERA determined as efficientan additional $790 million of asset investment above currently budgeted levels over2012-13 to 2015-16. This additional capital expenditure is not reflected in this mid-yearreview, as Western Power is required to submit detailed business cases for additionalcapital expenditure for consideration by the Government during 2013-14 and beyond.Horizon Power Generation CostsHorizon Power will be undertaking a procurement process for electricity generation in thePilbara in 2012-13 and 2013-14. The outcome of this process may result in highergeneration costs than currently budgeted. Additional short-term generation will also berequired to meet demand ahead of the new generation being commissioned.This short-term generation is likely to be at a higher price than currently budgeted andwill be considered during the 2013-14 Budget.Horizon Power Gas CostsHorizon Power’s current gas supply arrangements are estimated to expire towards the endof the forward estimates. Horizon Power will need to source gas from the market and thisis likely to be at a higher cost than currently budgeted. However, the volume of gasrequired by Horizon Power is uncertain at this time.39
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2012-13 Government Mid-year Financial Projections Statement

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