The Australian Local Government Association, of which we are the member representing Victoria, is leading a campaign for local government to be recognised in the Australian Constitution.
Recent decisions in the High Court have cast doubt on the Federal Government's ability to provide direct funding to councils. The Constitution does not mention local government, nor does it provide for the Federal Government to fund councils directly.
Our State Council passed a resolution in May 2011 that a referendum be held at the next federal election to amend the Australian constitution to expressly recognise local government.
In May 2012, this position was further reaffirmed when councils resolved at State Council to have the MAV issue a voluntary levy on members to contribute to the national campaign for the constitutional recognition.
The need for change
The 2009 High Court case of Pape v Commissioner of Taxation found that the Australian Government can only spend money where it has a specific power under the Constitution. Currently, it does not have the power to provide direct funding to local government.
This decision casts doubt over important programs such as Roads to Recovery, whereby the Australian Government provides direct funding to councils to fix local roads. In Victoria this amount is $365 million over four years.
Funding from the Australian Government occurs in one of two ways:
- direct payments to councils
- specific purpose grants which are distributed to councils through state governments
The constitutional validity of the Australian Government funding councils through specific purpose grants is irrefutable.
Despite making direct payments to local government for many years, the Australian Government may lack the constitutional power to do so. In the event of a successful constitutional challenge, all subsequent funding to councils would have to be processed as specific purpose payments.
It is also possible, but improbable, that councils will be required to repay funds previously received as direct payments.
The preferred wording, recommended by the Expert Panel and supported by local government is for financial recognition through an amendment to section 96 of the Australian Consitutional so it would read:
"Parliament may grant financial assistance to any state or local government body formed by or under a law of a state or territory."
Support for constitutional recognition
2010: The Australian Labor Party committed, as part of it's agreement with the Greens and Independents to form Government, to hold a referendum to recognise local government in the Constitution at the next Federal election.
2011: Australian Government appoints independent Expert Panel on Constitutional Recognition of Local Government.
2012: Following extensive public consultation, Expert Panel's final report released. Recommends the Government should financially recognise local government. Government appoints a Joint Select Committee on Constitutional Recognition of Local Government.
2013: Joint Select Committee recommends that a referendum on the financial recognition of local government take place at the September Federal election.