Cost shifting & government agreements

We monitor data on the financial viability of local government which is used when campaigning for improved funding for the sector.

Our analysis has indicated that there are a small number of councils that experience financial difficulty due to cost pressures.

Cost shifting

Other levels of government seek to shift service responsibility onto local government without a commensurate level of funding support. This puts an enormous strain on local government finances.

To ensure long-term sustainability for local government there must be a more equitable distribution of taxation among all levels of government through accessing improved funding arrangements.

The Australian Government’s inquiry into local government and cost shifting recognised cost shifting by the federal and state governments onto local government.

The inquiry proposed 18 recommendations aimed at clarifying roles and responsibilities of the different levels of government and addressing the issue of cost shifting.

National intergovernmental agreement

As a result of the inquiry, a national intergovernmental agreement on cost shifting was created by the Australian Government. This agreement commits all three levels of government to:

  • achieving productive and open relations
  • providing communities with services in an efficient and effective manner
  • considering the financial impact to local councils of service responsibility and delivery transfers.

It also sets out a framework for future service agreements between different levels of government where program or service responsibilities are shared.

Although the adoption of the agreement is an important first step to redressing funding arrangements to local government, we will continue to campaign for increased funding for specific programs where councils are funding shortfalls as a result of previous cost shifting.

The agreement was signed in 2006.

Victorian state-local government agreement

The Victorian state-local government agreement gives effect in Victoria to the national intergovernmental agreement on cost shifting.

The agreement strengthens state – local government relations by formally committing to principles and guidelines that give greater clarity to roles, responsibilities and financial arrangements. Additional guidelines assist state and local governments to negotiate fair funding agreements and ensure effective communication and consultation between parties.