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Payments for Specific Purpose 

Payments for specific purposes (PSPs) are grants from the Commonwealth to the States for specific activities, and comprise National Specific Purpose Payments (SPPs), National Health Reform Payments (NHRPs), National Partnership (NP) payments, and other miscellaneous payments.

Distinctions are also made between:

  • PSPs ‘to’ the State, that support specific areas of State responsibility; and 
  • PSPs that are channelled ‘through’ the State, primarily to local governments and private schools (the Commonwealth’s First Home Owners Boost is also included here).

Arrangements for PSPs were substantially reformed from 1 January 2009, through the Intergovernmental Agreement on Federal Financial Relations signed by the Council of Australian Governments (COAG).

There are four National SPPs for:

  • Schools; 
  • Skills and Workforce Development; 
  • Affordable Housing; and 
  • Disability Services.

These ongoing payments grow in line with agreed indexation arrangements. No conditions are attached other than the requirement to spend the payments in the relevant sector.

The NHRPs are ongoing and must be spent in accordance with the National Health Reform Agreement endorsed by COAG on 2 August 2011. They will see the Commonwealth and States share equally the ‘efficient’ cost of growth in hospital service costs. Their first year of payment is 2012 13 (replacing the previous Health NSPP).

There are many NP payments, provided under a range of NP Agreements to:

  • support the delivery of specified outputs or projects; 
  • facilitate reforms; or 
  • reward those jurisdictions that deliver on nationally significant reforms.

Entitlement to reward payments is contingent on an independent assessment by the COAG Reform Council of whether agreed performance benchmarks have been met.

The Intergovernmental Agreement on Federal Financial Relations seeks to reduce Commonwealth prescriptions in favour of increased flexibility for States to allocate funding so as to achieve the best overall community outcomes, with increased public accountability for the outcomes achieved.

However, deviation of NPs from the Intergovernmental Agreement principles in practice is a source of ongoing concern and reform effort. Among other things, the time limited nature of NPs creates significant budgetary risks for the States, particularly where the NPs inappropriately fund core ongoing service delivery.

Funding under PSPs

Western Australia’s estimated PSP funding for 2012-13 is shown in the following table.

Payments for Specific Purposes
Western Australia
 

2011-12
Budget
Estimate
$m

Share of
total PSPs
%
Payments ‘To’ the State    
National Specific Purpose Payments    
Schools

405

8
Skills and Workforce Development

143

3
Disability Services

123

2
Affordable Housing

132

3
     
Health Reform Funding    
Health Reform Payments

1,402

27
     
Other Payments ‘To’ the State    
Health

467

9
Housing 

153

3
Transport

675

13
Other (a)

490

10
     
Payments ‘Through’ the State    
Non-government Schools Assistance

872

17
Local Government Financial Assistance Grants

161

3
Local Government Roads

105

2
Other

25

-
     
Total Payments for Specific Purposes

5,152

100
(a) Comprises a large number of National Patnerships and other payments.

Note: Columns may not add due to rounding.