1 Victoria Grants Commission 2015 Rural Councils Victoria: Mayor, Councillor & CEO Forum 14 May 2015 Financial Assistance Grants for Rural Councils

2 The Commission Commission members: -John Watson (Chair) -Michael Ulbrick -Julie Eisenbise The Commission allocates Commonwealth financial assistance grants to local government (comprising general purpose grants and local roads grants). Funding is allocated between councils on the basis of agreed national principles, the most important of which is consideration of each council’s relative needs to receive funding. The funding is not tied to specific purposes.

3 Indexation “Pause” The national funding pool is usually indexed annually in line with population growth and inflation forecasts. In the May 2014 Budget, the Commonwealth Government announced that indexation would be “paused” for and the following two years. The Commission estimates that this will reduce financial assistance grants to Victorian councils by $200 million over the four years to If indexation resumes as planned in , it will be from a base that is about $64m below what would otherwise be the case – and this gap will continue to grow.

4 Growth in Financial Assistance Grants $64.1m $87.7m

Estimated Allocations - Victoria General Purpose Grants$ M (+0.2%) Local Roads Grants$ M (+0.0%) Total Victorian Allocation$ M

6 Data for financial year. Financial Assistance Grants Financial assistance grants account for more than 10% of the recurrent revenue base of most rural councils. A number of small rural councils receive 20% or more of their revenue from these grants.

7 Variable Capping As a response to the indexation “pause” (and the timing of the announcement), the Commission adopted a variable capping arrangement for the allocations to minimise the impact on the Victorian councils most reliant on financial assistance grants General Purpose Grants Local Roads Grants Max. Increase Max. Decrease Max. Increase Max. Decrease Min. Grant Councils N.A. N.A. 0.0% -2.0% Metro/Regional Centres +3.0% -2.0% +3.0% -2.0% Rural Councils +3.0% -1.0% +3.0% -1.0% Capping parameters for grants are still being finalised

8 Grants to Rural Councils The proportion of funding directed to rural councils is significantly greater than those councils’ share of Victoria’s population. Rural councils comprise 14.4% of Victoria’s population but receive 44.2% of the financial assistance grants pool.

9 Grants to Rural Councils This outcome reflects the Commission’s assessment that the relative needs of rural councils are higher than those of other councils – and that those relative needs are increasing over time. Changes to the allocation formula since have resulted in an ongoing transfer of funding from urban to rural councils. These changes include: -altering the local roads model to give greater weighting to rural roads; -introducing ‘minimum’ or ‘base’ populations for some functional areas; and -increasing the use of factors such as population dispersion.

10 General Purpose Grants grant outcomes: On a per capita basis, general purpose grants to regional and rural councils are higher than the State average ($68.60)

11 Trends – Total Grants Per Capita Rural councils receive higher per capita grants than councils in other groups, and this trend has been accelerating over time.

12 Movement in Grant Outcomes … in aggregate, rural councils received approximately $123m more in than they did in Of that, approximately $57m is due to changes in the Commission’s methodology over that period (i.e. a shift in funds from urban councils to rural councils).