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June 21, 2021

Cost shifting irks councils

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The Local Government Association and the Shires Associations of NSW (LGSA) have jointly called for an end to cost shifting on to NSW councils after their annual combined survey found councils were out of pocket nearly $500 million in the 2010/11 financial year due to cost shifting by the state and federal governments.

Cost shifting refers to the practice of one tier of government handing responsibilities to another tier without providing funding to cover the cost.

President of the Shires Association of NSW, Cr Ray Donald, said $499 million worth of responsibilities and functions of the state and federal governments had been shifted to councils. This equates to 5.72 per cent of the total income of local government in NSW, before capital amounts.

‘Findings of the LGSA’s cost-shifting survey for 2010/11 are consistent with results of the last five surveys carried out over the previous five financial years, highlighting the continual moves by the state and federal governments to palm their responsibilities on to local government without the corresponding funding,’ said Cr Donald.

‘The LGSA has asked the same 23 questions in the past five surveys, with an additional two questions added to the 2009/10 survey and again in collecting the 2010/11 data.

‘If we include those two additional questions, which relate to revenue-raising restrictions on council-managed Crown lands and the shortfall of cost recovery as a result of fee regulation when assessing development applications, cost shifting is estimated at 6.37 per cent of local government’s total income before capital amounts – or $555 million.’

‘This survey confirms that cost shifting continues to be a burden on the financial situation of NSW councils and is impeding local government’s ability to deliver services and maintain infrastructure.’

President of the Local Government Association of NSW, Cr Keith Rhoades AFSM, said 86 councils participated in the survey, which was conducted between May and November 2012, clearly indicating that cost shifting is a significant issue impacting on their operations.

‘Some of the major cost-shifting items identified in the survey include mandatory contributions to Fire and Rescue NSW, NSW Rural Fire Services and NSW State Emergency Service, inadequate funding for public libraries and the NSW government’s failure to reimburse councils for mandatory pensioner rebates for rates,’ said Cr Rhoades.

‘From controlling noxious weeds and managing contaminated land to enforcing the Companion Animals Act NSW (1998) – councils are constantly carrying out activities and regulatory functions for the state and federal governments without sufficient financial resources.

‘This is on top of the financial restrictions placed on the 152 councils across the state, courtesy of the NSW government’s rate-pegging system.

‘It’s not surprising the 2010/11 cost-shifting amount of $499 million is equal to the estimated annual infrastructure renewal gap of $500 million per annum, as found in the Percy Allan Report.

‘While the NSW government says that councils are often best placed to provide these cost-shifted services to communities, councils do not have the means to keep taking on new jobs without adequate resourcing.’


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