Local government funding and constitutional recognition

In December 2011, the Expert Panel on the Constitutional Recognition of Local Government recommended that a referendum be held to amend s 96 of the Commonwealth Constitution to allow the Commonwealth Parliament to make grants of financial assistance to ‘any local government body formed by State or Territory Legislation on such terms and conditions as the Parliament sees fit’. This recommendation was made subject to conditions, one of which was that the ‘Commonwealth negotiate with the States to achieve their support for the financial recognition option’.This paper provides the information and analysis that will be needed to underpin those negotiations and ensure that they are conducted upon an informed basis. Chapter II explains the current status of local government under the Commonwealth Constitution. It is necessary to understand this before an assessment can be made of how the Constitution ought to be changed.As the debate about the ‘financial recognition’ of local government in the Commonwealth Constitution largely concerns the method of funding of local government, the next two chapters provide vital factual information to support the debate. Chapter III provides a detailed history of Commonwealth funding of local government, from specific funding for roads, to general purpose grants, tax-sharing and financial assistance grants. It highlights the various problems with different methods of funding and why they were changed. It also notes the many reviews of local government funding and proposals that have been made for change. Chapter III concludes with an analysis of the High Court’s decision in the Pape and Williams cases and their potential effect upon the direct funding of local government, as well as a discussion of the current funding of local government and an assessment of the level of financial autonomy of local government.Chapter IV provides contrasting material which looks at how local government is funded in other federations. It includes an assessment of the benefits and problems arising from different forms of funding, including own-source revenue, transfers and tax-sharing. It concludes with an assessment of how Australian local government differs from local government in most other federations, but continues to consider what ideas might still usefully be borrowed from other countries.Chapter V provides an analysis of the 1974 and 1988 failed referenda on the constitutional recognition of local government. In doing so, it shows the types of arguments that are likely to be re-run in any future referendum. It also provides a detailed analysis of how local government is recognised in State Constitutions.Chapter VI addresses the current campaign for the constitutional recognition of local government. In particular, it provides a critique of the Final Report of the Expert Panel on the Constitutional Recognition of Local Government. It assesses submissions made to the Panel as well as the Panel’s findings. It concludes by providing a more in depth analysis of the potential effects of the proposed amendment upon the federal system as well as the financial implications of such a referendum