Specific Purpose Payments (SPPs)
SPPs are grants from the Commonwealth to the States for specified activities that come with conditions attached to their use that are usually set out in individual agreements.
In 2007‑08, Western Australia expects to receive around:
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$2.3 billion in SPPs ‘to’ the State to support specific areas of State responsibility;
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$0.8 billion in SPPs that are on-passed ‘through’ the State, primarily to local governments and private schools; and
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$0.7 billion in North West Shelf royalty payments (which are reported as SPPs because of the Commonwealth’s constitutional jurisdiction over offshore areas).
Although there are nearly 100 separate SPPs, the majority of SPP funding is concentrated in the core areas of health, education and training and roads. These SPPs to Western Australia are expected to account for 79 per cent of all SPPs ‘to’ the State in 2007‑08.
The distribution of individual SPPs between the States is based on a variety of arrangements, including population shares, historical shares, Commonwealth discretionary allocations and various formulae that attempt to reflect relative costs or demand. In 2007-08, Western Australia expects to receive 10.2 per cent of total Commonwealth SPPs ‘to’ the States (compared with Western Australia’s 10.1 per cent share of the national population).
SPPs have become a substantially larger component of Commonwealth grants (and therefore of total State revenues) over time, as shown in the chart below. To allow a consistent comparison over time, an adjusted series is shown which removes the impact of the replacement of State taxes by Commonwealth grants. However, there are concerns that the Commonwealth will not provide adequate growth in SPPs in the future.
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SPPs as a Proportion of Total Payments to the States
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Note: The “adjusted” data from 1997‑98 to 2006‑07 enable comparison on a consistent basis with data prior to the introduction of Commonwealth revenue replacement payments for State business franchise fees in 1997‑98 and the GST funding arrangements in 2000‑01.
Source: Commonwealth's Final Budget Outcome and Commonwealth Budget Papers.
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