Carrathool Council statement on cost shifting

"Cost shifting is when state or federal governments transfer, or ‘shift’ responsibility for providing a certain service, concession, asset or regulatory function to councils. The link below details a report prepared for Local Government NSW by consulting firm Morrison Low which provides information on how local government ratepayers are funding more than a billion dollars of state government obligations.

On average, the research determined that cost shifting represents an additional cost of $460.67 for every ratepayer across the state. With councils having to fund this ongoing subsidy for the state government every year, it means our communities get less or go without. They go without better roads, they go without better parks, they go without important community services that only councils provide and they, and the ratepayers, are effectively paying hidden taxes to other levels of government. The report further indicates that rural councils such as ours have seen a greater impact with rural councils experiencing cost shifting amounting to $590.80 for every ratepayer.

Primary examples of cost shifting impacting our shire include:

• emergency service contributions – through the emergency services levy, councils are required to fund 11.7% of expenditure
• rates exemptions for government owned property
• inadequate or reduced funding for services required to be delivered by Council – for example libraries (State Government originally funded 50% of costs but this has reduced over time to be approximately 8% in 2021/22)
• pensioner rebates required to be provided by Council but with only 55% subsidised by the State Government leaving ratepayers to subsidise the remaining 45%
• provision of services usually provided by other levels of government is particularly an issue for rural councils. Examples include aged care services and medical services.

The table below provides actual data for the financial year 2021/22 which demonstrates a minimum cost to the ratepayers of Carrathool Shire of $1,146,470 as a consequence of cost shifting by other levels of government. Our local government area has 2,634 rates assessments. Of these assessments, 700 are exempt from paying rates leaving the other 1,934 to absorb the impacts of cost shifting. This equates to an actual cost of approximately $592.80 per ratepayer. There are additional expenditures such as those for crown land reserve management where it is difficult to reliably estimate a cost to Council.

Carrathool Shire Council takes our responsibility to ensure sustainable financial management seriously and cost shifting by the state government seriously undermines our proactive approach to ensure our long-term financial viability while still delivering the infrastructure, programs and services our community expects and deserves.

Annual Cost Shifting Report 21-22