The State Grants Commission is required to apply the National Principles issued under the Local Government (Financial Assistance) Act 1995 when making its recommendations for the distribution of the Financial Assistance Grant funding. There are six National Principles that apply to the distribution of the Base Grant funds and one National Principle that applies to the distribution of the Road Grant funds. The National Principles are detailed in Attachment 1 of the State Grants Commission Financial Assistance Distribution Methodology Paper.
The overarching principle the Commission is required to apply for determining the distribution of the FAG funding among councils is full horizontal fiscal equalisation (HFE). HFE is a reference to the allocation of funds in a manner that:
- ensures that each local governing body in a State is able to function, by reasonable effort, at a standard not lower than the average standard of other local governing bodies in the State; and
- takes account of differences in the expenditure required to be incurred by local governing bodies in the performance of their functions and in their capacity to raise revenue.
The Commission must also ensure that no less than 30 per cent of the general purpose grant funding is distributed to all councils on a per capita basis.
In applying the National Principles, the Commission has developed its own State Principles that it applies to its decision making and recommendations. These are detailed in Attachment 2 of the State Grants Commission Financial Assistance Distribution Methodology Paper.
Full details of the Commission's current methodology can be found in the State Grants Commission Financial Assistance Distribution Methodology paper on the Publications page.
The Commission adopts a triennial review process whereby major method changes are incorporated into its assessments only every three years, with data updates and minor methodological revisions incorporated each year.
The current triennium spans the years 2016-17 to 2018-19. The 2016-17 distribution is the first year of the 2018-19 Triennial Review. This means that for determining the 2016-17 allocation of funds, the Commission has only incorporated data updates in its 2016-17 models. The next year when major methodological changes are expected to be incorporated is 2018-19.
The Commission has detailed the aspects of its methodology that it expects to review over the triennium in its Information Paper IP16-06 - 2018-19 Triennium Work Plan.