Victorian state and local governments split over referendum

By Paul Hemsley and Julian Bajkowski

Victorian councils have slammed the state’s local government minister, Jeanette Powell, over claims that a referendum on financial recognition of local government in the Constitution could result in an erosion of state government power as deliberate scaremongering.

In a broadside aimed squarely at his state government, Municipal Association of Victoria (MAV) president Bill McArthur said that it was “staggering to see such a blatant attempt to mislead the people of Victoria and place future funding at risk” at a time when the two tiers of governments should be working together to provide a solid economic base.

The public row between councils and the Victorian government over the looming referendum and the future flow of money from Canberra has underscored deepening tensions in Coalition between its state and federal wings over whether local projects can and ought be directly funded from federal coffers.

Australia’s peak local government body, the Australian Local Government Association (ALGA) had hoped that states like Victoria would ‘run dead’ on the issue of financial recognition for councils rather than publicly opposing it.

That now seems unlikely and has quickly provoked councils into warning constituents that they may ultimately pay for the obstruction of money.

“Surely it is in the Victorian Government’s best interests to work with – not against – local government to provide financial certainty that places less pressure on ratepayers and the State Budget,” Mr McArthur said, adding that Ms Powell had shown a lack of respect for the sector she is supposed to represent.

The lead-up to the 14th September referendum, which will ask the Australian public whether it believes local government should be recognised under a revision of Section 96 of the Constitution, is likely to prompt more clashes because of the short amount of time to educate and persuade the public on the issue.

Ms Powell claimed that the Victorian government could not support a change in the Commonwealth Constitution and because of a strong possibility that councils would be left “financially disadvantaged.” This is because the of state’s reformed and relatively better performing local government sector could lose money to subsidise “poorly performing councils in other states”.

She argued that there is no indication that Constitutional recognition will reverse the trend that the Commonwealth’s contribution to local government through Financial Assistance Grants (FAG) fell from 1.02 per cent of total Commonwealth taxation revenue in 1996-97 to about 0.65 per cent in 2011-12.

Her warning also entailed “unexpected repercussions” from Constitutional recognition because such changes could “blur the roles and responsibilities between the three tiers of government, leading to poorer outcomes” for communities.

She illustrated that these potential consequences resulting from Constitutional recognition would be a “tragedy” if state efforts to fix Brimbank City Council’s governance failings were “stymied” in the courts by lawyers arguing that the Commonwealth now had jurisdiction.

Brimbank City Council was put into administration in 2009 until 2012 after the state government found its internal management was “dysfunctional” in a 2009 report from the Department of Local Government.

Mr McArthur was not letting that salvo go unreturned.

“Minister Powell’s assertion that constitutional recognition may result in Victorian councils receiving less federal funding holds no weight. Her argument just doesn’t stack up,” Mr McArthur said.

Both the Victorian government and the Western Australian government have previously expressed their opposition to financial recognition of councils in the Constitution because of their suspicions that it would allow the federal government to bypass state government to fund council projects, which is funding that is usually managed by the states.

The New South Wales government was previously tight-lipped on the issue until Premier Barry O’Farrell warned in January 2013 told Government News that the federal government could potentially abuse any new powers to directly fund local government.

Other local government peak bodies aren’t giving up the fight for Constitional recognition as the Western Australian Local Government Association (WALGA) has been at odds with the Western Australian government after Premier Colin Barnett submission to the Joint Select Committee on Constitutional Recognition of Local Government that it opposed the idea because “local government exists under state legislation”.

WALGA President Troy Pickard said recognising local government in the Constitution has nothing to do with removing state’s rights or the power of direction of local government by the respective state governments.

Mr Pickard asserted that securing the revenue stream from federal to local government should be expected to help relieve financial demands on state budgets.

“To think differently is an unfounded fear,” he said.

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