Australian federalism in the age of Gonski

This monthly blog post may make sense to people who have been living in Australia for the past seven years – or maybe not.

The tale below relates to the tension of federal-state arrangements in Australia. This comes about from a power imbalance that exists between the Commonwealth government and the eight state and territory governments. The Australian Commonwealth government collects most of the taxes and then distributes much of the money back to states and territories for their spending on health, education and other responsibilities.

This sounds like an efficient arrangement in theory, except the Commonwealth Government can unilaterally attach whatever strings it likes to large swathes of taxpayer money. Theoretically, it can withhold some or all financial assistance from states or territories for whatever reasons it sees fit – subject to public opinion and potential election impacts. This puts the states and territories at the mercy of whatever political whims and fads prevail.

Things start to get even murkier because the national government is always of one political colour or the other and each of the states and territories cycles through ‘friend or foe’ according to their electoral cycle. The political map of Australian governments is a mix of red and blue but the balance shifts on a regular basis. Add to this the federal Senate, elected cross-benchers and machinations that occur between the upper and lower houses at both the federal and (in some cases) state level, and some of the odd outcomes you hear about in the news media start to ‘make sense’.

This is never so clear as in the education sector, in what has become known throughout Australia as ‘Gonski’ . The term has been attached to a myriad of concepts, after eminent businessman Mr David Gonski chaired a 2010-11 Australian Government Review of Funding for Schooling. Though self-admittedly not the most qualified person for such an undertaking, Mr Gonski  and his panel nevertheless threw themselves into the task of documenting factors that impact on socio-educational disadvantage and approving a conceptual model developed by consultants for how one might create a funding model to broadly equate to the disadvantage factors. This subsequently turned into a Frankenstein’s monster of political concessions, sectoral lobbying and sound-bites that continues to this day.

On 23 June 2017, the most recent chapter was written in the Gonski saga with the passing at approximately 2am in the morning of the Australian Education Amendment Act 2017. Among the many complex clauses and freaky-looking funding formulae in the Australian Education Act 2013 is now a new requirement for states and territories to maintain and grow their education budgets in accordance with rates specified in the federal legislation or determined by the federal Education Minister, as well as implementing as-yet unspecified education policy reforms or face as-yet unspecified financial penalties. Crikey!

So how, might you ask, does one government have the power to legally force another government to set its portfolio budget – not just next year, but forever (or until the legislation is changed)? Isn’t that a decision that State voters elect their State politicians to make? Isn’t it unconstitutional!? Apparently not.

The relevant clause in the Australian Constitution is Chapter IV Finance and Trade, section 96 on financial assistance to States. This simply says that ‘… Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.’ In other words, thanks to the way Australia’s tax and expenditure arrangements have evolved over time, s. 96 is basically the other golden rule: whoever has the gold makes the rules.