Cost shifting is one of the most significant problems faced by councils in NSW. Cost shifting forces Council to assume responsibility for more infrastructure and services, without additional corresponding revenue.
Technically cost shifting is the term used to describe when the state or federal governments transfer, or 'shift', responsibility for providing a certain service, concession, asset or regulatory function to councils.
Generally, this 'shift' occurs without providing local Council's with an opportunity to engage on the decision and with limited financial support.
The Emergency Services Levy (ESL) is a recent example of cost shifting with a huge impact on your Council. This is a cost imposed on councils and the insurance industry to fund the emergency services budget in NSW. In 2023 the NSW Government stopped the previous practice of funding the council component of the annual increase, which had been done since 2019. Kempsey Council's ESL this financial year is $800,000, which is $369,000 more than the previous year.
The NSW Government funds just 55% of pensioner rate rebates, with councils funding the remaining 45%. This equates to $600,000 of this year's budget. All other state and territory governments in Australia fund 100% of pensioner concessions.
The government also charges Council. A Waste Levy is charged to operators of waste facilities, including your Council, to act as an incentive to reduce landfill. Landfill in regional areas is charged a flat levy of $84 per tonne. Only around a third of the levy is spent on waste education and environmental programs. That levy is a cost of $1.7 million to Kempsey Council this financial year.
Since the 1970's the Federal Government has recognised the growing responsibilities faced by local Councils. A funding arrangement has been in place for more than 40 years to let your taxes help with this burden. However the percentage of personal income tax revenue transferred to local government has slipped from 2% in 1980 to a low of just 0.55%.
The result of cost-shifting is that rates must be spread further.
