The fiscal equalisation model: Options for ATSIC's future funding policy and practice

Abstract

The Aboriginal and Torres Strait Islander Commission (ATSIC) currently lacks integrated policy guidelines for its distribution of funds at regional, state and national levels. Smith (1993) examined ATSIC's existing financial powers and budgetary processes and argued that its financial objectives and the developing role of regional councils are hindered by the lack of funding policy and by an overly complex, functionally-based program structure. It was suggested that ATSIC needed a funding model based on distributive equity, where program expenditure would be allocated on the basis of relative need.

The present discussion paper develops the analysis of ATSIC's current funding role, suggesting that future funding policy and practice should be focused at the regional council level and equitably account for relative levels of Indigenous socioeconomic disadvantage, as well as between Indigenous peoples and the wider Australian population.

ATSIC is currently reassessing its methods for distributing financial resources to Indigenous organisations and communities and considering the relevance of horizontal fiscal equalisation. This paper examines the principle and methods of fiscal equalisation used by the Commonwealth Grants Commission and critically investigates its suitability as a future basis for ATSIC's allocation of funds to regional councils. While the paper is exploratory, it suggests that the principle of equalisation provides a potentially valuable distributive framework for ATSIC, but one which would require substantial modification. In conclusion, a number of issues associated with the use of equalisation are considered, including data management; implications for ATSIC's program structure; for government funding more broadly; and for ATSIC's potential co-ordinating role at the intergovernmental and interagency level. Show more