Despite the best efforts of Queensland treasurer Curtis Pitt to hose down hysterical predictions in his budget delivery speech yesterday afternoon, subsequent media reports had him “raiding public servant long-service leave” and putting defined benefit superannuation in jeopardy within the hour.
Pitt explained his decisions were based on solid advice from financial experts both inside and outside government. Everyone’s super is safe and so are the well-earned breaks being planned by career bureaucrats, according to the treasurer.
“Long service leave entitlements are guaranteed by legislation, and will be paid when claimed,” the treasurer confirmed, in case anyone believed the pre-budget scaremongering. On superannuation, he said: “No money is taken out. Nothing is being raided.”
What the rearrangement of the government’s finances to pay down its debts does involve, however, is switching the funding arrangements for long service leave to “as required” instead of holding the funds in advance, bringing the sunshine state into line with all other Australian governments.
“Queensland is the only Australian jurisdiction to fund long service leave in this manner,” said Pitt, arguing it was not appropriate to quarantine the funds at the same time as servicing “significant levels” of debt.
“Importantly, there will be no change for employees, who will not experience any difference in the way their long service leave is paid.”
The debt reduction plan also involves a five-year freeze on payments into Queensland’s legacy defined benefit super scheme, freeing up $2 billion to pay back the state’s creditors. The accumulation scheme to which most current public servants belong remains unchanged.
“The scheme will remain 100% fully funded at all times,” said Pitt, pointing out that Queensland is also the only Australian jurisdiction “to fully fund its defined benefit superannuation liabilities” and adding that the measure was an election commitment based on advice from state actuary Wayne Cannon. He said Cannon had provided written advice that the scheme would remain fully funded.
“Recent valuations by the state actuary indicate the defined benefit scheme currently has a funding surplus of more than $10 billion,” explained the treasurer. “On the more conservative accounting basis, the scheme currently has a surplus in the range of $2 billion to $2.5 billion.”
Valuing good advice
Pitt’s plan to get Queensland back in the black was informed by a review of the state’s finances undertaken by Treasury. The review recommended reducing the government’s debt-to-revenue ratio from 87% down to below 80% over the next decade. Pitt says his budget will get them there even quicker, to “around 70%” in the four-year forward estimates period.
He also praised the abilities of his departmental staff in the midst of an obvious swipe at his predecessor.
“We saw no need to employ highly paid external people, certainly not a former federal treasurer. We had confidence in the independent officers of Treasury for such a task.”
The third measure to get the debt down involves setting in motion a plan to merge three out of five state-owned electricity network corporations.
Pitt is claiming a $962 million net operating surplus for 2014-15, estimated to grow to a $1.2 billion surplus for 2015-16 and over $2 billion in the following two years.
The government will not require public service leaders to reduce headcounts at all and expects to have $2.31 billion in funding, including an extra $1.125 billion through a “whole-of-government reprioritisation” to cover $1.975 billion worth of commitments over the next four years. According to the budget papers:
“Achieving these allocations will be the responsibility of each Minister, and will be done in a manner consistent with the Government’s commitment to public sector job security. There will be no forced redundancies or voluntary redundancy programs in response to reprioritisation measures.”
It is expected that the public service will grow by about 3000 full-time equivalents this financial year to 202,787 with 80% of the growth in health and education.
“Public sector renewal programs” have been scaled back to save $6 million over the four years, according to the budget papers, but will still receive $13.1 million over three years, including $4.2 million redirected to a new program called “First Project (Community Insights)” within the Public Service Commission:
“The project is designed to improve services across the public sector. The project team will work with the public and government departments to drive process redesign, efficiencies and advance the use of technology solutions for improved access to government services.”
New independent agencies
Queensland’s own Productivity Commission, established on May 1 as a notionally independent unit of the Treasury, was allocated $300,000 in 2015-16 and $2.5 million per year after that as it transitions to an independent body as soon as legislation allows. The budget tells us:
“The QPC will undertake independent, in-depth reviews of complex economic, industry and regulatory issues through open and transparent processes informed by wide public consultation, and formulate policy proposals and recommendations to Government to encourage economic growth, productivity and improved living standards across Queensland.”
Following the New South Wales government, Queensland is now dipping a toe into social benefit bonds, with a pilot of three classes of the emergent funding instrument. There’s $2 million for “establishment and transaction costs” and $1 million in 2015-16 for a “Readiness Fund to assist service providers to prepare for contracting through the SBB pilots” in the budget for the bonds, which target re-offending, homelessness and indigenous disadvantage.
Cross-agency efforts to combat domestic violence get an additional $5.2 million in 2015-16, bringing total funding to $31.3 million, including $131,000 to implement high priority recommendations of the recent Domestic Violence Taskforce report Not Now, Not Ever.
The establishment of Building Queensland to “provide independent, expert advice on infrastructure priorities” will cost $20.2 million over two years, while $2 million goes to establish a new “one-stop shop for seniors” and an “advisory taskforce on residential transition for ageing Queenslanders”.
$3.1 million is being spent on establishing a new independent body to publish crime statistics and the Sentencing Advisory Council, abolished in 2012 only two years after it was first created, will be re-established at a cost of $5.5 million because, according to the budget:
“The Council has an important role in educating the community about the justice system and sentencing, collating statistical information about sentencing and researching the effectiveness of sentencing practices in reducing crime.”
Queensland Treasury also tweets some individual budget measures:
— Queensland Treasury (@qldtreasury) July 14, 2015
Innovation also gets a boost in the Palaszczuk government’s first budget with various measures to support entrepreneurs, chiefly a $40 million Business Development Fund and an extra $140 million going to the Advance Queensland program:
“This includes $45.6 million for the Government’s Advance Queensland election commitment (with an additional $4.6 million for this initiative being held in contingency by Queensland Treasury), and a further $90.2 million for a suite of programs to drive industry research collaboration and commercialisation of new ideas and to create an environment which boosts entrepreneurship.”
Measures to support business also include a new framework to assess proposals from private companies with ideas about possible public-private infrastructure projects, which they would submit through an online portal.
There are also two measures in the budget which, Pitt claimed, make good on recommendations of the auditor-general. Firstly, education facilities will receive upgrades and refurbishments costing at least 1% of the total value of all the state’s education assets.
Secondly, $100 million is allocated to protecting the Great Barrier Reef, to pay for a program that “addresses the deficiencies recently highlighted by the auditor-general” according to Pitt.
The Electoral Commission gets a new main computer system at a cost of $2.7 million evenly spread over three years, and police get an extra $6 million worth of new equipment including body-worn cameras. The police also get a new e-rostering system, and 5400 new mobile devices costing $25.1 million over the three years starting from 2016-17. New community policing boards will be established, costing $416,000 over three years, and $200,000 will be allocated to two community liaison officers to “provide an operational policing response and develop long term sustainable relationships within the Islamic community”.
The treasurer also flagged the possibility that in future, money from the overflowing defined benefit superannuation fund could be invested in the government-owned energy companies he is seeking to consolidate. Pitt said the proposal could come from a further six months of “due diligence work” on the part of Treasury staff.
He said the fund already invested in public infrastructure overseas and interstate, and claimed the Labor government would never sell or lease Queensland’s publicly owned assets. Some critics say that allowing the super fund to inject funds into state-owned enterprises would amount to asset sales by stealth.
“These assets will always be 100% owned by government, 100% controlled by government and 100% of all dividends continuing to be paid to the government,” said Pitt.