Chapter 5 – Cross Border Assessments

5) CROSS BORDER ASSESSMENTS




5.1.The cross border factor adjusts the population eligible to receive services and is assessed for categories where States provide services to residents of other States without direct reimbursement from the home State. For the 1999 Review, cross border factors were assessed by a general method for NSW and the ACT in Health, Law and Order, Welfare, and Culture and Recreation. Cross border factors were not assessed for expenditure on services provided in hospitals because the States re-imburse each other for hospital services provided to nonresidents under the Australian Health Care Agreement.

5.2.The Education categories have category specific cross border adjustments. The Preschools and Government Primary Education assessments are adjusted for cross border flows through the sociodemographic composition factor. Government Secondary Education has a cross border factor measured by reference to the proportion of regional students. In Vocational Education and Training a cross border adjustment has been applied to all States.

5.3.The Commission divided the South Eastern region of NSW into two groups of local government areas:

  • Group 1: Queanbeyan, Yass, Yarrowlumla and Gunning; and
  • Group 2: Bega Valley, Bombala, Boorowa, Cooma-Monaro, Crookwell, Eurobodalla, Goulburn, Harden, Mulwaree, Snowy River, Tallaganda and Young.

5.4.The approach used for calculating cross border factors for the ACT and NSW was to employ the general method, which is shown in the following formula. The magnitude of the factors depend on the population groups included in the calculation and the size of the population weights.

ACT Factor =

ACT Population + Weight Group 1*Population (Sub) Group 1 + Weight Group 2 *Population (Sub)Group 2


ACT population.

NSW Factor =

NSW Population - Weight Group 1*Population (Sub) Group 1 - Weight Group 2 *Population (Sub) Group 2


NSW population

5.5.Table 5.1 summarises the Commission’s decisions for each of the categories where cross border factors were assessed for the 1999 Review.

TABLE 5.1 - SUMMARY OF CROSS BORDER ASSESSMENTS

Category / Additional Population served by the ACT
Mental Health (community mental health component), Community Health (community health component), Police, Other Welfare (other welfare component) / 50 per cent of Group 1 and 20 per cent of Group 2 population.
Administration of Justice
(criminal and civil courts components) / 50 per cent of Group 1 and 20 per cent of Group 2 population aged 10 years and over.
Other Welfare (SAAP component) / 50 per cent of Group 1 and 20 per cent of Group 2 population aged 11 years and over.
Family and Child Services
(children’s services component) / 50 per cent of Group 1 and 20 per cent of Group 2 population aged 0 to 12 years.
Family and Child Services
(juvenile detention component) / 50 per cent of Group 1 population aged 10 to 17 years.
Public Health
(childhood immunisation component) / 50 per cent of Group 1 population aged 4 to 6 years.
Culture and Recreation, Public Health (population health component) / 25 per cent of Group 1 and 10 per cent of Group 2 population.
Aged and Disabled Welfare
(disability services component) / 25 per cent of Group 1 and 10 per cent of Group 2 population aged 0 to 59 years.
Corrective Services (prisons component) / 10 per cent of Group 1 and 5 per cent of Group 2 population aged 17 years and over.

1.Under arrangements between the Commonwealth and NSW Governments prior to ACT self-government. The ACT was developed to serve as a regional centre for South Eastern NSW. However, the ACT has separate legislative and administrative systems than the rest of the region which complicates the development of service interaction between the ACT and surrounding region.

5.6.The ACT’s role as a regional centre has been jointly fostered by the ACT Government and surrounding NSW Local Government Councils cooperating to integrate service provision to the residents of the Australian Capital Region (ACR). The ACR is comprised of the ACT and South Eastern Statistical Division of NSW. Importantly, however, cross border services are not limited to this region and non-resident users come from much further afield.

5.7.The importance of Canberra as the centre for the region cannot be overestimated, as it is this phenomenon which promotes cross border use of ACT services. Regional populations access a wide range of ACT community services including educational, medical, hospital, judicial, welfare, cultural and recreational services.

5.8.The use of ACT services by non-residents imposes additional costs on the ACT Government, for which it is not fully compensated, either through existing cross border agreements or the Commission’s assessments. Furthermore, these arrangements do not contribute to the ACT’s revenues, as non-residents do not recompense the ACT Government for the services used.

2.The ACT supports the continued assessment of cross border impacts on the ACT given the extent of non-resident use of the Territory’s services and the fact that it affects the ACT moreso than any other State.

5.9.The ACT believes that components of the general cross border assessment methods, developed in the 1993 Review and which will be over 10 years old by the time the 2004 Review is brought down, require amendment. They do not compensate the ACT for the full recurrent and capital costs associated with the provision of cross border services to nonresidents.

5.10.The ACT is concerned specifically with three components of the assessment which underestimate the ACT’s service provision costs:

  • the failure to acknowledge the socio-demographic differences between the ACT and non-resident populations using the Territory’s services, and apply the assessed cost weights to these populations;
  • the application of too narrow a definition of the NSW regional area that is serviced by the ACT - the ‘ACT Region’ based on LGAs; and
  • the underestimation of the proportion of the population procuring ACT services in some regional areas (population weights).

5.11.The underestimation of these components has a significant impact on a small jurisdiction such as the ACT, where cross border use of Territory services can be as high as 50%.

5.12.The Commission should also take into consideration the capital costs emanating from the cross border use of ACT facilities and infrastructure as these go ‘hand in hand’ with the provision of recurrent services to non-ACT residents.

5.13.The ACT believes that capital costs are currently significantlyunderestimated, and that these should be fully incorporated into the depreciation assessment.

Assessment of the socio-demographic characteristics of the nonresident population

5.14.There is an assumption implicit in the treatment of the sociodemographic composition of the ‘ACT Region’ in the cross border assessments, that the non-resident populations to which the ACT provides services have the same demographic composition as the Territory.

5.15.Currently, the assessment only takes into account the demand for services based on the proximity of non-resident users when assessing cross border needs. However, there are additional costs involved in the provision of services to particular socio-demographic groups.

5.16.The ACT believes that for the Commission to be consistent in its assessment of the relative costs of providing services to specific groups (socio-demographic composition weights are applied throughout the expenditure assessments), a socio-demographic factor should be applied to the nonresident population used in the cross border assessment.

5.17.Various weights have been applied to a number of specific subpopulation groups as part of the socio-demographic composition factors that exist in nearly all of its expenditure assessments. In the main, the groups focused on include:

  • age;
  • sex;
  • socio-economic status (based on income);
  • low English fluency;
  • regional location;
  • indigeneity; and
  • a range of other category specific variables (for example, young males in the police assessment).

5.18.The ACT believes that the cross border assessment should be consistent with the Commission’s general approach. Indeed, to conform to the agreed enhanced accountability and transparency guidelines agreed at the Priority Issues of Principles Conference held in 2001, the ACT believes that the same rules applying to the weighting of various sub-population groups should also be applied to the cross border assessments. These rules are set out in the following table.

Table 5.2 - Socio-demographic factors applied to the expenditure categories, 2002 Update

Category / Component / Socio-Demographic Factors
Community Health / Community Health /
  • Age-Sex
  • Indigenous (weight 1.6)
  • Low English Fluency (weight 1.5)
  • Remoteness (weight 2.0)

Population Health / Population Health /
  • EPC Assessment

Preventative Health / Childhood immunisation /
  • Age-Sex
  • Low English Fluency (weight 1.5)

Police / Police Services /
  • Age-Sex (weight 2.5 for young males)
  • Indigenous (weight 3.5)
  • Sydney/Melbourne (weight 1.1)

Administration of Justice / Criminal and Civil Courts /
  • Age-Sex
  • Indigenous (weight 1.1 for remote Indigenous)
  • Low English Fluency (weight 1.5)

Corrective Services / Prisons /
  • Age-Sex
  • Indigenous (weight 1.1)
  • Secure Prisoners (weight 2.0 )

Homelessness and General Welfare / SAAP /
  • Age-Sex
  • Indigenous (weight 1.25)
  • Low English Fluency (weight 1.5)

Homelessness and General Welfare / Other Welfare /
  • Age (weight 1.0 for 0-14yrs and over 60 yrs, weight 2.0 for 15-59 yrs)
  • Indigenous (weight 4.0 and weight 1.25 for remote Indigenous)
  • Low English Fluency (weight 1.5)

Family and Child Services / Children’s Services /
  • Each State’s ratio of
(0-12yrs population / Mean resident population) divided by Australian ratio of
(0-12yrs population / Mean resident population)
Family and Child Services / Juvenile Detention /
  • Age-sex
  • Indigenous (weight 1.5 for remote Indigenous)
  • Low English Fluency (weight 1.5)

Culture and Recreation / Service Provision /
  • Socio-demographic composition
  • Indigenous factor and Level of ATSIC grant expenditure
  • Economic environment (weight 1.1 for ACT.)

Aged and Disabled Services / Disability Services /
  • Age-Sex
  • Low English Fluency (weight 1.25)
  • Indigenous (weight 2.0 and weight 1.5 for remote Indigenous)

Source: Commonwealth Grants Commission 2002 Update, Working Papers.

5.19.However, if the Commission is unable to identify the individual sociodemographic profiles of the cross border populations accessing ACT services, the Territory suggests that it use the socio-demographic composition factors it applies to all expenditure categories across State populations as a proxy. These factors for the ACT and NSW are listed in Table 5.3.

Table 5.3 - Socio-demographic Composition factors,
2002 Update

Category/Component / ACT / NSW
Community Health
Community Health / 0.81501 / 0.96636
Preventative Health
Preventative Health / 0.97072 / 1.01742
Police
Police Services / 0.95862 / 1.00953
Administration of Justice
Criminal and Civil Courts / 1.00257 / 0.95663
Corrective Services
Prisons / 0.9221 / 1.06532
Homelessness and General Welfare
SAAP / 0.73574 / 0.93431
Other Welfare / 0.64833 / 0.96132
Family and Child Welfare
Children’s Services / 1.00834 / 0.99719
Juvenile Detention / 0.69611 / 0.92346
Culture and Recreation
Service Provision / 0.99161 / 0.99765
Aged and Disabled Services
Aged Services / 0.56985 / 1.04714
Disability Services / 1.05592 / 0.98279
National Parks and Wildlife
Service Provision / 0.13532 / 0.46031

Source: Commonwealth Grants Commission 2002 Update, Working Papers.

5.20.The ACT’s preference, however, is to apply weightings based on the demography of the population accessing ACT services, rather than for NSW as a whole, given that generally, the South Eastern NSW population has a greater number of more costly groups than NSW as a whole.

Socio-demographic composition of the Australian Capital Region

5.21.The ACT and its surrounding regions have dissimilar sociodemographic compositions, arising mainly from their distinct economic backgrounds. It is well known that ACT residents have above average incomes, which, in the main, are driven by the Commonwealth being the dominant employer in the ACT (nearly half of the workforce is employed in the public sector), and the general requirement for a tertiary educated workforce to support the industry base in the ACT. In contrast, most of the regions surrounding Canberra are serviced by primary industries.

5.22.Subsequently, the median weekly household income for the ACT is approximately $900, while the average median weekly household income for the South Eastern region of NSW is $588. The average median weekly household income for the whole of NSW is $653. The majority of the LGAs in the region also have a higher unemployment rate than the ACT.

5.23.Further, the ‘Region’ has a proportionately greater Indigenous population at 1.78% of the total population compared to 0.96% for Canberra. In particular, Queanbeyan has an Indigenous population that is proportionally 2.5 times larger than that of Canberra, as well as a proportionally greater number of residents with low English fluency.

5.24.A summary of a comparison of the socio-demographic profiles of the LGAs of the South Eastern Statistical Division with Canberra and NSW as a whole is provided in Table 5.4 below.

Table 5.4 - LGA Demographic profiles,
SOUTH EASTERN Statistical Division, 1996 Census Data

Source: ABS, 1996 Census, Basic Community Profiles.

5.25.The Commission already acknowledges that some community groups cost more to service, through its current assessment of State sociodemographic profiles, but these weights are not applied to cross border populations.

5.26.The ACT believes the full cost of cross border services, based on LGAs' socio-demographic composition, should be included in the category assessments to compensate the ACT for the full cost of the additional user population.

5.27.The ACT requests that the same sociodemographic composition rules that are applied to the general expenditure assessments be applied to the cross border assessment.

Underestimation of Recurrent Cross Border Costs

5.28.The ACT considers that many of the cross border assessments fail to take into account the full recurrent costs faced by the ACT in terms of service provision. The ACT’s view is that the Commission has:

  • applied too narrow a definition to the regional NSW LGAs which are serviced by the ACT (the current definition of the ACT Region); and
  • underestimated the proportion of the population procuring ACT services in the regional areas already assessed (population weights).

5.29.This underestimates the relevant population serviced, and thus underestimates the cost to the ACT.

Narrow definition of the regional NSW LGAs serviced by the ACT – ‘The ACT Region’

5.30.The ACT is concerned that the general cross border assessment method does not adequately compensate the ACT for recurrent expenditures, as it does not accurately reflect the demand placed on ACT services by nonresidents.

5.31.Canberra provides services to residents of NSW in much greater numbers, and to people who reside much further from the ACT, than the cross border assessments allow for.

5.32.The following figures illustrate where nonresident users of ACT public hospital, community care and judicial services normally reside.

5.33.The ACT requests that the Commission take note that nonresident users come from much further afield than the South Eastern Statistical Division of NSW and may, such as in the case of ACT public hospitals, come from every statistical division of NSW, or as in the case of the ACT judicial system, every State in Australia.

Figure 5.1 - ACT Public Hospital Separations, by Statistical Division NSW, 1999-2000


Figure 5.2 - ACT Community Care QEII clients, by Statistical Division NSW, 2001


Figure 5.3 - Defendants in ACT Magistrates Court, by Statistical Division NSW, 2001


SA 18 TAS 12 WA 11 NT 2

5.33.1.1.1.1.1.Based on this evidence, the ACT believes that the cross border assessment should incorporate a wider definition of the NSW regional area from which users of ACT services come from and recognise that more of the population of these areas are users of ACT services.

5.33.1.1.1.1.2.In particular, the ACT believes that weighted populations from the Illawarra and Central Murrumbidgee Statistical Divisions should be included in the assessment.

5.33.1.1.1.1.3.The Commission’s own considerations underlying the general method of cross border assessment lend strength to this argument. The Commission has assumed that:

“…frequent visitors to the ACT will have the widest impact on service provision in the ACT; and

very frequent visitors to the ACT are most likely to be constrained by distance travelled.” [1]

5.33.1.1.1.1.4.In effect, the distance travelled by non-residents to the ACT is likely to impact on their use of ACT services, such that, the closer non-residents live, the greater their tendency to use ACT services.

5.33.1.1.1.1.5.Based on these underlying assumptions, the inclusion of the Illawarra and Central Murrumbidgee areas in the ‘ACT Region’ is reasonable, given their proximity to the ACT in comparison to the outermost limits of the Australian Capital Region.

5.33.1.1.1.1.6.For example, as evident in Figure 5.4, Tumut LGA (which is currently excluded from the cross border assessment) is closer to the ACT than the Bombala LGA (which is currently included in the cross border assessment). It also houses nearly five times the population.

Figure 5.4 - The ACT REGION

  • Current definition of the ‘ACT Region’: the ACT and South Eastern Statistical Division (The Australian Capital Region).
  • ACT’s Proposed Region: the ACT, South Eastern, Central Murrumbidgee and Illawarra Statistical Divisions.

5.33.1.1.1.1.7.Further, the ACT believes that the residents of Tumut have a greater tendency to procure ACT services than the residents of Bombala. This is illustrated, for example, in data from the following services.