4 2017-18 BUDGET AND FORWARD ESTIMATES Key Issues The Net Operating Balance is expected to be in surplus throughout the 2017-18 Budget and Forward Estimates period, with an estimated surplus of $54.3 million for 2017-18. The Fiscal Balance is estimated to be a deficit of $253.9 million for 2017-18, with a projected improvement over the Forward Estimates period to achieve surpluses of $2.8 million in 2019-20 and $71.1 million in 2020-21. In relation to Net Debt, whilst reducing in 2018-19, Net Cash and Investments remains positive reaching a level of $339.6 million as at 30 June 2021. This reflects the impact of estimated Net Operating Balance outcomes and infrastructure expenditure levels. This chapter includes the Policy and Parameter Statement which provides a reconciliation of the major movements in the Net Operating Balance and the Fiscal Balance between the Budget and Forward Estimates presented in the 2016-17 Budget Papers and those in these Budget Papers. 2017-18 Budget and Forward Estimates 45
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4 2017-18 BUDGET AND FORWARD ESTIMATES
Key Issues
The Net Operating Balance is expected to be in surplus throughout the 2017-18 Budget and Forward Estimates period, with an estimated surplus of $54.3 million for 2017-18.
The Fiscal Balance is estimated to be a deficit of $253.9 million for 2017-18, with a projected improvement over the Forward Estimates period to achieve surpluses of $2.8 million in 2019-20 and $71.1 million in 2020-21.
In relation to Net Debt, whilst reducing in 2018-19, Net Cash and Investments remains positive reaching a level of $339.6 million as at 30 June 2021. This reflects the impact of estimated Net Operating Balance outcomes and infrastructure expenditure levels.
This chapter includes the Policy and Parameter Statement which provides a reconciliation of the major movements in the Net Operating Balance and the Fiscal Balance between the Budget and Forward Estimates presented in the 2016-17 Budget Papers and those in these Budget Papers.
2017-18 Budget and Forward Estimates 45
OVERVIEWThis chapter includes the General Government Sector Financial Statements for the 2017-18 Budget and Forward Estimates period and the Policy and Parameter Statement which reflects changes between the Budget and Forward Estimates reported in the 2016-17 Budget Papers and the 2017-18 Budget Papers.
The financial statements in this chapter have been prepared in accordance with the Uniform Presentation Framework (UPF). The statements present information for the 2016-17 Budget and for the 2017-18 Budget and Forward Estimates. Taxation information, required under the UPF, is provided in chapter 5 of this Budget Paper.
In accordance with the UPF, the final end of year results for the General Government Sector will be available in the Treasurer's Annual Financial Report 2016-17, which will be publicly released by no later than 31 October 2017.
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GOVERNMENT FINANCIAL ESTIMATESTables 4.1 to 4.3 detail the Income Statement, Balance Sheet and Cash Flow Statement for the General Government Sector.
Table 4.1: General Government Income Statement2016-17)
Notes:1. Detailed information on revenue estimates is provided in chapter 5 of this Budget Paper.2. The increase in Employee Expenses in 2017-18 primarily relates to the Department of Education; the Tasmanian
Health Service and the Department of Justice for increases associated with the delivery of 2017-18 Budget initiatives. Further information in relation to agency initiatives is contained in the relevant agency chapter in Government Services, Budget Paper No 2. The increase in 2020-21 primarily reflects the impact of the proposed voluntary earlier school starting age resulting from the new Education Act (which is contingent on a Ministerial Order being approved by Parliament by no later than 1 September 2017) and the Tasmanian Health Service for updates to Block and Activity Based Funding.
3. The movement in Superannuation reflects an actuarial assessment of the defined benefit schemes and agency expenditure estimates for accumulation scheme members.
4. The increase in Supplies and Consumables in 2017-18 and over the Forward Estimates primarily reflects the listing of Hepatitis C medications on the Pharmaceutical Benefits Scheme and revised Activity Based Funding (ABF) and Block funding estimates. In addition, the increase in expenditure in 2017-18 also reflects increased costs for the Tasmanian Risk Management Fund due to higher medical and property claims expenditure.
5. The decrease in Nominal Superannuation Interest Expense in 2017-18 reflects a revised actuarial assessment of the defined benefit schemes.
6. The increase in Grant Expenses from 2017-18 primarily reflects increased funding to non-government schools under the Students First education reforms; an updated funding profile for the Northern Cities Major Development Initiative and the implementation of the Bilateral Agreement for the Transition to the NDIS with the Australian Government.
7. The decrease in Movement in Investments in GBEs and SOCs in 2017-18 of $123.7 million reflects changes in the net assets of the Public Non-Financial Corporations and Public Financial Corporations Sectors.
8. Additional information on agency 2017-18 Budget Infrastructure Investment is provided in chapter 6 of this Budget Paper.
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Table 4.2: General Government Balance Sheet as at 30 June2017)
Notes:1. The increase in Cash and Deposits in 2018 primarily reflects a change in timing of Australian Government Funding
together with higher estimated cash balances at the end of 2017.2. The increase in Equity Investment in PNFC and PFC Sectors in 2018 primarily reflects an increase in Net Assets for
the Tasmanian Public Finance Corporation (following the transfer of the Australian Government Mersey Community Hospital payment to the Tasmanian Public Finance Corporation as a one-off equity contribution to be invested by the Tasmanian Public Finance Corporation with any returns to be retained in the Mersey Community Hospital Fund (payment expected to occur by 30 June 2017)), Hydro Tasmania, and Motor Accidents Insurance Board.
3. Borrowings of $711.8 million as at 30 June 2018 includes an estimated end of year borrowing of $499.1 million to be undertaken on 30 June 2018. The end of year borrowing has no impact on the Government’s Net Debt as the same amount will be borrowed and invested overnight on 30 June 2018 with the Tasmanian Public Finance Corporation, grossing-up the amount of cash held and borrowings. The change in Borrowings since the 2016-17 Budget is primarily due to changes in the estimated Consolidated Fund position.
4. The decrease in Superannuation in 2018 reflects the latest actuarial assessment of the liability related to the defined benefit schemes.
5. Net Worth represents Total Assets less Total Liabilities.6. Net Financial Worth represents Financial Assets less Total Liabilities.7. Net Financial Liabilities represents Total Liabilities less Financial Assets, excluding Equity Investment in PNFC &
PFC Sectors.8. Net Debt represents Borrowings less the sum of Cash and Deposits and Investments.
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Table 4.3: General Government Cash Flow Statement2016-17)
)Budget)
2017-18))
Budget)
2018-19)Forward)Estimate)
2019-20)Forward)Estimate)
2020-21)Forward)Estimate)
$m) $m) $m) $m) $m)
Cash Flows from Operating ActivitiesCash Receipts from Operating Activities
The Policy and Parameter Statement (PPS) is a reconciliation of the major movements in the Net Operating Balance and the Fiscal Balance between two points in time. The movements reflect changes between the Budget and Forward Estimates reported in the 2016-17 Budget Papers and the 2017-18 Budget Papers.
The movements in the PPS are classified as revenue, expenses or net acquisition of non-financial assets and then further categorised as a policy or parameter change. The classification of a variation as a policy or parameter change is a matter of judgement and it is recognised that there may be some instances where part of a Government initiative may have both policy and parameter components. In exercising judgement, Treasury aims to ensure that Government decisions are made transparent.
Policy VariationFor the purpose of the PPS, a policy variation reflects a specific decision by the Government that has an impact on the Budget and Forward Estimates and is related to a new policy or represents a change in the Government's existing policy position since the previous Budget. A decision to change a Budget or Forward Estimate aggregate, which is consistent with an existing policy, is not a policy decision.
Parameter VariationA parameter variation reflects changes to the Budget and Forward Estimates due to the economic environment, the agency operating environment or the timing of a transaction.
Parameter variations will reflect the impact of changes in taxes, grants or other income that do not arise because of a Government decision and demand and cost variations in agency service delivery, including the provision of indexation. Variations resulting from the rollover of a new Forward Estimate year and changes in accounting policies, such as a change in an agency depreciation policy or the impact on estimates of a change in an Australian Accounting Standard are classified as parameter variations.
Table 4.4 provides a summary of the policy and parameter changes detailed in Table 4.5 that have impacted on the formulation of the 2017-18 Budget since the 2016-17 Budget.
Further InformationAdditional information on revenue estimates is provided in chapter 5 of this Budget Paper. Additional information on agency expenditure estimates is included in the relevant agency chapters in Government Services Budget Paper No 2.
It should be noted that the estimates presented in the Policy and Parameter Statement were finalised prior to the release of the Australian Government's 2017-18 Budget. Therefore, the movements included for Specific Purpose Payments and some National Partnership payments may differ from those calculated using published Australian Government 2017-18 Budget estimates.
2017-18 Budget and Forward Estimates 53
Table 4.4: Summary Policy and Parameter Statement, 2016-17 to 2020-21
2016-17)Estimated)Outcome)
2017-18))
Budget)
2018-19)Forward)Estimate)
2019-20)Forward)Estimate)
2020-21 Forward
Estimate1
$m) $m) $m) $m) $mForward Estimates (Net Operating Balance) as per
the 2016-17 Budget (A) 77.3 7.9 (61.0) 18.4 …. Forward Estimates (Fiscal Balance) as per the
TOTAL NET ACQUISITION OF NON-FINANCIAL ASSETS FROM TRANSACTIONS VARIANCE (H) (E - F - G)
(39.0) 103.4 175.8 47.4 ….
FISCAL BALANCE (B + C - D - H) 613.1 (253.9) (229.2) 2.8 71.1
Notes:1. Parameter adjustments for 2020-21 are not reflected in the Table as the 2020-21 Forward Estimate was not
published in the 2016-17 Budget. However, policy adjustments are reflected to show the full impact on the Budget and Forward Estimates.
2. The reduction in Betting Exchange Taxes and Levies in 2016-17 and over the Forward Estimates reflects the surrender by Betfair of its Tasmanian Gaming License.
3. The decrease in Duties in 2018-19 primarily reflects that Conveyance Duty on large commercial property transactions is forecast to reduce towards trend levels, which have been higher than usual in 2016-17 and are forecast to remain at elevated levels in 2017-18.
4. The increase in Land Tax primarily reflects a net increase in land values across the State, system enhancements leading to improvements in debt management and targeted compliance efforts.
5. The decrease in Payroll Tax over the Forward Estimates reflects lower forecasts for growth in average weekly earnings (AWE).
6. For further information on expense related policy decisions, refer to the relevant agency chapter in Government Services Budget Paper No 2.
7. The State contribution for the City Deal Launceston initiative includes funding for the City Heart, Tamar Estuary Management Taskforce and a Jobs Co-ordinator.
8. For further information on the policy, refer to the Department of Treasury and Finance chapter in Government Services Budget Paper No 2.
9. For further information on the policy, refer to the Department of State Growth chapter in Government Services Budget Paper No 2.
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10. For further information on the policy, refer to the Department of Health and Human Services chapter in Government Services Budget Paper No 2.
11. For further information on the policy, refer to the Department of Justice chapter in Government Services Budget Paper No 2.
12. For further information on the policy, refer to the Department of Police, Fire and Emergency Management chapter in Government Services Budget Paper No 2.
13. While the movement recorded in the Policy and Parameter Statement for the Streets Ahead and Homeshare - Additional Investment is a negative amount in each year, this reflects the financial treatment of the redirection of the expenditure from the former Tasmanian Affordable Housing Limited Funding (TAHL) and represents an additional allocation to the Homeshare program.
14. An amount of $25 000 is included in 2016-17 for the 20th Anniversary of the Port Arthur Massacre Event.15. An amount of $30 000 is included in 2018-19 for the Premier's Scholarship Fund.16. An amount of $25 000 is included in 2016-17 for the Risdon Vale Bike Collective.17. An amount of $15 000 is included in 2016-17 for the Welcome Home to Olympians and Paralympians from the Rio
Olympics and Paralympic Games event.18. An amount of $30 000 is included in 2017-18 for the Agri-Food Plan: Bee Industry Futures.19. An amount of $30 000 per annum is included over the Budget and Forward Estimates for the Ben Lomond Ski
Patrol.20. An amount of $35 000 per annum is included over the Budget and Forward Estimates for the Continuation of
Launceston 10 ($10 000 per annum) and Stan Siejka Cycling Classic ($25 000 per annum). 21. This reflects new funding provided in the 2017-18 Budget. Existing funding transferred from Finance-General is
reflected as a parameter variation. For further information see chapter 10 of Government Services Budget Paper No 2.
22. The movement in Other primarily reflects adjustments to eliminations and indexation as well as cost estimates associated with the State's superannuation expense and liability.
23. For further information on Purchases of Non-Financial Assets from Transactions policy decisions refer to chapter 6 of this Budget Paper.
24. The expenditure for the Orange-bellied Parrot Facility will be offset by proceeds from the sale of the existing property.
25.
2017-18 Budget and Forward Estimates 75
MAJOR REVENUE VARIATIONS
Policy Decisions
Special Dividend The TT-Line Vessel Replacement Fund Act 2017 provides for the establishment of an account within the Public Account to accrue funds to assist in meeting costs for the replacement of Spirit of Tasmania I and II. The 2016-17 Budget provided for two $40 million special dividends from TT-Line Company Pty Ltd as initial contributions to the TT-Line Vessel Replacement Fund. A further two $40 million Special Dividends from TT-Line Company Pty Ltd in 2018-19 and 2019-20 and two $10 million contributions from the Consolidated Fund in 2019-20 and 2020-21 are included in this Budget as further contributions to the Fund. At the end of the Forward Estimates period (30 June 2021) the Fund will total $180 million plus accumulated interest.
Parameter Adjustments
DutiesDuties reflects changes in estimates for Conveyance Duty, Motor Vehicle Duty and Insurance Duty. The increase in 2016-17 reflects a higher level of large commercial property transactions. In addition, there has been a general increase to the base forecasts for Conveyance Duty, which is the main driver for the movement in the Budget and Forward Estimates.
Dividend, Tax and Rate Equivalent IncomeThe major movements in Dividends relate to increases from the Motor Accidents Insurance Board, due to favourable claims experience, and Hydro Tasmania in 2018-19 and 2019-20, due to an expected increase in profitability. The 2016-17 Budget estimates reflected the uncertainty at the time as to how long it would take for Hydro Tasmania to rebuild its water storages. These increases are offset by lower dividends from Tasmanian Networks Pty Ltd due to a decrease in profitability as regulated revenues are expected to be lower.
The major increases in Income Tax Equivalents relate to the Motor Accidents Insurance Board and Hydro Tasmania due to increased profitability, as noted above, and therefore also taxable income.
Further information relating to Dividend, Tax and Rate Equivalent Income is provided in chapter 5 of this Budget Paper.
Tasmanian Public Finance Corporation DividendThe one-off National Partnership Payment received from the Australian Government for the transfer of ownership of the Mersey Community Hospital to the State (expected to occur by 30 June 2017), will be transferred to the Tasmanian Public Finance Corporation (Tascorp) as a one-off equity contribution and will be invested by Tascorp with any returns to be retained in the Mersey Community Hospital Fund.
Further information relating to the dividend is provided in chapter 5 of this Budget Paper.
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GST Revenue The movement in GST reflects changes to estimates and assumptions regarding the size of the GST pool, Tasmania's population and its GST relativity.
Estimates of the size of the GST pool for distribution have been reduced, reflecting lower than expected GST receipts, but this is partially offset by a small increase in Tasmania’s share of the national population.
The per capita relativity used for 2017-18 is the relativity recommended by the Commonwealth Grants Commission and determined by the Australian Treasurer. The per capita relativities from 2018-19 onwards are based on modelling by the Department of Treasury and Finance. For more information on GST receipts, refer to chapter 5 of this Budget Paper.
National Partnership Payments Movements in National Partnership payments occur frequently and may reflect either changes to underlying program agreements or the reallocation of funding to different years as advised by the Australian Government.
Information on major movements is provided below.
The increase in Environment in 2016-17 primarily reflects a change in timing of the receipt of funding from the Australian Government for the second tranche of irrigation projects being undertaken by Tasmanian Irrigation Pty Ltd under the Sustainable Rural Water Use and Infrastructure Program.
The increase in Healthcare in 2016-17 primarily reflects the reallocation of cash flows for programs, including the Commonwealth Dental Health Program and Reducing Elective Surgery Waiting Lists in Tasmania.
The decrease in Infrastructure in 2016-17 and significant increase in 2017-18 reflects the reallocation of Roads funding from 2016-17 to 2017-18 together with the Australian Government’s contribution to new road projects announced during the 2016 Federal Election.
The increase in Natural Disaster Relief and Recovery Arrangements funding in 2016-17 and 2017-18 reflects estimated receipts (at the time of finalisation of Budget data) from the Australian Government for costs associated with the 2016 bushfire and flood events.
Specific Purpose Payments National Health Reform funding increases observed each year from the 2016-17 Estimated Outcome to 2019-20 primarily reflect an increase in Australian Government Activity Based Funding due to a revision of Tasmanian Health Services activity profiles. Increases also reflect the impact of other adjustments made by the Administrator of the National Health Funding Pool, such as movements in the National Efficient Price (NEP).
The movement in Students First funding reflects increased Australian Government funding for both the Government and Non-government education sectors. Students First allocations are provisional and subject to change and to the finalisation of enrolments and loadings in each school year.
2017-18 Budget and Forward Estimates 77
Agency Revenue
State Growth
The increase in revenue for the Department of State Growth primarily reflects a rise in mineral royalties due to higher mineral prices and includes the continuation of the Road Safety Levy from 2017-18.
Tasmanian Health Service
The increase in revenue for the Tasmanian Health Service in 2016-17 and across the Forward Estimates is primary driven by increased revenues in relation to the listing of Hepatitis C medications on the Pharmaceutical Benefits Scheme. In addition, the increase in 2016-17 includes a one-off amount of $10 million reflecting the expected transfer of ownership of the Mersey Community Hospital Facility from the Australian Government to the State prior to 30 June 2017. This reflects the appropriate accounting treatment of the transfer under which the asset value is recognised as Contributed Revenue within Other Revenue in the General Government Income Statement. An equivalent value is then reflected in Purchases of Non-Financial Assets within Net Acquisition of Non-Financial Assets. This results in the transfer of the value of the asset to the General Government Balance Sheet.
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MAJOR EXPENSE VARIATIONS
Policy Decisions
For detailed information on policy decisions, refer to agency chapters in Government Services Budget Paper No 2.
Parameter Adjustments
Agency Expenditure
Education
The increase in expenditure for 2016-17 and over the Forward Estimates includes the impact of increased Students First Specific Purpose Payment funding and increased funding associated with the 2014 election commitment to extend high schools to Year 11 and 12.
Finance-General
The increase in 2016-17 includes changes in expenditure for the Tasmanian Risk Management Fund related to the June 2016 flood event and Peacock Centre fire claim and duty related ex gratia payments where there are corporate reconstruction transactions that do not result in a change of ownership. The decrease in expenditure for 2017-18 and over the Forward Estimates reflects a transfer of the Forestry CSO expenditure to the Department of State Growth and a reduction in service administration costs, following the transfer of administration of defined benefit schemes to the Office of the Superannuation Commission within the Department of Treasury and Finance.
Health and Human Services
The increase in expenditure for the Department of Health and Human Services in 2016-17 reflects revised expenditure for a range of Commonwealth Own Purpose Expenditure Agreements and National Partnership payments. The decrease over the Forward Estimates reflects revised estimates for Housing activities and the transfer of the Child Health and Parenting Service to the Tasmanian Health Service.
Justice
The increase in expenditure for the Department of Justice in 2016-17 is associated with Working with Vulnerable Persons registration; the rollout of the new Building Act and Continuing Professional Development for contractors; and additional costs relating to Corrective Services.
Primary Industries, Parks, Water and Environment
The increase in expenditure for the Department of Primary Industries, Parks, Water and Environment reflects the change in classification of Water and Sewerage Licence Fee expenditure of $600 000 per annum from 2016-17; revised Australian Government funding for the Tasmanian Wilderness World Heritage Area Extension funding of $1.7 million in 2017-18 and 2018-19; and revised expenditure associated with the Three Capes Track due to higher than anticipated visitor numbers.
2017-18 Budget and Forward Estimates 79
State Growth
The increase in expenditure in 2016-17 and over the Forward Estimates reflects an updated funding profile for the Northern Cities Major Development Initiative; a reclassification of $16.9 million in Australian Government funding for roads infrastructure from Non-Financial Asset Purchases to Supplies and Consumables Expense; the transfer of Forestry CSO expenditure from Finance-General and includes expenditure associated with the continuation of the Road Safety Levy from 2017-18.
Tasmanian Health Service
The major expense variations for the Tasmanian Health Service in 2016-17 and over the Forward estimates period reflect additional expenditure in relation to the listing of Hepatitis C medication on the Pharmaceutical Benefits Scheme and the expenditure of revised Activity Based Funding (ABF) and Block Funding.
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MAJOR PURCHASES OF NON-FINANCIAL ASSETS VARIATIONS
Policy Decisions
For detailed information on 2017-18 Budget Infrastructure Policy Decisions, refer to chapter 6 of this Budget Paper.
Parameter Adjustments
Education
The movement for the Department of Education primarily reflects the reallocation of funding from 2016-17 to 2017-18 for Capital Investment Program projects to meet changed cashflow requirements including the Parklands High School, East Launceston Primary School, Austins Ferry Primary School, and Windermere Primary School.
Health and Human Services
The movement in Health and Human Services primarily reflects reallocation of cash flow estimates for the Royal Hobart Hospital Redevelopment together with expenditure of funds carried forward from 2015-16 to support initiatives under the Affordable Housing Action Plan.
State Growth
Movements primarily reflect the reallocation of funding from Non-financial Asset Purchases to Grant Expense associated with the Northern Cities Major Development Initiative and the reallocation of cash flow estimates for Australian Government Funded projects.
Tasmanian Health Service
The increase in Purchases of Non-Financial Assets in 2016-17 primarily reflects the transfer of ownership of the Mersey Community Hospital Facility from the Australian Government to the State, and expenditure carried forward from 2015-16.