Funding the National Disability Insurance Scheme

Budget Review 2015–16 Index

Tarek Dale and Luke Buckmaster

The National Disability Insurance Scheme (NDIS) is a major and highly complex reform to the way in which disability support is funded, accessed and provided. It is jointly governed and funded by the Commonwealth and state and territory governments. It is expected to involve significantly increased government expenditure, from both Commonwealth and state and territory governments.[1]

In a period of increased tension over the allocation of funding and service delivery responsibility between Commonwealth and state and territory governments, funding the NDIS may prove to be a contentious issue. This brief outlines the key issues and information available, including where information is available in the 2015–16 Budget.

Agreements between the Commonwealth and states and territories

The actual delivery of NDIS services occurs through an agency—the National Disability Insurance Agency (NDIA)—which disburses funds for the provision of support to NDIS participants.[2] The funding currently provided to the NDIA in relation to launch sites is governed by an intergovernmental agreement; this covers all states and territories except Queensland.[3]

The intergovernmental agreement includes schedules relating to each jurisdiction, which typically specify amounts (including both cash and in-kind contributions) up to and including the 2015–16 financial year.[4] The Assistant Minister for Social Services has re-iterated the Coalition’s commitment to ‘honouring the agreements’.[5]

The previous Government also signed heads of agreement documents on the transition to a full scheme with all states and territories except for Western Australia.[6] The heads of agreements documents include commitments on the funding split (but not specific amounts) between the Commonwealth and state and territory governments during the transition years between 2016–17 and full implementation of the scheme.[7] Work is under way with state and territory counterparts (with the exception of Western Australia), with the goal of signing agreements on the transition.[8] 

The heads of agreement documents also include specific amounts which states and territories will provide when the scheme is in full operation.[9] However if the Council of Australian Governments (COAG) agrees to parameter changes after a Productivity Commission review in 2017, these may also change to some extent.[10]

The NDIS in the 2015–16 Budget

The costs and funding commitments associated with the NDIS are reflected in a number of places in the 2015–16 Budget. Because of the negotiations under way with state and territory governments, figures in the Budget papers inevitably reflect to some extent assumptions which may change depending on the negotiated outcomes.

Budget Paper No. 1

NDIS costs are reflected in social security and welfare payments in Budget Strategy and Outlook: Budget Paper No. 1: 2015–16.[11] However the costs as reported in Budget Paper No. 1 include full NDIA costs, which are funded jointly by the Commonwealth and the states and territories.[12] Budget Paper No. 1 notes that ‘of the $37.0 billion in expenses over the forward estimates’, the Commonwealth will fund $18.9 billion, with the remainder from states and territories.[13]

Budget Paper No. 2

Budget Measures: Budget Paper No. 2: 2015–16 includes a number of measures which relate to the NDIS or NDIA:

  • ‘National Disability Insurance Agency Full Scheme ICT’ allocates funding for an ‘Information and Communication Technology’ system ‘to support the full implementation of’ the NDIS.[14] This includes redirecting $50.3 million from an earlier NDIS budget measure.[15]
  • ‘National Disability Insurance Scheme — early access for children in the Nepean Blue Mountains area of Western Sydney’ provides funding to ‘facilitate early access’ for around 2,000 children from 1 September 2015.[16]
  • ‘National Disability Insurance Scheme — Sector Development Fund transfer’ shifts funding and responsibility from the NDIA to the Department of Social Services for the Sector Development Fund, which ‘was established ... for the purpose of supporting the development of the disability support sector’ in preparation for NDIS implementation.[17]

Budget Paper No. 3

Federal Financial Relations: Budget Paper No. 3: 2015–16 specifies a number of national partnership agreements (NPAs) which relate to the NDIS.

  • The ‘National Partnership on assisting preparation towards the trial of the National Disability Insurance Scheme’ provides small amounts of funding for Tasmania and the Australian Capital Territory for ‘the transition to the new operating environment under the ... NDIS’. 2015–16 is the last year in which funding is budgeted under this NPA.[18]
  • The ‘National Partnership payments from the DisabilityCare Australia Fund’ reflects an agreement which is currently under negotiation.[19] The figures in Budget Paper 3 show expected payments that increase to $1.8 billion in 2018–19 for states and territories ‘when they meet key conditions such as agreement to fully roll out the NDIS and milestones relating to the participation of people with significant and permanent disability in the scheme’.[20]

Budget Paper No. 4 and the Portfolio Budget Statement

Both Agency Resourcing: Budget Paper No. 4: 2015–16 and the Portfolio budgets statements 2015–16: Budget related Paper no. 1.15A: Social Services Portfolio include detail on the NDIA’s funding and expenses.[21]

  • Budget Paper No. 4 includes a number of figures in relation to the NDIS and NDIA, including
    • Appropriations[22]
    • The DisabilityCare Australia Fund Special Account[23]
    • Staffing levels[24]
    • Estimated and projected expenses (covering 2015–16 to 2018–19). This includes a split between departmental expenses (broadly speaking, relating to the operation of the NDIA), and expense which are treated as administered (broadly speaking, this corresponds to the funds for support of NDIS participants)[25]
    • Capital investment,[26] and
    • Outcome statements.[27]
  • The Social Services Portfolio budget statement (PBS) also includes a section relating to the NDIA.[28] This includes:
    • projections of the number of participants. The PBS notes that ‘These are Australian Government estimates of potential path of roll-out to full scheme and have not been agreed with the states and territories’[29]
    • projections of the ‘expenses for reasonably and necessary care and support for participants’[30] and
    • projected agency costs.[31]

The Portfolio budget statement also includes budgeted financial statements and budgeted cash flows for the NDIA, including projections to 2018–19.[32]  To some extent these reflect expected cash-flows (although not actual contributions) from the Commonwealth and state and territory governments.

Both the financial statement and cash flow include a line entry for ‘Sale of goods and rendering of services’, which reflects expected cash flows from the state and territory governments.[33] This is projected to grow from $0.3 billion in 2015–16 to $10.8 billion in 2018–19. This cash-flow from state and territory governments does not match their actual cash contribution because a portion reflects the redirection of existing Special Purpose Payments (SPPs) into the NDIS.[34]

An entry for ‘Other gains’ in the budgeted financial statement appears to reflect in-kind contributions by both Commonwealth and state and territory governments (the relative proportions are not reported). This grows from $0.3 billion in 2015–16 to $1.2 billion in 2018–19.

This means that while the PBS shows expected funding for the NDIA, it does not provide an exact breakdown of the relative contributions by different levels of government. Ultimately, the actual outcomes will depend on the transition agreements which are currently under negotiation.

[1].          The full implementation costs of the NDIS are to some extent uncertain. In 2019–20 the NDIS is expected to cost ‘around $22 billion’, ‘around half of which’ will come from the Commonwealth, and the rest from the states and territories (Australian Government, Portfolio budget statements 2015–16: budget related paper no. 1.15A: Social Services Portfolio, p. 234). The 2015 Intergenerational Report projects that total government NDIS spending (including state and territory governments) is projected to reach 1.1 per cent of Australia’s gross domestic product in 2019–20 (Australian Government, 2015 Intergenerational Report: Australia in 2055, March 2015, p. xvii).

[2].          The National Disability Insurance Scheme Act 2013 (Cth) establishes the National Disability Insurance Scheme Launch Transition Agency, which is ‘known as the National Disability Insurance Agency’ (National Disability Insurance Agency, ‘Legislation’, NDIA website).

[3].          Council of Australian Governments (COAG), ‘Intergovernmental Agreement on the National Disability Insurance Scheme Launch’, COAG website.

[4].          The schedules vary in the exact period covered; for more detail see ‘Intergovernmental Agreement on the National Disability Insurance Scheme Launch’, op. cit.

[5].          M Fifield (Assistant Minister for Social Services), Address to the National Press Club, speech, 20 November 2013, p. 6.

[6].          For the detail included in the individual heads of agreement documents see NDIA, ‘The Council of Australian Governments’, NDIA website.

[7].          All the heads of agreement documents except for the New South Wales heads of agreement include a commitment that the state or territory will cover 59.6 per cent of care and support package costs (the care and support packages are a large component of NDIS costs). The heads of agreement documents also typically specify that the Commonwealth will fund agency costs, and bear the risk of unexpected cost increases. The exact years identified vary between heads of agreement documents; some jurisdictions begin the full scheme in 2018–19, while for others it is 2019–20.  

[8].          Senate Community Affairs Legislation Committee, Official Committee Hansard, 26 February 2015, p. 142.

[9].          These amounts are indexed over time by what are referred to in the heads of agreement documents as ‘escalation parameters’. Under the heads of agreement documents, the Commonwealth has committed to bearing a significant portion of the risk associated with cost increases.

[10].       Most of the heads of agreement documents refer to a Productivity Commission review in 2017. The review will examine a number of factors, including the ‘escalation parameters’. If COAG agrees to changes to the risk allocation or escalation parameters based on the Commission’s analysis, this could also impact on the funding arrangements.

[11].       Australian Government, Budget strategy and outlook: budget paper no. 1: 2015–16, pp. 5-11 to 5-12 and 5-27 to 5-32.

[12].       Ibid., pp. 5-12 and 5-29. See also Senate Finance and Public Administration Committee, Official Committee Hansard, 28 May 2014, pp. 85-87 and 147-148.

[13].       Budget strategy and outlook: budget paper no. 1: 2015–16, op. cit., p. 5-29. Implicitly, this means that the Budget  estimates include additional receipts from the states and territories of $18.1 billion over the forward estimates.

[14].       Australian Government, Budget measures: budget paper no. 2: 2015–16, p. 163.

[15].       Ibid., p. 164.

[16].       Ibid., p. 164.

[17].       Ibid., p. 165.

[18].       Australian Government, Federal financial relations: Budget paper no. 3: 2015–16, p. 41.

[19].       Department of Social Services, email, 18 May 2015.

[20].       Ibid., p. 44.

[21].       Australian Government, Agency resourcing: Budget paper no. 4: 2015–16; Portfolio budgets statements 2015–16: Budget related paper no. 1.15A: Social Services Portfolio, op. cit.

[22].       Agency resourcing: Budget paper No. 4: 2015–16, op. cit., p. 78.

[23].       Ibid., p. 111.

[24].       Ibid., p. 138.

[25].       Ibid., p. 147.

[26].       Ibid., p. 150.

[27].       Ibid., p. 167.

[28].       Portfolio budgets statements 2015–16: Budget related paper no. 1.15A: Social Services Portfolio, op. cit., pp. 225-258.

[29].       Ibid., p. 238.

[30].       Ibid., p. 237. These likely depend on the projections of the number of participants, and are therefore also contingent on negotiations with the states and territories.

[31].       Ibid., p. 241. These are expected to increase from $0.2 billion in 2015–16 to $1.5 billion in 2018–19.

[32].       Ibid., pp. 245 and 248.

[33].       Ibid., pp. 244-245.

[34].       These SPPs still paid by the Commonwealth to states and territories, but the states and territories then provide a portion of the funds to the NDIA. That portion provided to the NDIA is treated as Commonwealth funding in the intergovernmental agreements. See for example Tables 4 and 8 in ‘Appendix E – Victoria balance of cash and in-kind contributions’, Intergovernmental Agreement on the National Disability Insurance Scheme Launch, COAG website. Because the amount of NPP funding redirected into the NDIS is proportional to the population in a state covered by the NDIS, this amount may increase as the NDIS transitions to full implementation.


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