Analysis

A potent legal threat that could potentially hit up to 10 per cent of Commonwealth funding worth billions – which in turn underpin direct federal payments for local projects like Roads to Recovery – has come home to roost following a second landmark decision in the High Court of Australia over the controversial school chaplaincy program.

[To find out more in depth about why the Williams cases matter for local and regional, funding click on previous extensive coverage by Government News ]

Dubbed the Williams case Mk II, the High Court’s decision on Thursday found that the funding basis for the Commonwealth’s school chaplaincy program was legally invalid under Australia’s Constitution, a result that potentially redefines how Canberra gives money to more than 420 various local projects.

The High Court’s latest decision has for years been a legal time bomb waiting to explode ever since a Toowoomba father, Ronald Williams, first mounted a challenge to direct Commonwealth funding of religious counsellors put into state-run schools, a move instigated by former Prime Minister John Howard.

The latest finding is effectively the last roll of the dice for Canberra on direct Federal funding which, under the previous Labor government, had been artificially propped-up by passing stop-gap legislation to keep local projects funded before the last election.

You could call it a hospital-pass legislation.

The legislative quick-fix has now been unpicked by the High Court, sending lawyers from all jurisdictions urgently scurrying away to try and figure out what – in legal, financial and practical terms – actually happens next.

Australia’s 560-plus councils and local government authorities are clearly very worried.

The President of the Australian Local Government Association, Mayor Felicity-ann Lewis, said her organisation (which has a seat on the Council of Australian Governments) was reviewing the High Court decision and is now “seeking legal advice on the decision in regard to any implications for local government.”

“From our initial assessment, the decision potentially has significant implications for all programs under the Financial Framework Legislation Amendment Act 2012, some of which provide funds to councils,” Ms Lewis said.

“The Commonwealth has provided funding to local government for more than 40 years and these funds are very important to councils for the provision of local services and infrastructure.”

It’s what could happen if those funds become legally unavailable that has both councils and Canberra gravely worried, even if they are attempting to project a ‘keep calm and carry-on’ demeanour.

Ms Lewis said Deputy Prime Minister and Minister for Infrastructure and Regional Development, Warren Truss, had addressed the issue of the Williams case at the ALGA National General Assembly on Wednesday, just a day before the finding was handed down.

Ms Lewis said Mr Truss had given, on behalf of the Commonwealth “a commitment to work as quickly as possible to provide funding to local government in a way that is constitutionally valid, if required.”

On Thursday the issue of the legality of local funding flared at Prime Minister Tony Abbott’s announcement that there had now been six months without illegal boat arrivals, prompting the nation’s leader to give reassurances that the status quo should continue.

“We’ve only just got the judgment. The Attorney-General is having a look at it as we speak, and there will be a response as soon as we can, appropriately respond,” the Prime Minister said.

“Obviously we want our existing programs to continue. We particularly want the chaplaincy program to continue because it’s one that we invented. It’s one that we supported. It’s one that we took to the election. But we have to look at the decision and see exactly what its ramifications are and then we will be in a better position to respond.”

The PM’s up-front emphasis on the chaplaincy program over programs like Roads to Recovery is understood to have annoyed some Nationals and regional Coalition members who see infrastructure and services funding as a more pertinent article of political faith.

In the Senate on Thursday, Federal Attorney General George Brandis was making reassuring noises and trying to cool rising tensions over highly sensitive programs like Roads to Recovery.

Local government associations in the states were not about to let the latest big legal problem for funding problem go unnoticed.

The Local Government Association of Queensland (LGAQ) warned the High Court’s decision “has profound implications for the future of direct federal funding for programs delivered to local communities” and that direct federal-to-local funding “stretched back more 40 years.”

“It works for local communities and we would like to see it continue,” said LGAQ President Margaret de Wit. “It is in the community’s interest for local government to have an ongoing direct funding relationship with the Federal Government.”

Yet despite deep worries of councils, and a lack of political attention in the run-up to the finding, the High Court’s decision was far from unexpected.

The urgent need to find a lasting fix to the Constitutional problem of direct federal funding via a referendum for a Constitutional amendment had, against the odds, garnered actually tri-partisan support during the term of the last government after the issue was heavily pushed by former balance of power independents Tony Windsor and Rob Oakeshott and then independent Bob Katter.

The push for a referendum by the independents had been one of the key demands that allowed Julia Gillard and Labor to form a minority government, but was also agreed to by the Coalition with strong support from the Nationals, particularly then shadow for local government Barnaby Joyce, who is now Agriculture Minister.

The push got as far as wording for the referendum being finalised, the date being set and funding allocated for both the Yes and No cases to mount their arguments.

However in the final days of the 2013 Federal Election campaign, Coalition support for the referendum came badly unstuck after Tony Abbott cautioned people against voting for something they might not understand – rather than backing and explaining the case for change as previously agreed.

Two time former Prime Minister Kevin Rudd then hammered the final nail in the referendum coffin by selecting an election date that was outside (and before) the legislative window of opportunity for the crucial vote to take place.

Consequently, the Abbott government has now been left with the highly risky task of trying to sustain more than 420 electorally popular but fragile schemes that it inadvertently pulled the funding plug on – a challenge made all the harder by a federal Budget that cost shifted $80 billion back to the states.

Given that Abbott government has now conspicuously committed to two big picture reform white papers   one on the Federation and another on taxation – the most obvious question now is what role local governments will play in that process, and what kind of clout they will carry.

The ramifications Williams case still have some way to run.