By Angela Dorizas

The Australian Local Government Association (ALGA) has warned that an impending High Court challenge over the Rudd Government’s stimulus package bonuses would have a devastating impact on local government.

The basis of the High Court challenge by University of New England lecturer and former National party officer, Bryan Pape, is that payments delivered through the Rudd Government’s Nation Building and Jobs Plan are unconstitutional because the monetary ‘gifts’ are not covered by tax law.

ALGA president Cr Geoff Lake said the legal challenge, to be heard on the 30 March, could annul past Commonwealth funding to local government and send local communities bankrupt.

“The challenge to the Federal Government’s $900 bonus payments to taxpayers has serious implications for more than $6 billion in direct payments from the Federal Government to councils in recent year,” Cr Lake said.

He said if the High Court upheld the challenge, councils would potentially need to repay the Federal Government for funding received through the Roads to Recovery Program and the recent Regional and Local Community Infrastructure Program.

“This would cripple communities across Australia and potentially lead to a crisis in the delivery of hundreds of services at the local level,” Cr Lake said.

Constitutional law expert Professor George Williams, from the University of New South Wales, said the invalidation of past funding was an unlikely outcome.

“It could well invalidate past funding, but I don’t think local government bodies will have to pay the money back,” Professor Williams told GovernmentNews.

He said if the challenge were to succeed and the stimulus payments were ruled unlawful, emergency laws and federal-state cooperation would be required to avoid repayments on previous payments.

“I think they will get around that to validate the past funding,” Professor Williams said.

“The big impact would be on future funding.”

However, he predicted that the challenge was unlikely to succeed.

“The Commonwealth more often than not wins these types of cases and the trend of authority is in the Commonwealth’s favour,” Professor Williams said.

The High Court has only heard two challenges to Federal Parliament’s appropriation of money “for the purposes of the Commonwealth” and on both occasions the federal-state dispute was left unresolved.

Stronger case for constitutional recognition

Professor Williams said the case was likely to boost local government’s campaign for constitutional recognition.

“This case illustrates the flaw in the Constitution that by not referring to local government and by not providing clear funding the current arrangements can be thrown into uncertainty,” he said.

“We do need clear recognition of local government in the Constitution and a clear understanding of its role.”

In line with its election promise, the Rudd Government has agreed to hear local government’s case for constitutional recognition. It is now up to the Federal Government to decide whether Australian voters are ready for a referendum on the issue, which could be held as early as 2010.

“It could be done in 2010, absolutely,” Professor Williams said.

“It is a matter of political will more than anything else at the federal level.”

Cr Lake said until local government was included in the Australian Constitution there would be continued uncertainty over the ability of local governments to receive sufficient funding.