The Turnbull Government’s first budget was delivered this week. We have studied the budget papers and other source materials to present the implications as we see them for the not-for-profit (“NFP”) sector. In summary, there are clearly some wins, but many losses.

We have commented on matters that will affect the whole NFP sector, and those specific to certain sub-sectors.

Impacts on the whole sector

Due to the Government placing such high importance on high income earners and small businesses, NFPs are unlikely to see this budget as the solution to their problems. While we note that there are some positive elements (i.e. in relation to youth employment and the funding of schools), NFPs may be disappointed. What’s more, some areas like foreign aid and aged care will have to deal with having their funding slashed.

According to Stephen Walters, Chief Economist for the Australian Institute of Company Directors, this shouldn’t be a surprise. He states that:

“I think we need to look at the context- this is an election manifesto and [the government] are really clearly targeting middle Australia. Let’s be honest, the NFP sector is not the sector that the government is focused on at this point. That is not to say that they are ignoring NFPs- but the priorities for the government clearly at this time is to get small business owners and high income earners on board.”

While we agree that this budget is not ground breaking for NFPs overall, there are facets of the budget that will impact certain NFP sectors quite significantly. We will now take you through these affected areas one by one.

Overseas aid and development

The Government has announced that it will maintain the foreign aid cuts made under the Abbott Government last year, which means a further $224 million fall in aid for the 2016/17 financial year. To put this cut in perspective, the remaining aid program ($3.8 billion) represents 0.22% of the national income.

The cuts were criticised by aid organisations, with World Vision CEO Tim Costello stating that “this latest round of aid cuts puts lives and futures at risk as well as regional and global security and prosperity; it’s both unwise and unworthy of our nation”.

Australian Christian Lobby managing director Lyle Shelton also followed suit, remarking that “given Australia is one of the world’s wealthiest nations, it is deeply disappointing that tonight’s budget sees Australia’s overseas aid cut to the lowest in our history”.

On the positive side, the aid budget is expected to increase by 1.1% over the next three years.

Health sector

Putting aside the $2.9 billion in funding for public hospitals agreed to at the Council of Australian Governments in April this year, the health sector will largely be disappointed by the budget.

The major area of concern will be the $182 million removed from 16 flexible funds that provide financing for programs, interest groups and NFPs. The funds cover a diversity of health priority areas, including: chronic disease prevention, substance misuse prevention, rural health outreach, health workforce, communicable disease prevention, Aboriginal and Torres Strait Island chronic disease, and primary care incentives.

This cut is in line with previous years, where $600 million was slashed from the flexible funds in 2015/16 and $197 million in 2014/15.

The Government states that the cuts to the flexible funds will be achieved “through various methods, including by reducing uncommitted funds and continuing the current pause in the indexation of the funds for a further two years from 2018-19”.

The budget also includes a plan to continue the pause on indexation for Medicare rebates (until 2019-20), estimated to save the Government $925 million over the four year forward estimates.

According to Brian Owler, the President of the Australian Medical Association, this will in fact have a negative impact on people that need help. He states that “it means $925 million out of the pockets of everyday Australians. It means people are going to have to pay more out of their pockets when they receive medical treatment.”

It was not all doom and gloom for the health sector however, with the budget including:

• $1.7 billion for a new Child and Adult Public Dental Scheme to be delivered by the states and territories under a National Partnership Agreement (although the benefit of this funding has been disputed);
• $0.8 million to develop online support resources for women who are experiencing, or are at risk of developing, perinatal depression;
• $2.2 million to consider the future ownership of Australian Hearing Services to ensure it has a strong and viable future and continues to provide services to Australians with a hearing loss; and
• $37.9 million to extend access to certain mental health services to all current and former permanent Australian Defence Force members.

Education sector

The budget can be seen as mixed bag for the education sector.

On the one hand, the Government has announced that it will provide an additional $1.2 billion for schools between 2018 and 2020, and $118.2 million for students with a disability (with funding targeted to schools with the greatest need).

On the other hand, the $1.2 billion falls short of the Gonski funding that the Liberal Party promised it would match at the 2013 election, and well below the $4.5 billion that Labor promises to fund if it were to win the upcoming election.

According to the Australian Education Union President Correna Haythorpe, “this budget fails the fairness test. It confirms Malcolm Turnbull will walk away from needs-based Gonski funding and turn their backs on disadvantaged students.”

Furthermore, the Government has announced a series of large cuts to the universities.

Firstly, $152.2 million will be cut to the Higher Education Participation Program (which funds universities to bring in students from the lowest socio-economic levels) and $20.9 million to the Promotion of Excellence in Learning and Teaching in Higher Education Program (which “supports teaching excellence”).

Secondly, in a funding cut that the government describes as a “sustainability measure”, university funding will be cut by $601 million in 2018-19 and $868 million in 2019-20.

Universities Australia CEO Belinda Robinson claims that “cuts worth a combined $180 million to university programs that support disadvantaged students and teaching excellence are fresh blows”.

Therefore, it appears both schools and universities may be frustrated with this budget.

Community welfare sector

The community welfare sector received both good and bad news in this year’s budget.

On the positive side, the Government has announced that it will provide $751.7 million to establish a Youth Jobs Path program for young job seekers aged under 25. The program is designed to provide real work experience to up to 30,000 young people each year, with the hope that this will translate into new employment opportunities.

This program has been heralded as something that could provide real benefits to those seeking employment, with ACOSS CEO Dr Cassandra Goldie stating:

“We are very pleased to see the new approach to helping young people into paid work. This Budget recognises the failure of work for the dole, and has instead provided an opportunity for young people to get work experience in real jobs with a wage subsidy, something we have urged for some time and should be used more widely.”

The Government has also announced that it will crackdown on super tax concessions for higher income earners. Accompanying this crackdown will be a Low Income Superannuation Tax Offset, which will give people with incomes up to $37,000 a refund of up to $500 in their super account of the amount of tax paid on their super contributions.

While the above are certainly positive for the social welfare sector, NFPs may see it as a case of what funding is not included. For example, the budget has maintained the cuts from previous budgets, including cuts to family payments for low income families, reductions in Pharmaceutical Benefits Scheme concessions, higher age pension eligibility age, one month waiting period for young people to access income support and lower payments for many young unemployed people.

An area where the cuts have not only been maintained but increased is the aged care services area. The Government has announced that in addition to the $1.9 billion in cuts to aged care services found in the 2014 budget, a further $1.2 billion will be cut over the next four years.

NFPs may also not see the funding that they think should be included. These include community services for Aboriginal and Torres Strait Islanders, family violence against women and children (receiving $33 million next year compared to the $572 recently announced by the Victorian Government), under resourced legal aid centres, and the rising rate of homelessness.

The decision to not fund these issues have left certain NFPs feeling disenfranchised by the Government, with St Vincent de Paul Society CEO John Flazon claiming “tonight’s budget, like its predecessor, entrenches inequality rather than fighting it.”

Disability services sector

The disability services sector is likely going to be quite happy, with the Government reiterating its commitment to fully fund the National Disability Insurance Scheme (“NDIS”) (which is due to be implemented from 1 July 2016).

The Government has also revealed that it will meet the future costs of the NDIS through the creation of the NDIS Savings Plan. A deposit of $2.1 billion of budget savings will be placed in the NDIS Savings Plan Special Account and these funds will be quarantined, which will lock them in as protected contributions to the NDIS in the future.

According to the Government, the savings will come from:

• Closing carbon tax compensation for new welfare recipients from 20 September 2016;
• Closing carbon tax compensation for those single income families not already in the welfare system but who will enter the welfare system from 1 July 2017; and
• Additional reviews for Disability Support Pension recipients.

While the recommitment to the NDIS is sure to be positively received by those in the disability services sector, People with Disability Australia President Craig Wallace raised serious concerns over how it is funded. He states:

“We have always welcomed a discussion about funding the NDIS so it is sustainable into the future and to ensure it is taken out of the budget cycle. However, the NDIS Savings Fund announcements risk moving the NDIS further into the budget cycle by creating an expectation that the NDIS will be funded from ongoing trade-offs against other equally important human services expenditures. If there is to be a savings fund, it should not be a device to make savings, and poor trade-offs between programs and services supporting and sustaining vulnerable members of our community.”

Conclusion

Federal Treasurer, Scott Morrison, in his speech to parliament said:

“This Budget is an economic plan, it’s not just another budget.”

Unfortunately there will be some NFPs that will be disappointed with the level of funding made available for their own plans.

This article was originally sourced from Moores and was written by Andrew Brooks.