Community sector organisations face growing demand from Victorians with increasingly complex needs. The sector needs a sustainable and appropriately indexed funding base to meet these challenges, and funding to meet mandated increases in wage and superannuation entitlements for employees. Victoria must strengthen the community sector to help people thrive.
A strong community sector helps people overcome disadvantage and become part of strong, cohesive, self-reliant communities. A strong community sector is able to deliver a wide range of services and programs and advocate for policies that help tackle the causes of poverty and disadvantage.
The Victorian Government can strengthen the community sector by ensuring that funding is provided in a sustainable manner that meets the full cost of service delivery.
The cost of service provision is growing. The sector is facing mandated increases in employee entitlements from the Equal Remuneration Order, the National Minimum Wage Order and the Superannuation Guarantee Levy. Other costs, such as the cost of technology, goods and services continue to increase.
Over the past three years, the previous Government did not increase funding sufficiently to cover all these cost increases. While the costs of the Equal Remuneration Order were funded, the Superannuation Guarantee Levy increases were not. And, as costs associated with the National Minimum Wage Order and other unavoidable expenses were not fully covered, the overall costs to organisations of delivering vital community services has far outstripped the level of funding they receive. Unless appropriately addressed this will ultimately have an impact upon the services that many Victorians rely upon.
Fund the Equal Remuneration Order
The state government can help community organisations continue providing quality services to help people overcome disadvantage by honouring its stated obligation and commitment to funding the Equal Remuneration Order (ERO) through to the final increment in December 2019.
The ERO means community organisations must pay wage increases of between 23 and 41 per cent to workers over eight years, through to December 2019. However funding for the wage increases has not been included in state budget forward estimates after June 2015. Without new government funding to cover the prescribed wage increases, organisations may need to cut staff and services to cover these costs, causing greater hardship for those facing poverty. The onus is now on the state government to fund these mandated wage increases in the 2015–16 budget. This will cost around $160 million in 2015–16.
Provide fair indexation for community organisations
The state government can help community organisations meet the rising costs of providing services, by annually indexing its funding for the sector using an appropriate formula.
Approximately 80 per cent of community organisations’ expenditure is on wages and associated costs. A fair indexation formula would index 80 per cent of funding to changes in wages. The remaining 20 per cent would be indexed to changes in prices of goods and services used by community organisations.
Cost increases in the 2012–15 period included:
- The National Minimum Wage Orders of 2.9 per cent (July 2012), 2.6 per cent (July 2013) and 3.0 per cent (July 2014).
- Increases in non-wage costs (e.g. transport, electricity, and office rent) that approximately correlate with the Melbourne Consumer Price Index (1.2 per cent in the year to June 2012, 2.2 per cent to June 2013, and 3.2 per cent to June 2014).
These increases have not been covered by the indexation provided of two per cent per annum.
Offset the cost of the Superannuation Guarantee Levy increase
By covering the cost of the mandated increase in the Superannuation Levy Guarantee, the state government can ensure community sector workers receive legislated entitlements, without organisations needing to cut services to people facing disadvantage.
The Superannuation Guarantee Levy increased by 0.25 per cent in July 2013 and by a further 0.25 per cent in July 2014. As is legally required, community organisations have paid these increased entitlements to employee superannuation funds, but in an unprecedented decision in Victoria, these increases have not been covered by the Victorian government.
The 2015–16 Budget is an opportunity for the new Victorian Labor Government to rectify the shortfalls in community sector funding that have occurred over the past three years.
What the Victorian government will get for fairer funding for the community sector:
- Community organisations focussing on the best way to help people receiving funded services, rather than scrambling to find staff and service cuts
- Services for people who need them that are managed through sustainable, long-term investment approach, rather than a short-term cost-cutting focus
- Community organisations capable of collaborating with government and each other to maintain and implement quality standards and build a more cohesive sector, rather than focussing inward on revenue problems
- Services with the financial stability required to innovate, and be in a position to explore opportunities to innovate, experiment and evaluate their services.