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Reference: C13/4247

The Hon Ted Baillieu MLA Premier of Victoria 1 Treasury Place MELBOURNE VIC 3000

Dear Premier I refer to your letters of 21 January 2013 and 15 February 2013 regarding the adjustments in national health reform funding payments made in the 2012-13 MidYear Economic and Fiscal Outlook (MYEFO). As you are well aware, Federal Government funding for Victorias health system will continue to increase year on year, from $3.6 billion in 2012-13 to $4.5 billion in 2015-16. This is an increase of $900 million or 26 per cent. I note this increased funding comes at a time when your government has cut $616 million over 4 years from Victorias state health budget. Despite these facts, in recent months you have embarked on a disingenuous and purely political campaign in relation to a $107 million adjustment of health funding from the Federal Government. Your campaign has been designed to detract from the decisions you and your Government have made. You know that the adjustments made in MYEFO are part of a regular process that ensures payments are based on the most up to date information and estimates. The adjustments are not a decision of Government and the Commonwealths actions are consistent with the Federal Financial Relations Act 2009 and the Intergovernmental Agreement on Federal Financial Relations (IGA-FFR). You signed the IGA FFR and the historic, $16.4 billion National Health Reform Agreement on 1 August 2011. Unfortunately, as the system manager of Victorias hospital system, you have chosen to pass on the $107 million adjustment in 2012-13 directly to your Local Hospital Networks (LHNs). Victorian hospitals and patients have been adversely affected as a direct result of your decision. I note that you have done this despite a Goods and Services Tax balancing adjustment that saw additional, unexpected revenue of around $67 million paid to Victoria in 2012-13. This is additional, unbudgeted funding you have chosen not to direct to hospital services.

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This is an unacceptable outcome. Given your inability to manage Victorias health budget, I have decided to pay $107 million directly to LHNs, redirected from areas where Victoria might otherwise have received Commonwealth funding. This additional funding in 2012-13 will enable LHNs to maintain services, and prepare for the additional $900 million in Commonwealth health funding Victoria is set to receive over the next four years. In your letter of 23 May 2012, you stated your intention not to complete the Occupational Health and Safety (OHS) reform stream under the 2008 Seamless National Economy (SNE) National Partnership Agreement. As I indicated to you at COAG and in my reply of 21 September 2012, Victorias performance on SNE reforms would have implications for the allocation of reward payments. Accordingly, the Commonwealth has made a decision that Victoria will be ineligible for $55 million of its reward payment allocation. This funding will be redirected to LHNs to help fix your budgeting problems. The remaining $52 million will count against Victoria when allocating future funding for projects to Victoria. I have written to all other First Ministers to inform them of this decision. Yours sincerely

Julia Gillard

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