This question was received as a comment to the post What is a ‘national emergency’? (December 25, 2019) but I thought it deserved a post in its own right. The question is:
Under the existing arrangement where states declare the emergency situations, who pays for what? Are all federal provisions free? The reason I ask is that I’m a student of an emerging new economic school of thought known as modern monetary economics. An outcome of this economics is that it identifies that currency issuing governments, so our federal govt, can essentially afford anything that’s for sale in its currency, so Australian dollars. State governments however are still constrained by the normal having to get dollars and not spending more than they get. So I wonder if both NSW and Vic are at the moment going as hard as they can or do they have some fear of the costs. In a modern monetary economic world, being able to declare a national state of emergency would/should trigger the supply of money and resources to the states to fight these things that is far greater than any state would currently be game to attempt now, lest it runs up a big loan to the banks and is stuck with interest burden as well.
There are two relevant answers to that question. The first relates to the Disaster Recovery Funding Arrangements (formerly the Natural Disaster Relief and Recovery Arrangements (NDRRA)) and the second to the direct delivery of commonwealth support, such as military support as part of the response and recovery arrangements.
Disaster Recovery Funding Arrangements
Each jurisdiction has two thresholds (Department of Home Affairs, Disaster Recovery Funding Arrangements 2018 (Commonwealth of Australia, 5 June 2018; p. 12):
The first threshold is 0.225 per cent of the state’s total general government sector revenue and grants in the financial year two years prior to the relevant financial year; and the second threshold is 1.75 times the state’s first threshold.
Where expenditure on eligible relief and recovery assistance measures exceeds the first threshold, but is less than the second threshold, the Commonwealth reimburses 50% of that expenditure. Once the expenditure reaches the second threshold the Commonwealth reimburses 75% of the expenditure over that threshold.
To trigger the Disaster Recovery Arrangements the jurisdictions do declare that an event is a ‘natural disaster’. Paragraph [5.1] says:
When a natural disaster occurs and the relevant state knows, or expects, the natural disaster to be an eligible disaster the state must notify the department of that fact within three (3) months.
A declaration that an event is a ‘natural disaster’ for the purpose of the Disaster Recovery Arrangements is unrelated to a declaration of emergency or disaster.
Commonwealth physical assistance
The second answer relates to the delivery of commonwealth assistance eg the use of Australian Defence Force resources. Providing direct commonwealth assistance is managed under the Commonwealth Disaster Response Plan (COMDISPLAN). That plan says:
4.1.1 The Australian Government does not normally seek financial reimbursement from jurisdictions for assistance provided under COMDISPLAN. However, when Australian Government assistance is provided for tasks not directly related to the safety of life and property or that could be handled by jurisdiction resources (e.g. clean-up teams) the Australian Government may seek reimbursement from the affected jurisdiction.
4.1.2. Unless the Task Request to the agency clearly states that costs are recoverable, costs incurred to fulfil the request will be absorbed by that agency…
Assistance by the Australian Defence Force is governed by the Defence Assistance to the Civil Community Manual (First ed, 2012). (The manual is not restricted. I obtained a copy of the manual via an FOI request in 2016. I can find no reference to suggest that there is an updated version but, equally, I cannot confirm that this is the latest issue. In any event I have uploaded a copy of the DACC Manual, as amended to 17 April 2015, here – DACC Manual). Paragraph [1.11] says that defence assistance to the civil community (DACC):
… is divided into two classes, emergency and non-emergency, and comprises six categories as follows:
a. Emergency Assistance:
(1) Category 1—local emergency assistance (DACC 1);
(2) Category 2—significant emergency assistance (DACC 2); and
(3) Category 3—emergency recovery assistance (DACC 3).
b. Non-emergency Assistance:
(1) Category 4—significant non-emergency assistance (DACC 4);
(2) Category 5—local non-emergency assistance of a minor nature (DACC 5); and
(3) Category 6—law enforcement non-emergency assistance (DACC 6).
(Further details of what is included in each category is provided at [2.12]). Paragraph [2.31] says:
2.32 The policy for cost recovery is as follows:
a. DACC 1 and 2—no cost recovery (unless DACC recipient agrees to pay costs of support);
b. DACC 3, 4 and 6—direct cost recovery (unless a cost waiver/variation is approved);
c. DACC 5—no cost recovery for community or charitable groups up to a net additional cost of $2500, if amount exceeds the net additional costs of $2500 then the support must be categorised and processed as DACC 4.
The list of assistance that Defence is, and has been providing to the current fire emergencies identifies that nearly all of that assistance is DACC 1 or 2.
There has been some DACC 4 assistance provided in accordance with standing arrangements. These are identified as arrangements with the NSW government to allow the Large Aerial Tanker and other aircraft to use RAAF Base Richmond, RAAF Base Williamtown and the Naval Air Station Nowra and arrangements with Western Australian government and the use of RAAF Base Pearce.
It follows that one would expect that all the DACC 1 and 2 assistance (eg the use of the Navy to evacuate Mallacoota, the use of the Air Force to transport firefighters etc) is being provided at no cost to the states and territories.
There may be cost recovery for the DACC 4 assistance (ie the use of the RAAF air bases and Naval Air Station Nowra) if that is consistent with the pre-arranged agreement unless a cost waiver/variation has been approved.
Relationship between Disaster Recovery Funding Arrangements and COMDISPLAN and state declarations of emergency or disaster
Neither the Disaster Recovery Funding Arrangements nor COMDISPLAN require that the states make a formal declaration of emergency or disaster before they come into operation. The declaration of emergency or disaster by the states and territories is to trigger special emergency powers vested in the Minister or State/Territory controller to manage the response. The declarations do not relate to the arrangements between the Commonwealth and the States.
Whilst I cannot conclusively confirm it, I anticipate that the current Commonwealth assistance to the states and territories arising out of the bushfire emergencies is being provided at no cost to the affected states in accordance with COMDISPLAN. Even if there is a cost, the Commonwealth is likely to meet 50-75% of that cost in accordance with the Disaster Recovery Funding Arrangements.