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Budget 2005 Home Page Half-Year Economic & Fiscal Update 2005

Specific Fiscal Risks - continued

Statement of Fiscal Risks

Child, Youth and Family Services – Collective Employment Contract Negotiations (unchanged, unquantified risk)

The Department of Child, Youth and Family Services has two collective employment agreements that expired on 30 June 2005. The Government is currently in negotiation with the Public Service Association and the National Union of Public Employees to settle new collective employment agreements. Some funding has already been agreed, but any additional funding that may be sought would reduce the operating balance.

This risk is unquantified as disclosure may compromise the Crown in negotiations.

Child, Youth and Family Services – Residential Services Strategy 2003 (unchanged, quantified risk)

The Government is implementing the 2003 Residential Services Strategy for youth justice, which builds on the considerable investment made in facilities when implementing the 1996 Residential Services Strategy.

The Government has agreed in principle to fund the 2003 Strategy subject to fully developed and costed proposals. Some initiatives have already been agreed, and the remaining operating cost risk is $8.4 million in 2006/07 rising to $16.1 million in 2009/10 and outyears, which would decrease the operating balance. The remaining capital risk is $29.5 million, which would increase gross debt. The current proposed phasing of this is $4.4 million in 2006/07, $7.4 million in 2007/08 and $17.7 million in 2008/09.

The Minister of Finance has yet to fully consider the quantum of this risk.

Source: Department of Child, Youth and Family Services

Child, Youth and Family Services – Reviewing Levels of Funding and Service Delivery (changed, unquantified risk)

The Government is reviewing the Department of Child, Youth and Family Services’ funding requirements in order to identify options for sustainable levels of funding and service delivery in the medium term. In addition, there are ongoing demand pressures for which additional funding is sought. Options may be submitted for consideration in Budget 2006. The risk is unquantified as it is unclear what change in departmental funding is required. Any change in funding to reflect a new baseline and/or meet necessary capital injections would impact on the operating balance and/or debt.

Conservation – Foreshore and Seabed Compensation (new, unquantified risk)

Section 25 of the Foreshore and Seabed Act 2004 directs the Minister of Conservation to provide compensation to local authorities that lost their title to any area of foreshore and seabed through the operation of section 13 of the Foreshore and Seabed Act. Councils were to apply for redress by 25 November 2005.

As work is still underway on assessing the quantum of these claims, total potential compensation is not yet known.

Conservation – Lease of Taupo Property Rights from Tuwharetoa (new, unquantified risk)

On 18 May 2005, The Government agreed to enter into negotiations with Tuwharetoa Māori Trust Board following legal clarification of property rights relating to Lake Taupo. The Crown is considering leasing certain property rights from the Tuwharetoa Māori Trust Board in order to resolve current disputes. Negotiations are ongoing and the outcome is not yet known.

This risk is unquantified as disclosure could compromise the Crown in negotiations.

Corrections – Capital Projects (changed, quantified risk)

In Budget 2005, $206 million capital and $220 million operating was approved for Corrections capital projects. The Department of Corrections has estimated that a further total of $180 million capital and $236 million operating funding may be required over the forecast period. The actual amounts depend on the specification and timing of the individual projects and the contracted prices. These estimates include consideration of funding for the Otago Region Corrections Facility and Mt Eden Prison and have increased since the Pre-election Update to reflect revised inmate forecasts and construction costs.

Capital injections would increase gross debt while operating funding would decrease the operating balance.

The Minister of Finance has yet to fully consider the quantum of these risks.

Source: Department of Corrections

Culture and Heritage – Public Broadcasting Programme of Action (unchanged, quantified risk)

On 3 February 2005, the Government released a Public Broadcasting Programme of Action. The Programme contains a set of priorities to guide public broadcasting policy over the next six years, and a series of proposals to give effect to these priorities. The Programme as a whole (if fully implemented) would have total ongoing operating costs rising to around $44 million in 2009/10. Broadcasting initiatives of $10.5 million per annum were included in Budget 2005, leaving a remainder of around $33.5 million. Other individual elements of the Programme of Action may be considered in future Budgets over the next six years. These would decrease the operating balance.

The Minister of Finance has yet to fully consider the quantum of this risk.

Source: Ministry for Culture and Heritage

Economic Development – Large Budget Screen Production Fund (unchanged, quantified risk)

The Large Budget Screen Production Fund was increased by $12 million in July to cover payments up to September 2005. In addition, the Film Commission is aware of a number of other possible applications being made later in 2005/06 that, if approved, would require up to a further $17 million. This would decrease the operating balance.

The Minister of Finance has yet to fully consider the quantum of this risk.

Source: Ministry of Economic Development

Education – Early Childhood Education (new, quantified risk)

As part of the ten-year Strategic Plan for Early Childhood Education, the Government provided funding in Budget 2004 to introduce 20 hours free early childhood education for all three and four year olds who attend community-based teacher-led ECE services from July 2007.

The Government is now considering expanding the type of providers eligible to offer the 20 hours free ECE policy to include any licensed, teacher-led services. Policy development is still underway but this initiative would decrease the operating balance by up to $54 million per annum from 2007/08.

The Minister of Finance has yet to fully consider the quantum of this risk.

Source: Ministry of Education

Education – School Property (changed, quantified risk)

The Government has provided capital of $77.5 million in 2005/06 for school accommodation. Additional capital injections for school accommodation are likely to be required in future years to meet roll growth. Additional capital injections could be up to $125 million in each of the next four years with a corresponding increase in debt.

In addition to capital injections, consequential operating costs of $7 million in 2007/08, $12 million in 2008/09 and $18 million per annum thereafter are likely to be incurred, which would decrease the operating balance.

The Minister of Finance has yet to fully consider the quantum of this risk.

Source: Ministry of Education

Education – Schools ICT Network Infrastructure Upgrade (unchanged, unquantified risk)

The Government is considering the roll-out of the Schools ICT Network Infrastructure Upgrade. This would assist schools to meet the costs of upgrading their computer networks to meet the new IT infrastructure standards.

The Government will consider rolling out phase 2 as part of Budget 2006. This would decrease the operating balance and increase debt.

This risk is unquantified as disclosure could compromise the Crown in negotiations.

Education – Tertiary Student Support Changes (new, unquantified risk)

The Government is considering increasing eligibility for student allowances and expanding scholarships over the parliamentary term. The impact on the operating balance and debt of these changes is unclear as it would depend upon the options chosen.

Education – Tertiary Education Expenditure Review (changed, quantified risk)

The Government has initiated a review on the quality, relevance, sustainability and predictability of tertiary education spending. A number of decisions relating to certificate and diploma tertiary education provision were taken in July 2005. The ongoing capital impacts of these and other decisions on Tertiary Education Institutions are as yet unclear but could increase debt by up to $250 million.

Further policy development is underway and decisions are expected late in 2005 with a particular focus on policy and funding mechanisms that support the long term sustainability of tertiary education and research that is high quality, relevant and value for money. At this stage the impact on the operating balance is unclear as decisions have yet to be taken.

The Minister of Finance has yet to fully consider the quantum of this risk.

Source: Ministry of Education

Education – Vocational Training (new, quantified risk)

The Government is considering a number of policies regarding the expansion of vocational training. These would include increasing the total number of Modern Apprentices to 14,000 by 2008 (up from the existing target of 11,000 funded places by 2007); having 250,000 people participating in industry training; and expanding the Gateway programme to all state secondary schools by 2007. These policies would decrease the operating balance by up to $7 million in 2006/07; $20 million in 2007/08; and $24 million per annum thereafter.

The Minister of Finance has yet to fully consider the quantum of this risk.

Source: Ministry of Education

Education – Wananga Capital Injection (unchanged, unquantified risk)

The Government is currently negotiating with one Wananga (Māori tertiary institution) over settlement of its Waitangi Tribunal claim. The Waitangi Tribunal has recommended that the Wananga be compensated for capital expenditure that has been incurred on facilities to date, be provided funding to bring their facilities up to a standard comparable with other tertiary institutions, and to meet additional capital requirements. A second Wananga claim, which has already been settled, may require a further capital injection should certain conditions be met.

Any capital injection would increase gross debt. This risk is unquantified as disclosure could compromise the Crown in negotiations with the Wananga.

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