by Laura Tingle

Prime Minister Malcolm Turnbull is facing a new budget brawl with the states over who will foot a bill that could potentially run into billions of dollars of spending, with the states concerned that the federal government will seek to rewrite the agreement about sharing the cost of the National Disability Insurance Scheme.

Disabilities Minister Christian Porter is due to meet state and territory disability ministers in Adelaide this week, with an agenda that seeks to link control of the board of the scheme to earlier-than-planned access by the states to Medicare levy funds.

The states, however, are both united and outraged in what they claim is an attempt to limit their say in the running of the scheme – which they still currently fund on a 60/40 split with the federal government – while they also perceive him to be moving away from the 2013 agreement, which said that the federal government would cover any cost blowouts in the scheme in the future.

Mr Porter insisted on Sunday that "any changes to risk-sharing structures appears highly improbable", and also downplayed the suggestion that he is seeking to determine the list of candidates who may be appointed to the scheme's board

However, Canberra continues to be concerned that any cost overruns in the scheme will add billions of dollars to government spending in the future, even though the scheme to date has been running in line with original forecasts. A massive expansion of the scheme from its pilot stage is due to begin from July 1, with forecasts that 65,000 people will join the scheme in the coming financial year to give it overall coverage over 100,000 people.

The outcome of the discussions this coming Friday on what is known as the Disability Reform Council has major implications for other areas of state spending, including on hospitals, education, correctional services and housing, as the definition of what is "reasonable and necessary" support under the NDIS has knock-on effects for institutions and budgets, including hospitals and schools.

An example of the sorts of issues involved is the  definition of where "reasonable and necessary" care for children with significant disabilities applies. If it ends just inside the school gate, costs incurred inside the school must be borne by the education system.

Who sits on the NDIS board

At the centre of the immediate dispute is the long-running tussle over who sits on the board of the agency that runs the NDIS, and a push by some states to get access to what is known as the disability care fund, which collects a proportion of the Medicare Levy. State premiers received a letter from Canberra last Friday directly linking the funding to the board governance issue.

The terms of the existing board expire at the end of June and the Coalition has repeatedly indicated it wishes to replace some or all members with new people who the government says have more appropriate experience for such an agency. Defenders of the current board point to both its record to date but also the need for continuity in arguing that some part of the old board should stay on.

Mr Porter has proposed that the board's appointments be extended by terms of six months and 12 months to allow a staggered turnover of appointments.

The states say he has asserted that the only appointments the states can agree to are from a list he will provide, and also wants to expand the board with three members nominated by the federal government.

Mr Porter claims the states agreed to this at a meeting last year. The states flatly deny this and point to the communique of the meeting which only speaks of it noting Mr Porter's proposal. The scheme's legislation requires the government to get agreement on changes to the board.

Mr Porter told The Australian Financial Review on Sunday that "It is correct that negotiations regarding the future access for states to the Disability Care Australia Fund [where the NDIS Medicare levy money is deposited] is well under way".

"The situation here is that the the former Labor government provided states with the arrangement for states' access to the DCAF moneys which remains the standing offer until a National Partnership Agreement is negotiated.

"Any agreement must occur through multilateral negotiations with all states designed to provide agreement by all states and the Commonwealth to a consistent arrangement for DCAF access.

"The Commonwealth is leading those negotiations in good faith and it is a matter of open acknowledgment that the Commonwealth would like to see those negotiations lead to an outcome where any faster access to DCAF moneys than those provided for by the previous government were accompanied by NDIS governance reforms.

"In any event, the negotiations are ongoing, are proceeding well and no state minister has ever approached me signalling any problems with how the negotiations are being conducted. The notion of the negotiating process being threatening is completely ludicrous."

Canberra trying to bribe states

However, a number of state sources say the federal government is trying to bribe some cash-strapped states into agreeing to the governance changes by offering early access to the Medicare-levy-financed fund, which would normally only start distributing money to the states once the scheme was at full capacity.

Some states have asked for early access to the scheme, or to funds which reflect the proportion of the scheme that is up and running.

Victorian Disabilities Minister Martin Foley told the Financial Review that "no disability minister is in a position to walk away from the intergovernmental agreement and what will cost billions of dollars".

"At a time of major expansion of the scheme, the need to keep continuity and leave experience at the heart of the board is very important and I can't see any reason why that issue would need to be linked to obligations to distribute the disability care  funding money as promised."

NSW Disabilities Minister John Ajaka also pointedly referred to the agreement signed between NSW and the federal government.

"The NSW government's commitment to the NDIS is rock-solid", he said "We remain committed to delivering the NDIS in accordance with our bilateral agreement with the Commonwealth. The NDIS is on time and on budget in NSW. 

"With the NDIS rolling out across half of NSW in July, our foremost priority is helping people with disability, their families and providers get ready.

"I look forward to frank and fruitful conversations with my Commonwealth and state counterparts on a range of issues at the upcoming Disability Reform Council."