Will defunding school chaplains mean smaller government?

It's hard to come up with a good reason why the federal government should fund chaplains in schools. Even if you feel the program has merit, why should taxpayers fund the general provision of religious services anywhere (like belief itself, this should be up to individuals)? Moreover, services delivered in state schools are unquestionably a state government responsibility.

However the recent High Court decision that effectively ends federal funding for the national school chaplaincy program does not address the merits of the program. Nor does it rest on separation of state and church; that argument had already been rejected in the first case on this issue in 2012.

Instead the High Court's latest decision confirms that the government can only fund and run programs where legislative authority is given under a specific head of power in the Constitution. While this limitation sounds obvious, there are more than 400 programs that have been identified that may not meet that condition.

This decision is a marked turnaround from several decades of expanding involvement of the Commonwealth in all aspects of government. This expansion has been justified in a number of ways – from the states 'dropping the ball' and providing subpar services, to the need to implement international treaties (under the Tasmanian Dams case), and even the importance of local government to the community (in the recent failed constitutional amendment).

In reality, the expanded involvement of the Commonwealth boils down to one thing. The states may provide the services, but the Commonwealth has the money – politely this is called a vertical fiscal imbalance.

The massive duplication of regulation at the state and federal level is a side effect of the vertical fiscal imbalance. The Commonwealth has to see outcomes (though outcomes here really means positive news stories), and can't be seen to be funding failures, so they attach strings to their funding.

But things have changed. The recent federal budget flagged the end of spiralling Commonwealth funding for state government responsibilities in hospitals and schools. And while the budget may have upset the apple cart; by reminding the Commonwealth government they are limited by the Constitution, the High Court is threatening to shut down the whole market.

Some have called this High Court affirmation of states' rights a 'sinister cause,' but it can instead be a pathway to better government. If politicians can't do an end run around federalism any more, they might finally be compelled to fix it.

Simon Cowan is a Research Fellow at The Centre for Independent Studies.