Victoria stands to lose up to $1.2 billion a year in funding if the federal government forges ahead with already-legislated GST reform, treasury estimates show.
The Victorian Department of Treasury and Finance estimated the impact of the "no worse off" GST guarantee, legislated by the Commonwealth in 2018, expiring in 2026/27 as part of a bipartisan state parliamentary committee.
Based on the modelling, published in the committee's report released on Thursday, the state could lose between $87 million and $1.2 billion in 2027/28 alone - enough to fund up to 9000 teachers, 9200 police officers or more than 10,000 nurses.
"The impact of this revenue loss on Victoria and states other than WA is expected to affect their ability to provide adequate public services and infrastructure," reads the report.
"These states will have to either provide fewer or poorer quality services, impose higher or new state taxes and/or incur more debt."
Victorian Treasurer Tim Pallas said the GST distribution is "distorted" to reward WA and he wants the guarantee extended.
"Essentially the state of Western Australia, unlike any other state before it, has been given a guaranteed floor on their GST returns," he told reporters.
In an opinion piece published in the Australian Financial Review, Mr Pallas and NSW Treasurer Matt Kean pleaded their case for a review into the GST formula to be brought forward to reflect the disproportionate cost of COVID-19 on the two states.
Victoria has spent $44 billion to support workers, business and the community through the pandemic and Mr Pallas said it could lose up to $3 billion in GST revenue over the next four years without changes.
In a response to the Board of Treasurers, which includes Mr Pallas and Mr Kean, Federal Treasurer Josh Frydenberg rejected the push for a review.
"I understand there was not a unanimous view among our treasuries that out-of-cycle changes in the (Commonwealth Grants Commission's) methodologies were warranted, and that as such changes could undermine the integrity of the GST distribution system," he wrote.
He noted the Commonwealth has provided more than $337 billion in health and economic support outside the GST system, including providing about $14.7 billion in business assistance to states and territories since June 2021.
The next comprehensive CGC review will not be finalised until 2025.
The last review was completed in March 2020, just as COVID-19 hit Australia, and Mr Pallas said it did not account for the "monumental impact" of the pandemic.
Mr Pallas said Victoria's unity ticket on GST with the state opposition and coalition-led NSW government was based on fairness.
