A longer forecast window from the Commonwealth Grants Commission would help secure budget bottom lines and reorganise spending if needed, advocates say.
Under the $89 billion carve-up for the 2024-25 financial year, NSW and Queensland's share of the GST pool will fall because rising coal royalties have put them in a stronger budget position to provide services relative to other states, according to the commission.
All other states are estimated to receive more in total GST, with Victoria getting a $3.7 billion increase because it is less able to raise royalties from mining.
NSW Treasurer Daniel Mookhey says the distribution system is broken and is furious the state will be $1.65 billion worse off in the largest single-year cut to its share since the tax was introduced.
In a "frank and fearless" meeting with federal Treasurer Jim Chalmers and state and territory equivalents on Friday, Mr Mookhey called for a wholesale overhaul of the GST-sharing system.
Daniel Mookhey wants the GST-sharing system overhauled. (Dean Lewins/AAP PHOTOS)
He called on the commission to advise each state how much GST they can expect for the next four years so the system can be more transparent and states are better able to prepare.
The commission makes its forecasts public for the coming financial year usually in late February or early March, leaving little time for state treasurers to reorganise their spending and revenue priorities.
Mr Mookhey says the current model leaves states unable to depend on GST funding beyond a single year.
"We need a better system when it comes to this key revenue line so we have more options into the future," he told ABC radio on Tuesday.
"The fact is the Commonwealth Grants Commission doesn't even tell us what they're expecting ... we don't get to see a draft determination.
"The first time we find out about it is generally a couple of days before they release it and it's quite absurd."
Daniel Mookhey says there's little time to adjust the budget after the GST allocation is revealed. (Bianca De Marchi/AAP PHOTOS)
Mr Mookhey maintained the annual GST distribution should be divided according to population share, with smaller states topped up by the federal government to ensure they are not worse off.
"We should simply allocate it on the number of people in each state because it's more correlated to the cost of service delivery," he said.
"For every $1 that Victoria will be giving to other states, NSW will be giving $7."
But Victorian Treasurer Tim Pallas says his state has subsidised other states, not the other way around.
Prime Minister Anthony Albanese also rejected criticisms, saying the independent process is designed to be free of political interference.
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