This morning, a bunch of judges in Canberra created more red tape for the Abbott government by declaring it unconstitutional for the federal government to provide funding for chaplains in schools run by state governments. As The Australian correctly reports, this has thrown into doubt another 400 federal government programs.

This could have been fixed by the Rudd-Gillard government when it embarked upon a referendum to legalise direct payments to local councils for popular federal programs pioneered by the Howard government, such as Roads to Recovery. Alas, the Gillard government opted for the most minimal constitutional change possible, with the insertion of just 17 more words in our outdated 16,000-word governing document.

In the face of a furious campaign from the likes of conservative commentator Tim Wilson, Howard-era defence minister Peter Reith and a few recalcitrant Coalition senators including Nick Minchin, then-prime minister Kevin Rudd then ditched the idea altogether when he decided to bring forward the 2013 federal election by one week to September 7. Wilson, now on the federal payroll, described this as his most important victory of 2013. This Canberra-funded public servant supposedly wants to limit the size of government, but all he is doing is maximising the size and power of state government and creating unnecessary red tape.

Rather than giving a grant to his local surf club in Bondi, Wentworth MP Malcolm Turnbull would have to negotiate a tied grant so that the money is first channelled through the NSW state government in Macquarie Street. Talk about bureaucracy gone mad. The minimalist Rudd proposal, crafted by Anthony Albanese, would have headed off any future challenge to Roads to Recovery — but the school chaplains program would still have been in trouble.

The states do most of the heavy lifting in Australia across schools, hospitals, policing, the courts, public transport, insurance schemes (i.e. workers’ compensation), ports and biggest of all, infrastructure development in our capital cities. Besides an almighty taxing power that funds huge amounts of welfare redistribution, the feds don’t do much at all and find themselves constantly arm wrestling with the states over how they distribute their surplus revenues through state budgets. Even the likes of the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission are dependent on state support because these federal regulators could be unscrambled if recalcitrant states withdrew their support and took the powers back.

The one area that has appreciably gone the other way is industrial relations after then-prime minister John Howard used the corporations power to undermine the states to get WorkChoices through a High Court challenge. However, this overreach ultimately backfired on the conservatives because it helped get Labor back in power and then, with the help of the Greens, industrial relations laws regressed further the other way despite what conservative state governments might have wanted to do.

As a local government councillor frustrated by our lack of access to direct Canberra funding, I’m delighted that the High Court has backed Toowoomba man Ron Williams, who wants a separation of church and state. These successful constitutional challenges merely reflect the original compromises of Federation way back in 1901. Australia today has arguably the biggest and most powerful second level of government in the world. It’s a complete anachronism.

It’s now game on for constitutional reform in Australia. Prime Minister Tony Abbott should be bold on the question of indigenous recognition and equally bold on Commonwealth funding with a simple amendment that declares Canberra can allocate funds to any person, institution or project within Australia’s sovereign borders. The bottom line here is that federal Parliament should be able to make laws and give money to whomever it damn well pleases. The states certainly can within their own boundaries.

The constitution hasn’t prevented Abbott from stopping the boats. Why should it be able to stop the funds in such a sweeping and dramatic fashion?