The NSW government says it will absorb Canberra's "callous" cuts to cost-of-living discounts for the state's seniors for this year.
But Treasurer Andrew Constance has refused to commit the state to funding a shortfall in pensioner concessions beyond 2014/15, saying the federal government must return to the negotiating table.
Mr Constance has been vocal in his criticism of the Abbott government's move to cut $450 million in concession commitments over four years, and has now confirmed his budget will include $107 million extra for pensioners' cost-of-living discounts when it comes down later this month.
The concessions include discounted public transport fares, cheaper energy and water bills, council rates and vehicle registration, and would have taken a hit from July 1 if the NSW government had not agreed to stump up the missing cash.
"We believe Canberra has an obligation to reverse their cut: it was an unfair cut, an unjust cut, and certainly a cut which was callous and cruel in nature," Mr Constance told reporters in Sydney on Sunday.
"We'll soak it up in the 14/15 budget.
"But we're also very keen to go back to Canberra to negotiate further around the concessions."
He said reforms to better target concessions are needed.
But the prospect of generations of seniors who have made a "lifelong contribution" to the state taking a hit to the hip pocket with so little notice was untenable.
"Canberra are doing a cost shift onto the states and onto local government," Mr Constance said.
"Well, enough's enough. The line is in the sand. We want to debate tax, we want to debate the federation, and they have an obligation to do so - not enforce change on the states through a federal budget."
He and Minister for Ageing John Ajaka have co-signed a letter with key pensioner advocates calling on Prime Minister Tony Abbott to reverse the cuts.
"We will continue to go back to Canberra demanding that the seniors' concessions be reinstated," Mr Ajaka said.
"They removed these seniors' concessions without any consultation with the seniors groups (or) with our government."
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