The state and territory leaders remain concerned over budget cuts despite assurances from the federal government.

Treasurer Joe Hockey says reversing an $80 billion federal budget saving on state school and hospitals funding would be reckless.

The premiers are pushing ahead with a crisis meeting in Sydney on Sunday despite Prime Minister Tony Abbott’s efforts to calm them over budget cuts.

The Abbott government’s first budget signalled an end to school and hospital agreements entered into between the states and the previous Labor government, saving $80 billion over the decade.

Mr Hockey told a business lunch in Brisbane on Friday that federal Labor leader Bill Shorten’s budget reply speech promise to oppose the savings, as well as other measures, was “recklessness writ large”.

“Our political opponents would have you believe there is no problem – they are just dead wrong,” he said of the government’s budget task.

Mr Abbott held a joint media conference with NSW Premier Mike Baird in Sydney after private talks to address the state Liberal leader’s concerns over the budget.

Mr Baird said earlier in the week the budget was a “kick in the guts” to the people of NSW.

He told reporters on Friday that nothing had changed in terms of his concerns.

“We have a long-term challenge with our state finances across the country.”

“What we need to do is constructively put ideas to the prime minister and federal treasurer.”

Queensland Premier Campbell Newman – who will chair Sunday’s meeting – has flagged a push for all the states to receive a portion of the income tax that comes from their residents, which would go to schools and hospitals.

“If the states and territories don’t hang together on Sunday they will be hung separately by this federal government,” he said.

Mr Abbott said he was happy the premiers were thinking about proposals they could put to the federal government, particularly on tax reform and improving the federation.

“I’m not interested in picking fights – I’m interested in finding pathways forward,” he said.

The prime minister said federal funding of schools and hospitals would continue to grow but at a “sustainable rate”, not at the same rate as Labor’s “pie-in-the-sky” proposal.

ACT Chief Minister Katy Gallagher said she expected to lose about $1.3 billion in health funding.

“People will still arrive at the emergency department, they will still require operations, cancer treatment and renal dialysis – this decision simply shifts the burden to the states and territories,” she said.

All state leaders are attending the meeting, except West Australian premier Colin Barnett who said “we’re not panicking”.

Mr Shorten has declared Labor will oppose deregulated university fees, the Medicare co-payment, the fuel tax rise, and hits to pensions and the dole.

Labor revealed figures from the National Centre for Social and Economic Modelling that shows a couple with a single income of $65,000 and two children in school will have more than $1700 cut from their annual budget.

Mr Abbott said “responsible” members of parliament would work with the government to pass the budget.