Sparkes, who has a petition before Parliament to fund such surgery for young people, said she was ecstatic.
She said the extra money was vital, especially considering that transsexual people were much more likely to commit suicide.
"It's a life-saver, if you can get the surgery. If you can't ... unfortunately it's happened too many times and I've attended too many funerals. So for me, it's emotional."
Sparkes, who paid for her own surgery 11 years ago when she was 67, said the money would provide hope for other transsexual people.
"It's a relief to recognise there might be something going on for younger people."
Associate Health Minister Julie Anne Genter the money was expected benefit 14 more people each year.
"Every New Zealander deserves access to healthcare they need. For some people it's life or death if they get access to this gender affirming medical care."
The first publicly-funded surgery since the cap was scrapped is expected to take place in September.
Last week the Ministry of Health chief medical officer Andy Simpson told the health select committee that some had been on the waiting list since 2007/08, and there had been an upsurge in referrals in the last two years.
A surgeon capable of doing the surgery had recently become available in Auckland, filling a void that had been in place since 2014.
Last week, in an emotional submission to the health select committee, Sparkes told the committee about the difficulties of living in the wrong body.
She said it was important to distinguish between the broader term "transgender" and the narrower term "transsexual", who were people who had "physically crossed the boundary between the sexes".
"I've been a transsexual all my life. I'm 78 now. When I was 8, I knew something wasn't right. My body worked fine, it just wasn't the right body.
"Transsexuals are people who only ever want to change their body. Their body is not wrong. It's a purely physical thing, nothing else.
"It's not a wannabe. It's a matter of being who you are."
She said a transsexual friend had gone to Thailand for vulvoplasty for $8000, a procedure that would have cost $32,000 to be done privately in New Zealand.
She was only able to get the surgery in Thailand because of money left to her by her mother when she died.
Health Ministry group manager Caroline Flora told the committee that people had to be 18 to qualify for publicly-funded surgery.
These are paid out of the High Cost Treatment Pool, a fund available for one-off treatments not otherwise funded by the public system.
Flora said the ministry was working with DHBs to reduce barriers to gender affirming healthcare.
