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Australia's school funding system needs an overhaul

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The idea of two competing school systems saving taxpayers' money is a myth (Screenshot via YouTube)

Australia certainly isn’t short of policy headaches, but one promises to be of migraine proportions: our school funding regime has reached new heights of absurdity and needs urgent review.

We thought we had resolved this a few years back, but we have “resolved” school funding six times over 50 years. Each resolution has ignored the really wicked problems which just sit, like the migraine, ready to emerge again.

This time around there are two of these. The first is that the funding of competing public and private sectors is no longer delivering on its various promises, especially the expectation that funding two systems “saves” the taxpayer. The second is that the Gonski-agreed funding of government schools – 20% from the Federal Government, 80% from the states – will almost certainly never happen. There are huge policy implications of both of these problems.

The first problem has been brewing for years. State aid to non-government schools began as a subsidy, but it now totals over $14 billion each year. The funding is now high enough to require a rethink of the relationship between the two sectors. This might only happen if and when the “taxpayer saving” argument is re-examined. This is what I have done, ably assisted by Rachel Wilson, Paul Kidson and Tom Greenwell.

How does this re-examination work out? To start with, the common refrain that funding both a public and private system represents a saving to the public purse of $8 billion each year. But in its most crude form, the $8 billion claim simply calculates the total recurrent spend on private schools, then subtracts the government funding share and declares the balance – mostly school fees – as the amount the taxpayer saves.

Our recalculation of the real financial costs and/or benefits of current arrangements is done by notionally “transferring” non-government school students into government schools which enrol students with similar backgrounds. When the costs of this are calculated the annual “savings” range from none at all to, at most, around $1 billion.

Interestingly, two-thirds of non-government schools represent no saving at all to the taxpayer as these schools are already funded, by governments, at the same or higher level than are similar public schools. And all this is before taking into account economies of scale and uncounted forms of financial support to the non-government school sector.

As far as the wealthier non-government schools are concerned, even the lower amounts paid by governments could be recouped. In similar countries, governments don’t pay for these schools; visitors to Australia are constantly amazed that we do. If our high-end private schools were to become genuinely private, governments would be further ahead by $600 million each year, an amount which could be redirected to where it would make a difference.

At the very least the current similar per-student spend by governments on both sectors is a big argument for making sure they have similar responsibilities, accountability and especially obligations to the taxpayer who funds them. The obligations need to match the money. Without that happening, we’ll continue to have a public sector which must serve everyone and a private sector without anything like such an obligation.

The second problem is a big fly in the school funding ointment and it’s called federalism, Australian style. State and federal governments fund our schools' different amounts for different reasons: the former to make sure a school is available to everyone and everywhere, the latter to provide a choice of schools, at least to anyone who can afford the fees. Now here is the shocker — by funding private schools, the states and territories actually do save taxpayer funds, but the Federal Government – the one with more money and far less obligation – spends up big.

On balance, the taxpayer – the same one who contributes to the coffers of both governments – is paying more than is needed. And there is a bigger problem: if the states “save” by part-funding private schools, what chance is there that they will ever fund their own schools to the agreed 80% of the Schools Resourcing Standard (SRS)? They have no incentive to do this. In the meantime, much of the private sector already enjoys funding in excess of their SRS entitlement. In the old quiz terms, while the non-government schools are getting both the money and the box, it appears that government schools will never even get the money.

If anyone had sat down decades ago and designed what we have now, they would have been laughed out of any decision-making forum. We need a complete review of Australia’s framework of schools, especially how they are provided and funded. The funding of schools has to come out of one bucket and allocated by a completely independent authority at arm’s length from governments. Alternatively, all schools should be funded by the states alone, a proposal recently advanced by a former top federal bureaucrat.

But let’s face it: none of this will happen and we’ll continue to bear the cost and the waste in so many ways. After all, such a rethink would require a level of political courage that has gone missing in (in)action in recent years. In the meantime, let’s pour cold water over claims that having two parallel and competing school systems saves the taxpayer. Then we can start to create something better.

Chris Bonnor is co-writer, with Rachel Wilson, Paul Kidson and Tom Greenwell of The school money-go-round released on 16 March and reported in The Sydney Morning Herald.

This article was originally published by 'Pearls and Irritations' and is republished with permission.

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