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When private schools go public

16 March 2020

No longer can non-government schools be said to be saving taxpayer dollars


“We now have two equivalently funded school systems, one of which is significantly advantaged.” Michele Mossop/Australian Financial Review

“We now have two equivalently funded school systems, one of which is significantly advantaged.” Michele Mossop/Australian Financial Review

Australia’s decades-old debate about school funding is increasingly weighed down by assumptions and claims that passed their use-by date years ago. Foremost among these is the belief that non-government schools represent a big saving to taxpayers, and therefore warrant public subsidies. If privately educated children went to public schools, the argument goes, then taxpayers would spend a lot more than the subsidy private schools receive from state and federal governments.

Some have claimed that saving to be anything up to $8 billion in recurrent funding each year. But the reality, at least in the case of two-thirds of non-government schools, is that government funding produces no savings at all. Why? Because those schools are now funded at the same or higher level as similar public schools.

Since 2011, in fact, governments would have come out ahead if all new school enrolments had gone to public schools. That would have involved capital expenditure, of course, but even the capital savings created by competing school sectors are less than a third of the amounts frequently claimed.

Australia will always have both government and non-government schools; they provide an element of choice and in some cases educational diversity, and any fundamental shift would be politically fraught. But we need to ask hard questions about funding. How has a partially subsidised choice of schools become, in two-thirds of schools, a fully funded choice? What are the educational, equity and social consequences? And if governments are funding government and non-government schools at similar levels, should their obligations also be similar?

Crude measures of how much governments save by encouraging private schools simply subtract government funding from those schools’ total spending. What’s left is largely income from fees, and this figure is presented as the saving to taxpayers. The combined claims made by Catholic and independent schools add up to around $8 billion.

To unpack such claims we need to know more about the annual costs of educating students in the government, Catholic and independent sectors, which is not easy. The most common claims are that governments (state and federal combined) provide $9350 for each independent school student, $11,180 for each Catholic school student and $17,530 for each government school student. But the most recent school finance data on the My School website, for 2017, shows an average of $9600, $11,508 and $13,339 respectively.

Why the difference? Catholic Schools NSW, among others, has cautioned that the first set of figures, compiled by the Productivity Commission, measures funding for the public and private sectors in different ways. The second set of numbers — which use consistent measures across the sectors — comes from the Australian Curriculum, Assessment and Reporting Authority.

ACARA’s numbers certainly narrow the average public funding gaps. But using averages creates an additional problem. As My School’s school-level data shows, the three sectors serve students with measurably different rankings according to the Index of Community Socio-Educational Advantage, or ICSEA. Independent schools have the highest ICSEA average, at 1065. Catholic schools are next on 1045, followed by government schools on 981. (An explanation of school ICSEA values is available at My School.)

Lower ICSEA students cost more to educate, and this is reflected in per-student public funding levels. On average, the government sector will always be funded at a higher per-student rate, and any authentic comparisons must take those differences in student needs and costs into account.

Comparisons become more accurate, of course, if schools enrolling students with similar backgrounds are compared. When this is done, the per-student funding differences between the sectors shrinks considerably. The funding data for schools in the narrow 1000–1049 ICSEA range, for example, shows each independent school student receiving an average of $12,136, Catholic school students receiving $12,906 and government school students receiving $14,492.

But there is yet another problem created by the use of averages. Even a “like” group of schools will include big schools, small schools and everything in-between. Averages are distorted by big and small numbers. In the ICSEA range 1000–1049 for example, the per-student public funding (in rounded figures) for government schools ranges from $8500 to $30,000. These figures contribute to the average figure of $14,492.

Using the median, or “middle,” of a set of numbers can reduce these extremes and reduce the distortions they often create. For schools in the 1000–1049 ICSEA range, the median funding figures are $12,046 (per student in independent schools), $12,274 (Catholic schools) and $12,148 (government schools). The public funding differences between the sectors in that ICSEA range all but disappear — to the point where some non-government schools are being funded more per student than are their government counterparts.

But the 1000–1049 ICSEA range represents only a quarter of all students. How similar is the public funding of schools that a majority of students attend?

Schools in the larger ICSEA range of 950–1099 — basically middle-range schools on this measure — enrol just over 60 per cent of students. The average measures for this much larger group of schools reveal that non-government schools in 2017, depending on their ICSEA, received between 83.4 per cent and 104.9 per cent of the public funding going to government schools enrolling students with similar levels of advantage. The median measures show that non-government schools received between 96.9 per cent and 106.9 per cent of the public funding going to government schools enrolling similar students.

Not surprisingly, the public funding of non-government schools since 2011 has increased at around double the rate of increases to government schools. Adjusted for inflation, the public funding differences widen further.

In financial terms, a majority of non-government schools have become “public” — often receiving even more public funding than similar government schools. Hence the question: to what extent does public funding of non-government schools represent any saving to the public purse? And another question: if most Australian schools are publicly funded, shouldn’t they all have the same obligations to the public that funds them?

What would be the recurrent cost to government if all existing non-government school students were funded at the same level as government school students with similar levels of advantage and needs? Finding an answer using My School data involves grouping schools with similar others across all ICSEA ranges, then calculating — for each ICSEA range — the median per-student spend by governments on Catholic and independent school students. This figure is then compared with the equivalent spend on students in government schools. Tables showing these calculations are available in our full report, The School Money-Go-Round.

This exercise reveals a total additional recurrent cost to governments of around $1.1 billion if all existing non-government school students were funded at the same level as similar government school students. This is made up of around $170 million extra to fund Catholic school students and around $900 million extra to fund independent school students. The $1.1 billion to notionally “transfer” all non-government students in this way still comes at a cost, but nowhere near the $8 billion commonly claimed. It is just 2.4 per cent of existing government recurrent spending on schools.

There are good reasons why these calculations may still be inflated:

• The recurrent funding of each sector may change in the future — but current trends are unlikely to reverse. On the contrary, funding changes such as the supplementary funding for non-government schools, announced in 2018, are likely to see previous increases in non-government school funding continue.

• Economies of scale from merging schools and bringing them under one authority are not included. Some economies of scale are implicit, but not calculated.

Other costs directly or indirectly carried by all three levels of government are not counted.

The “savings” calculation assumes that governments would fully fund all students. The reality, as evidenced in comparable countries overseas, is that a percentage of families would continue to seek private schooling without governments subsidising the cost. If this became reality, an unsubsidised fully private sector in Australia would likely enrol between 5 and 8 per cent of all students; the cost to governments of funding these students would reduce to zero. Taking these students out of the calculation would reduce annual cost to governments by around $0.6 billion.

To this point we have focused on the recurrent funding of schools and how the cost to governments has been spread over the public and private sectors. But what might have been the cost to governments if, over time, the growth of student enrolments had instead been accommodated in the public sector?

We know more from work by Lyndsay Connors and Jim McMorrow for the Australian Council for Educational Research. In their 2015 report, they found that if new enrolments in non-government schools between 1973 and 2012 had instead gone to government schools, the recurrent cost saving to governments over this period would have been approximately $7.4 billion.

My School data lends itself to a similar analysis. The total recurrent cost to governments of the additional enrolments across both sectors between 2011 and 2017 was $11.4 billion. However, the per-student cost varied considerably between the two main sectors:

• The 231,333 additional enrolments in the government sector cost $4516 per student in combined federal and state recurrent funding.

• The 102,020 additional enrolments in the non-government sector cost $5697 per student in combined federal and state recurrent funding.

If the additional non-government school students had enrolled in the government sector, the annual cost to governments over the seven years would have been $460.7 million rather than the actual cost of $581.2 million. This represents an overspend, by governments, of $120.5 million each year. Private schooling cost — rather than saved — taxpayers’ dollars over this period.

But there is a catch, which is revealed if state and federal recurrent funding are considered separately.

It cost the states around $2850 each year for every additional student in a government school. If those students had attended a non-government school the figure would be much lower, at $929 per student. The states did save money. It is hardly surprising that they have been willing to provide funding to the non-government sector, especially if they also reduced funding increases to their public schools.

This odd situation helps explain the current tardiness of the states in bringing their school funding up to the agreed 80 per cent of the Schooling Resourcing Standard, or SRS. It also undermines the push for schools in each sector to be funded to their SRS entitlement. As one analyst has revealed, public schools across Australia can’t and won’t get there.

But this is only half the story. Over the seven-year period, it cost the federal government $1666 for every new government school student, but $4705, around three times as much, for every new non-government school student. This much higher spend delivers just one outcome: greater school choice for some families. Arguably, while economics drives state government spending decisions, the ideology of unfettered choice underpins decisions made by federal governments of all political colour. One solution, which requires close scrutiny, might be found in the recent call by Martin Parkinson, former head of the Department of Prime Minister and Cabinet, for the federal government to get out of school funding altogether; at the very least, school funding has to come out of one agreed pot of money.

What about capital funding? Raw figures show that governments do save by not having to meet the capital costs of non-government schools. In 2017, governments paid $234 million towards these costs — still $2.9 billion short of the almost $3 billion capital spend by non-government schools.

But why would governments be obliged to spend this much? The total (from all funding sources) per-student capital investment in 2017 was $738 for government schools, $1794 for Catholic schools, and $3230 for independent schools. Increasing enrolments in any sector require additional capital investment, but the question asked about recurrent funding also applies here: why would governments spend so much more per student?

This is a particularly relevant question to ask of independent schools. Two-thirds of their total capital funds (from all sources) are spent in the most advantaged schools, those above ICSEA 1100. In 2017 this averaged $4763 per student — over six times the per-student rate in government schools. Would governments be expected to match this largesse?

At the government school rate of $738 per student, the additional capital cost to governments would be $966 million, just a third of the $2.9 billion capital spending by non-government schools out of their own funds.

Clearly, in capital as in recurrent costs, the existing high spend in non-government schools doesn’t represent the likely cost to governments if all students attended public schools. This is especially the case given that, when similar ICSEA schools are compared, a much larger per-capita recurrent and capital spending in such schools has little if any impact on measurable student achievement.

Any proposal made fifty years ago to fund a public education system and a competing private system equally would have been greeted with disbelief and derision. Yet we are almost there. It has been slow and incremental, characterised not by any defining agreement or legislation but by an accumulation of deals and dalliances engineered by politicians and sectoral interests.

The shift hasn’t been accompanied by any serious redesign of the operation, accountabilities and obligations of schools to reflect the extent of their public funding. School education is not alone in being “outsourced” in this way, but the wider educational and social consequences of our divided school system are becoming too obvious to ignore. And the creep towards fully funding non-government schools has been accompanied by increasing growth in inequity, something which disadvantages all Australians by restricting overall educational system quality.

There’s a possible silver lining, though. The fact that governments fund most schools roughly equivalently has the potential to open the door to new and productive structures. Shouldn’t governments now insist on matching obligations and service provision from all schools? This would certainly level the playing field and reduce the very evident social and educational segregation. Shouldn’t funding be tied to each school’s commitment to serving a diverse range of families? Wouldn’t we also save by reducing the duplication of schools in so many communities? Shouldn’t restructuring in these directions be at least trialled across some levels/stages of schooling?

Little will happen unless we put aside the slogans and catchcries that have resonated over many years of debate about schools and funding. The belief that funding competing sectors saves public money no longer reflects reality. My School funding data shows that we now have, at the very least, two equivalently funded school systems, one of which is significantly advantaged by additional and unregulated private funding while enjoying fewer rules and obligations. This isn’t working: it is now time for a much better school settlement. •

This article draws on the authors’ new paper, The School Money-Go-Round, released today.

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