School funding: Time to break the mould and build a new model

Dr Lawrence Ingvarson AM

A deep contradiction has developed between Australia’s values and the way our schools are funded—a concern relevant to but absent from the recent productivity roundtable.

In his recent address to the National Press Club, Prime Minister Albanese said: “On the 3rd of May, the Australian people voted for Australian values; for fairness, aspiration and opportunity for all.”

Yet our education system no longer reflects these values. Among OECD nations, Australia now has one of the most socially segregated school systems. Over 80 percent of students from disadvantaged families now attend public schools, compared with only 12 percent in Catholic schools and 8 percent in Independent schools.

Australia’s performance on international tests, such as the OECD’s PISA assessments, has declined since 2000, with widening gaps between advantaged and disadvantaged students, and between high and low achievers.

It would be difficult to devise a more cumbersome or damaging method of funding schools than the one we currently use. Try explaining it to someone from another country. Even harder—try finding a rational explanation for the mess we are in. As many have documented, the system is the product of makeshift political compromises and misguided faith in competition as the path to quality education for all.

The residue is a clumsy school funding model that divides communities, limits opportunity, and wastes human potential. Too many young people are underachieving, unable to realise their talents. The system is also inefficient—far more costly than it needs to be.

Origins of the problem lie in the Whitlam era, which deepened under the Howard Government’s changes to the New Schools Policy. These encouraged almost any group—religious or otherwise—to start a school, even in areas already well served by public schools, and to have it largely funded by the Commonwealth while permitted to charging fees and selectively enrol students.

We have since created what seems an intractable problem: movement in any direction meets resistance. Yet there has probably been no better time than now for the Commonwealth Government to design a simpler, fairer, less wasteful model.

A system that reproduces disadvantage

Rather than supporting fairness and opportunity, current funding settings entrench socio-economic inequality across generations.

Take Bacchus Marsh. The local high school, Bacchus Marsh College, founded in 1921, is funded mainly by the state and open to all. In 1988, a Grammar School was established in the same area. Funded primarily by the Commonwealth, it can also charge fees and select students.

In 2023, Bacchus Marsh College received $17,631 per student—the Schooling Resource Standard. The Grammar School received $24,437 per student, half from government and half from fees. A third of this recurrent funding ($8,548 per student) was diverted to capital works, which in 2023 totalled over $36 million. The College’s capital expenditure was $2.6 million.

Predictably, this created an uneven playing field and divided the community. Students at the College now come from families more disadvantaged than 67 percent of Australian schools, compared with only 13 percent at the Grammar. Forty percent of Grammar students are from non-English speaking backgrounds, compared with 10 percent at the College.

Through no fault of its own, Bacchus Marsh College struggles against the Grammar on measures such as retention rates, NAPLAN scores, VCE results, and satisfaction surveys. Former students often speak of feeling trapped, with limited options.

This pattern is repeated nationwide. With fees exceeding $8,000, many Catholic schools now educate far fewer disadvantaged students than nearby public schools.

Public schools include many excellent ones, but too often they cannot offer the full range of subjects, face staff shortages, and employ teachers outside their areas of expertise. Classrooms lack resources. Buildings are substandard.

It’s time to stop kidding ourselves. We are not giving all students a fair go.

False economies

If intelligence is evenly distributed across society, regardless of socio-educational advantage, differences in achievement and Year 12 completion rates should be small. That they are not is not the children’s fault—it is ours.

Schooling should bind communities together, yet increasingly divides them socially, religiously, and financially. Parents often pay far more than a sound education should cost.

For example, families of Balwyn High School and Carey Baptist Grammar School in Melbourne are at similarly high levels of socio-educational advantage. In 2023, the High School had $16,255 per student in recurrent income, while Carey had $42,196 per student, 81 percent from fees. Carey redirected nearly a third of this income into capital works—over $21 million in 2023—while Balwyn High spent $570,892.

Yet VCE results and NAPLAN scores were little different. Carey may offer more extracurricular activities, but questions arise about efficiency and whether parents truly get value for money.

As this pattern is repeated across Australia it’s not surprising that Australia has the highest level of expenditure on private educational institutions in the OECD: 0.7 percent of GDP, more than double the OECD-wide average of 0.3 percent.

Towards reform

What has become clear are the harmful consequences of allowing some schools to receive public funding and to charge fees in a largely unregulated and expanding market. An “arms race” of extravagant capital works across Melbourne non-government schools has been evident for many years.

Fee structures are designed not only to meet the Schooling Resource Standard but also to provide excess revenue for facilities that enhance relative status in the marketplace, without necessarily improving the quality of teaching.

Evidence of unproductive competition and extravagant spending extends to banal advertising slogans plastered on schools, freeways and railway stations across Melbourne—spending that has little to do with actual classroom teaching.

The danger is that the primary motivation shifts from serving the educational needs of the local community to competing with other private schools for families who can pay high fees or for students likely to achieve academic success.

It’s time for more fundamental reform in the way our schools are funded.

Recent increases in federal contributions to Gonski funding are welcome, but they do not address the core problem. The division of responsibility—Commonwealth funding non-government schools while states fund public schools—is illogical and fosters inequality. There is no evidence that Australia is gaining higher levels of student outcomes from the current situation.

The Age recently reported the principal of a high-fee Christian school praising parents’ sacrifices to enrol their children, without acknowledging that his school’s business model depended on its ability to segregate along class lines students, select high-achieving students and offer teachers better pay and conditions.

No parent in a fair society should have to make sacrifices to secure a good education for their child.

Recent claims from the national lobby group, Independent Schools Australia that private schools are “national assets saving taxpayers $12.5bn a year” can be misleading. Saving whom? Certainly not the parents who pay fees often more than double the cost of educating students in public schools, money that could be far better invested elsewhere.

Countries that perform better on international tests provide choice within cheaper, fully funded public systems. Differences in performance between advantaged and disadvantaged students are smaller.

What we should have realised long ago is that we can provide choice within a publicly funded school system, with no need to charge fees, as has long been the arrangement in countries such as the UK, Ireland, New Zealand and the Canadian province of Ontario, where fewer than ten percent of schools choose to remain outside the system

Australia needs a unified model for funding school: both levels of government jointly funding all schools through a common formula, based on a revised Schooling Resource Standard. All schools, government and non-government, would receive full recurrent and capital funding, provided they do not charge fees.

Some dismiss this idea, but it deserves serious debate. Commonwealth funding would need to rise, but less than many assume, as most non-government schools already receive close to or above 80 percent of the SRS. In 2016, 85 percent of private schools received more public funding per student than comparable public schools.

If fees were eliminated, most parents would welcome the change. A small minority, as in other countries, would continue to choose fee-charging schools.

Building a fairer system

Independent Schools Australia chief executive Graham Catt recently said: “All schools should move to 100 percent of the schooling resource standard, regardless of the sector.” That view is welcome.

But, if is claimed that non-government schools should also be allowed to charge fees or they would not survive, it raises the obvious question; why then should we expect public schools to survive on the SRS?

Claims that highlighting inequities amounts to “class warfare” should be rejected, especially when many private schools operate on business models built on segregation, selection, and superior pay and conditions.

We can do better. The Labor Government now has the best opportunity in years to deliver school funding reform.

No fair-minded society would design a funding system as inequitable and inefficient as ours—especially if its architects did not know where their own children would fall within it.

It is time for a funding model consistent with Australia’s values: fairness, aspiration, and opportunity for all.