Pearls and Irritations

Skulduggery between the Morrison and Victorian Labor Government will defraud Victorian public schools of about $17 billion over ten years to 2028. The new funding agreement between the Commonwealth and Victorian Governments signed last month will mean that public schools will be under-funded indefinitely while private schools are fully funded or more by 2023 at the latest.

Under the agreement, the Commonwealth will increase its funding of public schools from 17.2% of the Schooling Resource Standard (SRS) in 2018 to 20% by 2023 while the Victorian Government is due to increase its share from 68% to 75% by 2028. Formally, public schools will only ever be funded at 95% of their SRS. The cumulative funding loss from transitioning to only 95% of their SRS by 2028 compared with funding at 100% from 2018 is estimated by Save Our Schools at about $12 billion.

However, public schools are short-changed even more as a result of two special deals in the agreement. They are accounting tricks that allow the Victorian Government to count other expenditures, not included in the nationally agreed definition of the SRS, towards its 75% target. This skulduggery allows it to reduce its effective funding share to slightly less than 71% by 2028, so that public schools will only ever be funded at less than 91% of their SRS.

The first special deal extends one included in other Commonwealth/state funding agreements signed at the end of last year to the Victorian Government whereby it can claim other non-school based expenditure up to 4% of the SRS towards its 75% target. The additional expenditures allowed are depreciation of capital assets and rural school transport. Clause 32(a) in the agreement states that these are the only items that can be included as part of the 4% concession.

Allowance for these expenditure items undermines the integrity of the SRS because they are not included in the nationally agreed definition of the SRS. The SRS of public schools is measured by net recurrent income per student as compiled by the Australian Curriculum, Assessment and Reporting Authority (ACARA). It includes income received by schools and a “notional income” derived from benefits provided by state education departments in the form of teaching staff, administrative support, IT support, etc. which are allocated to schools according to full-time equivalent enrolments. ACARA’s Financial Data Reporting Methodology specifically excludes a number of other non-school expenditures including payroll tax, user cost of capital, depreciation, school transport and expenditure by regulatory agencies such as curriculum and registration authorities.

The cumulative loss to public schools from substituting the allowed non-school expenditures for increases in recurrent school funding to 2028 under this special arrangement is estimated by Save Our Schools at about $5 billion.

The Victorian Government also got a second special deal from the Morrison Government for signing up that is not available to other states. In addition to the 4% allowance, it can claim expenditure on the Victorian Curriculum and Assessment Authority and Victorian Registration and Qualifications Authority as it relates to public schools as part of its share of the SRS. In other state agreements, expenditure on such regulatory authorities is included in the 4% allowance and not as an extra allowance. However, Clause 32(b) in the Victorian agreement clearly specifies regulatory expenditure as additional to the 4% concession.

The annual reports of these Victorian authorities show that their expenditure was $79 million in 2018. This amounts to about $50 million for public schools pro-rated by enrolment share. The cumulative expenditure over ten years to 2028 is estimated at $612 million assuming 2% annual growth in expenditure. It counts as a loss to public school funding because the Government would have otherwise had to increase its recurrent funding by this amount to achieve the 75% SRS target.

This is another breech of the nationally agreed definition of the SRS. Governments have undermined the integrity of the SRS measure to meet their financial interests in limiting increases in funding for public schools.

The two special concessions mean that the Victorian Government has to increase its share of the SRS from the current 68% to only slightly less than 71% over the next 10 years, rather than 75%. Consequently, Victorian public schools will only ever be funded at a little less than 91% of their SRS at best. The total cumulative under-funding to 2028 is estimated at $17.6 billion.

While public schools will remain indefinitely under-funded, private schools in Victoria will be fully funded at 100% of their SRS by 2023. The Commonwealth has guaranteed that Victorian private schools will be funded at 80% of their SRS by 2023 (they are currently funded at 78%). They are also funded at 19.8% of their SRS by the Victorian Government and this is due to increase to 20% by 2023.

Another stark inconsistency in the agreement that favours private schools is that there is no provision for the Victorian Government to substitute non-school expenditure for an increase in its recurrent funding of private schools. For example, there is no provision for expenditure on the Curriculum and Assessment Authority and the Registration and Qualifications Authority as it relates to private schools to be included as part of the state’s share of the SRS of private schools. Private schools will get an actual increase in recurrent funding whereas public schools get defrauded by the inclusion of non-school expenditure items in their SRS.

Moreover, private schools are likely to be over-funded as a result of funding provided by the Morrison Government outside the current model and the new funding agreement. Victorian private schools will receive an additional $1.4 billion under the funding arrangements announced by the Morrison Government last year to apply over ten years from 2020. This will take them to over 100% of their SRS.

The new agreement continues the misdirection of school funding increases over the past decade and longer in favouring the more privileged, better-off school sectors and students. Over 80% of disadvantaged students in Victoria are in public schools and nearly 90% of disadvantaged schools are public schools. The new agreement robs these students and schools of funding needed to meet the learning challenges they face.

Public school organisations should make clear to the Victorian Labor Government that its short-changing of public schools is totally unacceptable. They should ask why a Labor Government is not giving priority to fully funding disadvantaged students and schools. They should insist that the Government renounce its skulduggery with the Morrison Government to defraud public schools. They should insist that the Government commit to funding public schools at 80% of the SRS by 2023 so that they are fully funded according to the nationally agreed Schooling Resource Standard.

Trevor Cobbold is National Convenor of Save Our Schools

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