Principles for school funding

Entitlement to a base level of funding

For over 40 years, Australian governments have accepted a responsibility to provide a base level of government funding for all students, no matter what school they attend. This government funding acknowledges that schooling is an important public good, vital to a country’s economic prosperity and social well-being. All students are members of the community and all schools provide public benefit, beyond the benefit to individual students.

Until 2014, the base level of funding for Independent schools was calculated as a proportion of the average cost of educating a student in a government school. From 2014, the base level of funding for Independent schools is the Schooling Resource Standard (SRS), adjusted according to a measure of the community’s capacity to contribute.

Needs-based support

Since government funding for non-government schools was introduced in the 1970s, Australian Government funding has been provided on a needs basis, to recognise the relative advantage or disadvantage of different school communities. Since 2001, the relative need of Independent schools for recurrent funding purposes has been measured according to the socio-economic status (SES) of the school community, using Australian Bureau of Statistics (ABS) Census data. From 2014, the proportion of the SRS base funding an Independent school will be entitled to will be calculated by using the same measure – the SES of the school community, although the relativities are not the same between the two models. Schools may also be entitled to additional funding in the form of loadings for disadvantage.

Critical to the effectiveness of a needs-based funding system is the soundness of the measures used to assess relative need. The use of independently collected data which is transparent and rigorous and cannot be manipulated, such as ABS Census data, is an essential requirement of an effective and credible funding model.

Addressing disadvantage

Disadvantaged students in Independent schools, including students with a disability, students from non-English speaking backgrounds, indigenous students and students from regional and remote areas, have long attracted additional government funding, above base recurrent funding, often through specific purpose funding programs established by governments. Some disadvantaged students attending Independent schools, particularly students with disability, have attracted considerably less government funding than students with the same needs attending government schools.

The new school funding model introduced in 2014 incorporates loadings to address specific areas of disadvantage. The six areas of disadvantage are:

  • School size
  • School location
  • Low SES background
  • Students with disability
  • English language proficiency
  • Indigenous students

The majority of Independent schools are in transition to their new funding entitlement which means that most schools are not yet being funded according to the SRS funding formula. Changes made to the SRS funding model now have all schools transitioning by 2029.

Keeping up with cost increases

Governments have long recognised a need to index their recurrent funding for schools annually, to provide for the increasing costs of schooling such as movements in salaries and conditions for staff and other cost increases. Schools in all sectors face continuing financial pressures from rising community expectations in areas such as curriculum, information technology, specialist teachers and pastoral care as well as increases in teacher salaries and extensive regulatory and administrative requirements.

This annual indexation, which has in the past been based specifically on increases in schooling costs, has been critical to continual improvement in education programs in the Independent sector. Fees in Independent schools, while varying considerably from school to school, have generally been increasing at a rate similar to increases in government school costs.

The indexation arrangements for schools will change for Australian Government funding from 2018 away from a school specific index to a fixed index of 3.56% from 2018 to 2020 and then a floating measure of 75% Wage Price Index and 25% Consumer Price Index with a floor of 3% from 2021, raising concern that funding levels may not keep pace with the rising costs of schooling. School specific index annual increases in CPI and WPI are generally higher than overall CPI and WPI.

Stability for families and schools

Independent schools rely on stable and predictable government funding in order to plan and deliver their education programs. Stability in government funding allows schools to predict the private contribution they need to sustain the quality and range of education programs they offer.

Stability and predictability in government funding is also important to parents intending to send their children to Independent schools. The level of government funding is a key determinant of the level of fees, and parents need to plan their finances in advance to meet the cost of school fees.

The continuing financial viability of Independent schools depends on governments maintaining stability and predictability in their funding policies for the sector, as well as on the continuing commitment and capacity of parents to pay fees.

Criteria for government funding models

In addition to a base entitlement for all students, needs-based recurrent funding, additional funding for educational disadvantage and annual indexation to take account of increasing school-related costs, the sector believes that the effectiveness of a government funding model should also be measured against the following six criteria:

  • Equity – schools serving similar communities should generally be funded at similar levels.
  • Incentive – governments should support students in a way that encourages, not discourages, parental investment in schooling.
  • Flexibility – schools should not be locked into a particular funding level, impeding them from responding to changes in their school community.
  • Transparency – the relative need of schools should be assessed on reliable and transparent data.
  • Simplicity – the funding arrangement should be simple to administer, with low administration costs for both government and schools.
  • Predictability – it is important that there is a high degree of stability and certainty in school funding arrangements to assist schools with their financial planning and management.
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