Govt. Figures Challenged by Public Finance Expert

Friday June 23, 2006

The ACT Government’s savings estimates from school closures have been challenged by a leading expert in public finance. Ian McAuley, Adjunct Lecturer in Public Sector Finance at the University of Canberra, says that the figures presented by the Government are unduly narrow and ignore costs that will be borne by the community.

Indeed, the Minister for Education has been quite explicit about ignoring community costs. He told the Gungahlin regional consultation meeting on 19 June that what happened to the Hall shops if Hall PS closed isn’t of concern to the Government. The Minister is ignoring the requirements of the Education Act that the Minister have regard to the social impact on families and the general school community of closing a school.

Ian McAuley’s comments follow:

There are three things missing from the school closure debate.

First, the figures provided by the government seem to take a narrow fiscal focus. They do not take into account the travel costs imposed on parents and children, or the damage done to communities. In other words these are considered to be what economists call “externalities”, not taken into account because they are “external” to the decision-maker.

That’s hardly advanced economics, but it’s an example of the influence of managerialism in government. Responsible government considers all costs borne by the community; it would not even consider these to be “externalities”. But governments now consider themselves to be businesses, and their performance and decision-making is based on a narrow set of metrics, usually financial metrics, such as $ per student. We’re witnessing a thinned-down philosophy of government, not just poor accounting.

Second, this is, in part at least, a failure of planning. The original NCDC vision of Canberra was of a set of mixed communities. Just as there were not to be rich or poor suburbs, by extension there should not have developed young and old suburbs. Because their capital resources are constrained young people buy on the periphery, crowded out of the closer suburbs by those who don’t have dependent children. Part of the fault lies with the Commonwealth and its tax distortions, but there is also a local failure in physical planning.

Third, there’s an accountant’s obsession with scale economies. Scale economies are easy to measure, and they produce those neat little hyperbolic scatter diagrams we have been seeing in the Canberra Times. But there are also offsetting scale diseconomies, which means the real cost curve is “U” shaped rather than hyperbolic, with some optimum point, and a reasonably large zone around that optimum where unit costs vary little with size.

The trouble with scale diseconomies is that while they are real, they are hard to measure. Think of the benefit if a school is small enough if every teacher knows every student. Think of the cost if there are four bullies who can form a gang rather than two who can be kept in easy control – I’d suggest at least a square law when it comes to playground discipline. Think of the costs of coordinating 2n teachers rather n teachers. Accountants ignore these because they cannot measure them. Those curves presented by the ACT Government should curve upwards past some point.

Ian McAuley
Adjunct Lecturer in Public Sector Finance
University of Canberra
23 June 2006

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Minister Says He Will Provide Savings Estimates

Friday June 23, 2006

The Minister for Education told the Weston Creek regional consultation meeting held at Stromlo HS on 21 June that he will provide the Government’s estimates of savings from school closures for each school in the ACT proposed for closure. He also committed the Government to providing a break up of the savings according to the major components in each case. He told the meeting that the major components of savings were from site-based salaries such as those of the principal and bursar; utilities costs such as water, telecommunications, electricity and heating; and maintenance.

The savings estimates are critical to the Government’s case for closing schools. It is a gross incompetence that they have not been made available from the start of the consultation, despite the Minister’s statements about being committed to an open consultation. Their unavailability precludes public scrutiny of the Government’s decisions and is hampering school efforts to prepare their case.

The Minister also made some specific commitments to families in the Weston Creek region. He stated that all families would be able to enroll their child at a school of their choice in the region following the closure of Rivett and Weston pre-schools and primary schools. This followed a question from the audience that families may not get their school of choice because Arawang and Chapman primary schools are close to capacity.

This commitment may involve additional Government expenditure not provided in the Budget. If Arawang and Chapman are over-enrolled, the Government will need to provide portable classrooms to accommodate the additional students. The transport and installation of portable classrooms involve substantial costs.

The Minister also committed the Government to building a new hall at Chapman PS.

Trevor Cobbold
23 June 2006

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Public Education Under Threat From Budget Cuts

Sunday June 11, 2006

SOS rejects the Government’s cuts to public education as constituting a major threat to the future of public education in the ACT. Massive school closures and massive cuts to secondary teacher numbers will undermine the quality of government schooling. Rather than renew public education as the Government asserts, the cuts will drive more people into the private sector. They will also undermine social inclusion and equity in school education.

SOS also challenges the Government’s estimates of recurrent savings from closing schools. Previous savings estimates have always proved to be greatly exaggerated because of the failure to take full account of the costs of school closures. Significant savings will be dependent on selling off school grounds and shifting large numbers of students into the private sector where the Commonwealth foots most of the funding bill.

The package of school closures and amalgamations is rejected for several reasons. First, it will greatly reduce physical access to government schools. Some 17 schools and 22 preschools will close. Nearly 25 per cent of all primary schools are to close. Over 3000 children will have to travel to a more distant school. This will create serious safety issues for very young children who have to walk or cycle to school over long distances and across the major thoroughfares that surround most Canberra suburbs.

One of the key principles of the ACT Education Act is that the government school system is committed to ensuring reasonable access to public education for all students. It appears that this principle has now been rejected by the Stanhope Government.

Second, it will impose additional financial burdens on families, especially for those who can least afford it. Many families will face additional transport costs to get their children to school. In effect, the Government is transferring some of its costs to families.

Third, it will undermine a key component of the success of the ACT government school system, namely, parent and community participation in schools. The harder or more costly it is for families to get to a school, the more likely it is that participation will decline. This means that parent participation will tend to become the preserve of families of more privileged backgrounds. Yet, it is participation by the families of students more at risk that has the greater impact on student outcomes.

Fourth, there will be an extensive impact on local communities. Schools are at the centre of local community life, they help sustain local facilities such as shops and services and provide a foundation for social support networks. They are also a public facility for recreational, leisure and adult learning activities in the suburbs.

SOS also rejects the Government’s proposal to cut about 160 teachers from our schools. Some 120 of these will be from the secondary school sector and equates to about 10 per cent of the teaching force. This will have a disastrous impact on the quality of secondary school education. Apart from increasing the workload of teachers, it will mean reductions in the number of course options, reduced time for lesson preparation and assessment, and reduced time for course development.

A major concern is that teachers will no longer be able to provide additional individual support for students in terms of extra learning assistance and/or student welfare support. Extra-curricular activities will be severely affected. These are a key part of school life, developing school community, developing student relationships and their relations with teachers, and involving parents and other community members.

The cuts will undermine teacher morale and commitment to the public good. They are a recipe for continued industrial disputation and disruption.

In cutting teacher positions, the Government has broken the central plank of its 2004 election platform. It promised to provide an additional $12 million to government high schools to employ more teachers and other staff to improve student learning outcomes. It has failed to deliver this and now it has been ditched without even an apology.

Together, the school closures and teaching cuts will drive more people to the private school system. It is noteworthy that the government school sector is bearing all the brunt of the Government’s school education cuts. Territory funding of private schools will actually increase with indexation. The private system has proportionately just as many small schools as the government system, yet these small private schools will continue to be funded by the Stanhope Government.

Such a blatant contradiction in government policy must be questioned. To the extent that it faces a stringent fiscal outlook, the Stanhope Government has a very big incentive to move large numbers of students to the private sector because it shifts costs to the Commonwealth and provides large savings for the Territory. The Territory provides 90 per cent of government school funding but only about 15 per cent of private school funding while the Commonwealth and private fees fund the rest. The potential savings amount to $9 000 – $10 000 per student so that, if a third of all students displaced by school closures end up in private schools, the Government saves upwards of $10 million per annum.

The Territory gets an immediate dividend of 50 per cent of these savings while the other 50 per cent is nominally retained by the Commonwealth through the Enrolment Benchmark Adjustment (EBA). However, the EBA liability is returned to states and territories as a conditional grant for science and innovation capacity in schools. So, the Territory Budget gains all round.

The Government says that there is large excess capacity in government schools which is wasting taxpayer funds. The main savings from reducing excess spaces derive from part of a principal’s salary, other site based staff salaries and major maintenance. However, the Government will also incur substantial costs that have to be offset against these savings. The additional costs include: bus transport subsidies, bus purchases and bus maintenance; traffic control works to ensure student safety; transfer and installation of portable classrooms; loss of rent from tenants in closed schools; re-location of government tenants in closed schools; ongoing commercial office accommodation costs for those currently located in closing schools; and refurbishment of some building and grounds in receiving schools.

When such costs are factored into the equation, the net ongoing savings to the Government from closing schools are inevitably quite small. The only real prospect for substantial savings from school closures comes from the sale of land and buildings and from the transfer of large numbers of students to the private sector. The sale of school sites leads to a reduction of green space and recreation areas in local communities and, possibly, a reduction in house values in the affected areas as other facilities dependent on schools decline.

The Government says that the ACT is over-spending on government schools. However, most of the difference between the ACT and the national average is accounted for by higher superannuation, slightly higher teacher salaries, higher depreciation and a higher proportion of students in the high cost senior secondary years. The salary and superannuation conditions have been used to attract teachers in face of highly competitive conditions in the public service and the more expensive depreciation method is one chosen by the ACT Government. The higher proportion of senior secondary students is surely a measure of the success of the ACT college system.

The Government says that it is increasing choice in the government sector through its new package, but all it is doing is creating a hodgepodge of different school structures, many of which have no real demonstrated educational benefit. In practice, the Government is denying many parents what they want most – a good quality local school, where their children can mix with others in the neighbourhood and travel safely to and from school.

It is also denying parents the choice of sending their child to a small school in the government sector. Many parents positively choose small schools for their educational and social development benefits, especially for students with special needs. By contrast, private schools will continue to offer such a choice.

It is the less well-off who will suffer most from the cuts, with reduced access to a local school, higher transport costs, fewer local facilities, and reduced teacher support for their children. It makes a mockery of the goal of the Government’s Social Plan to improve social and educational equity.

Far from supporting public education, the Stanhope Government is in effect encouraging the further privatization of ACT school education. It is obliterating a major distinctive feature of the public system, namely ready access to a local primary and high school. Secondary school quality will be severely impaired by taking out some 10 per cent of teachers. These cuts will undermine public confidence in what has been to date a highly successful school system by national and international standards. They should be rejected by the ACT community.

Trevor Cobbold
11 June 2006