The wealthiest, most exclusive private schools in Australia are raking in millions of dollars in donations and investment income. These millions are ignored in assessing the need for government funding. This is a major flaw in how private schools are funded. The flaw means the schools are massively over-funded by the taxpayer. Funding of private schools must be overhauled.
New figures obtained from the Australian Charities and Not-for-profits Commission (ACNC) show that 50 private schools received $611 million in donations and investment income over five years from 2017 to 2021 (see table below). Donations totalled $461 million and investment income was $50 million. Just 10 schools raked in $291 million, or nearly one-third of the total of donations and investments. The average income from these sources was $12.2 million per school over the five years. This is in addition to their income from fees and other charges.
The top 10 schools were: Melbourne Grammar (Vic) $43.2M; SHORE (NSW) $37.9M; Christ Church Grammar (WA) $36.3M; The Scots College (NSW) $33M; Geelong Grammar (Vic) $32M; Scotch College(Vic) $31.4M; Cranbrook (NSW) $21.4M; Brisbane Grammar (Qld) $20M; Moriah College (NSW) $19.1M and Caulfield Grammar (Vic) $17M.
Donations and investment income of these wealthy, exclusive schools dwarfs other private income of public schools. The average privately sourced other income of Victorian public schools in 2020 was $279 per student. By contrast the donations and investment income of Melbourne Grammar was $5,055 per student and $5,784 per student at Geelong Grammar. The average such income of NSW public schools in 2020 was $154 per student. By contrast the donations and investment income of SHORE averaged $4,533 per student and $3,243 per student at The Scots College.
These are very wealthy and exclusive schools. Their average fees in 2021 were $24,423 per student. Many have fees of around $30,000 or more per student. The fees at Sydney Grammar were $40,700 per student. Ninety per cent or more of students in 40 of the 50 schools were from the top two socio-educationally advantage quartiles. The proportion in the other ten schools ranged from 83 to 89%.
These 50 private schools also received $539 million in funding by the Commonwealth and state governments in 2020. This funding was determined without regard to their donations and investment income.
Under the current Commonwealth funding method, private school funding is determined by the capacity of families to pay fees. This is measured by the adjusted taxable income of families as reported by the Australian Taxation Office. It ignores other very lucrative sources of income for private schools such as donations and investment income.
In addition to fees and other charges, these schools raise additional funds through multiple tax-exempt organizations such as foundations, building funds, scholarship funds and others. For example, SHORE raises funds through its SHORE Foundation which has assets of $42 million. The King’s School Foundation has building, scholarship and bursaries funds and has assets of $50 million. Melbourne Grammar raises funds from its Foundation Endowment Fund with assets of $56 million and a building fund. Geelong Grammar raises funds from its Endowment Trust, with assets of $31 million, a Scholarship Foundation with assets of $40 million, a building fund and a foundation.
Scotch College (Vic) has numerous trusts and beneficial funds that provide funding for the school. Indeed, it has so many that it had a special Act of the Victorian Parliament passed in 2001 to enable it to pool the investment of those trust funds in one or more common funds to minimise administrative costs of operating each fund and increase its investment income. The Scotch College Foundation has assets of $100 million.
These donations also reduce the tax burden of the donors, so even more money goes to private, not public benefit.
The failure to include donations and investment income in determining Commonwealth funding of private schools is a major flaw in the current funding model. It results in over-estimation of the financial need of private schools and massive over-funding by the taxpayer. While including other school income in determining the financial need of private schools would be a step forward to a more equitable funding system it is not sufficient because there are other major flaws in the model.
A major flaw is the assumption that the parents of students pay the school fees and other charges. This is demonstrably untrue. Many private school students have their fees at least partly paid by their grandparents. The funding model also ignores other income provided by grandparents such as money for house renovations, household assets such as whitegoods, furniture and IT equipment, cars, holidays and medical expenses that free up family income to be spent on school fees. Over 50% of parents help their adult children with a variety of expenses including school fees. The Bank of Mum and Dad is reputed to be the 9th largest home lender in Australia. As a result of this direct and indirect financial support for families, which is not recorded in adjusted taxable income, the capacity of private school parents to pay school fees is vastly under-estimated and private schools are consequently massively over-funded by taxpayers.
Even apart from these flaws, the current funding model is over-funding many wealthy schools according to its own criteria. Private schools are supposed to be funded at 80% of their Schooling Resource Standard (SRS) by the Commonwealth Government and the remaining 20% by state governments. However, many of these exclusive schools are already hugely over-funded by the Commonwealth. For example, in NSW Loreto Kirribilli was funded at 143% of its SRS in 2022 by the Commonwealth instead of 80% and St Aloysius’ College was funded at 140%. Melbourne Grammar was funded at 107%. Brisbane Grammar was funded at 133% and St Mary’s Anglican Girls School in Perth was funded at 140%
The over-funding of Loreto Kirribilli is estimated by Save Our Schools at $2.3 million in 2022 and $2.4 million for St Aloysius’ College. Melbourne Grammar was over-funded by $1.7 million while Brisbane Grammar and St Mary’s Anglican Girls School were over-funded by $3 million. The total over-funding of 38 of the 50 schools was $57.6 million. Seven schools were funded at slightly less than 80% in 2022 but will be funded at 80% in 2023. Figures for the other five schools could not be obtained.
The current funding model for private schools needs a complete overhaul. The Commonwealth Government’s funding model purports to assess the financial need of schools for taxpayer funding but it ignores millions of dollars in donations and investment income received by private schools and additional income provided to families by grandparents of children in private schools. It is a highly inequitable funding system. It unfairly over-funds private schools while massively under-funding public schools.
At the very least, income from donations and investments should be included in the assessment of the financial need of private schools. A more significant first step would be to end all government funding for wealthy, exclusive high fee private schools. They don’t need taxpayer funding. It is a complete waste and simply adds to their huge resource advantage over public schools. It is funding that would be better used to support disadvantaged students and schools where additional funding will have much greater impact on improving education outcomes than the taxpayer money being squandered on wealthy schools.
A comprehensive overhaul of the current system is needed to overcome other fundamental flaws. A new system should be governed by the principle that government funding for private schools should only fill the gap between private income and a revised SRS. The base SRS should be set as the cost of highly successful public schools with minimum disadvantage. Funding for private schools should be conditional on meeting social obligations and education standards. Private schools whose private income is above the SRS should not receive government funding because it extends their resource advantage over public schools.