Answers are Needed on Inconsistencies in Private School Funding Figures

The recent estimates of government expenditure on private schools published by the Productivity Commission in its Report on Government Services (RGS) are inconsistent with other official figures. The inconsistencies need explanation as they are creating confusion in public debate about trends in school funding.

The Commission’s figures show a much lower increase in government funding for private schools than for government schools in recent years while other official figures show that government funding for private schools has increased by much more than for government schools.

The RGS states that total Commonwealth and state/territory government expenditure on private schools fell in real terms (that is, adjusted for inflation) by $462 per student between 2004-05 and 2008-09 while government expenditure on government schools increased by $623 per student. In current dollar terms, expenditure on government schools increased by $2,829 per student (or 26%) while expenditure on private schools increased by only $796 per student (13%).

This increase for private schools is much less than the annual indexation provided to private schools under the SES funding model. It is also much less than the increase shown in the National Report on Schooling (NRS) published by the national education ministers’ council.

Inconsistency with SES funding
The increase in Commonwealth Government expenditure on private schools in the RGS is much less than the increase in the annual supplementation provided to private schools by the Commonwealth according to increases in Average Government School Recurrent Costs (AGSRC).

The AGSRC is used as the benchmark for annual increases in Commonwealth general recurrent funding of private schools under the SES funding model. Private schools are funded at varying percentages of AGSRC. All schools, except a small proportion categorised as “funding guaranteed”, receive annual percentage increases in funding in line with the percentage increase in AGSRC. Commonwealth Government expenditure accounts for about three-quarters of total government expenditure on private schools.

The percentage increase in Commonwealth Government expenditure on private schools reported in the RGS is about half that actually provided by the Commonwealth in annual SES supplementation over the period. According to the RGS, Commonwealth Government recurrent expenditure on private schools increased by 11% between 2004-05 and 2008-09 (Table 1). In contrast, the AGSRC primary school and secondary school rates increased by 23% and 18% respectively. As a result, private primary schools had their SES funding increased by 23% and all private secondary schools had their SES funding increased by 18%.

This disparity needs to be explained. It is just not possible for private schools to have received a lower increase in Commonwealth Government funding than that shown by the increase in AGSRC apart from for the small number of funding guaranteed schools which do not receive AGSRC increases.

It is also to be noted that the RGS shows an increase of 19% in state and territory government expenditure on private schools in the same period is similar to the increases in AGSRC.

Inconsistency with National Report on Schooling
The increase in government expenditure on private schools shown in the RGS is also less than half the increase shown in the NRS. To see this it is necessary to use 2007-08 figures because the 2008-09 figures have not yet been published by the national ministers’ council.

The increase in total government expenditure per student in private schools between 2004-05 and 2007-08 in the NRS was 20% compared to only 9% in the RGS (Table 1). The NRS increase was $1,161 per student compared to $553 in the RGS.

There are also large differences between the two reports for both Commonwealth and state/territory government expenditure on private schools. According to the NRS, Commonwealth Government expenditure increased by 20% per student between 2004-05 and 2007-08 but by only 8% according to the RGS. The actual increase shown in the NRS was $861 per student compared to $349 in the RGS.

Similarly, the state and territory government funding increases are also higher in the NRS than in the RGS – 20% compared to 12%. The actual increases were $300 per student in the NRS and $204 in the RGS.

One possible explanation for this difference between the reports is that the NRS figures include both recurrent and capital funding by governments while the RGS figures include only recurrent funding. Therefore, it would be expected that the NRS figures are higher than the RGS figures. However, this is not the case – the NRS figures are lower than the RGS figures for much of the period considered. This is quite anomalous.

The NRS figures for total government expenditure are consistently below those in the RGS for the period from 2001-02 to 2005-06 by varying amounts up to $300 per student. However, thereafter, they are higher than the RGS figure as would be expected because they include capital grants which are excluded from the RGS figures. In 2007-08, the NRS figure was $6907 per student compared to $6607 in the RGS.

Disparities between the reports are evident for both the Commonwealth and state funding figures. The Commonwealth funding figures for private schools in the RGS are higher than in the NRS between 2001-02 and 2005-06, but are lower for 2006-07 and 2007-08. The state government funding figures in RGS are higher than in the NRS for the whole period.

As a result of these differences, the comparative increases for government expenditure on private and government schools in the RGS are highly inconsistent with those reported in the NRS. The NRS shows that total government expenditure on private schools increased by 20% between 2004-05 and 2007-08 compared to an increase of 18% for government schools. However, the RGS shows that expenditure on private schools increased by only 9% compared to the increase of 18% for government schools.

The NRS figures also show that government expenditure on private schools has increased significantly more than for government schools since 2001-02. Expenditure per student on private schools increased by 49% between 2000-01 and 2007-08 compared to 41% for government schools. In contrast, the RGS shows that government expenditure on private schools increased by less than for government schools – 36% compared to 41%.

The different trends are entirely due to differences in figures on government expenditure on private schools as both reports have common figures for government expenditure on government schools, except in 2000-01. They both show that between 2004-05 and 2007-08 government expenditure on government schools increased by 18% per student.

Inconsistencies in the treatment of government expenditure on government and private schools
A further important matter in the discussion of government expenditure on schools is the inconsistencies in what is included as expenditure on private and government schools. Both reports do not compare like with like.

Several items are included in government expenditure on government schools which are not included in expenditure on private schools. These are the user cost of capital, payroll tax and subsidies for student transport costs. As a result, government expenditure on government schools is over-estimated in comparison with expenditure on private schools in both the RGS and NRS.

In addition, government capital expenditure is treated as depreciation for government schools but as cash grants for private schools (the latter being excluded from the RGS series). Several other items are not included in government expenditure on private schools in both series. These include government expenditure on tax concessions for donations, administration of funding and regulation of private schools and expenditure on shared government services for private schools.

The user cost of capital is the major item included in expenditure on government schools but excluded from expenditure on private schools. It amounted to $1953 per student in government schools in 2008-09. It should be excluded from government expenditure on government schools to obtain a more accurate comparison of government expenditure increases for government and private schools.

For the NRS series, this adjustment means that government expenditure per student in government schools increased by 16% between 2004-05 and 2007-08 compared to 20% in private schools (Table 2). Between 2001-02 and 2007-08, government expenditure per student in private schools increased by 49% compared to 38% in government schools.

It is also to be noted that the user cost of capital increased by much more than total government expenditure on government schools in both periods. Between 2001-02 and 2007-08 it increased by 67% compared to an increase of 38% in expenditure on government schools excluding the user cost of capital. Between 2004-05 and 2007-08 it increased by 26% compared to total expenditure of 16%.

Conclusion
These inconsistencies in the official figures on government expenditure on government and private schools need to be resolved. They hamper informed public debate and create much confusion about trends in government expenditure on schools. They must be cleared up. It is something the Gonski Review of School Funding will have to get to the bottom of.

In the meantime, it is more appropriate to use the NRS figures for several reasons. First, the RGS figures are incomprehensible because government expenditure on private schools is estimated as increasing by less than AGSRC, the benchmark used to provide annual supplementation to private schools under the SES funding model.

Second, the NRS figures include capital grants to private schools and therefore provide a more comprehensive estimate of government expenditure on private schools. Third, as the NRS figures include capital grants to private schools they are more comparable with the government school expenditure figures, which include capital expenditure by way of depreciation, although there are several other incompatibilities between these expenditure series.

Trevor Cobbold

Tables on Government Funding of Government and Private Schools

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