Private schools have a long history of adopting spurious and misleading arguments to defend their privileged over-funding by governments. It was on show again in a recent article by the NSW Association of Independent Schools (NSW AIS). It all serves to deflect attention from the indisputable bias towards private schools in the school funding system.
NSW AIS claims it is “trickery” to adjust for inflation when measuring changes in government funding. It is standard practice to adjust for inflation to exclude the effect of salary and price changes in order to measure changes in the quantity of real resources such as teachers and education materials in both public and private schools. In fact, private schools practice their own form of “indexation,” by generally increasing their annual fees at a rate faster than the inflation rate.
What NSW AIS is really complaining about is that they receive a reduced amount of the base Schooling Resource Standard (SRS) according to the “capacity to contribute” (CTC) of families to pay school fees. The implication is that private schools should receive the same level of government funding as public schools. This would extend their already huge resource advantage over public schools and contradict the Gonski principle of directing funding to those most in need, the overwhelming majority of whom attend public schools.
NSW AIS incorrectly assumes that indexation of the base SRS is the main driver of government funding under the current arrangements. The base SRS is simply a measure of the funding needed by schools with very few disadvantaged students to achieve successful outcomes for students. It is indexed to maintain the measure of real resources needed by schools. Governments choose how much of the SRS they fund. They have chosen to over-fund private schools until at least 2029 and to under-fund public schools until at least 2034. This alone indicates the bias of the current funding system towards private schools.
Over-funding by the Commonwealth and NSW governments
Figures supplied to Senate 2024-25 Budget Estimates by the Commonwealth Department of Education and reported in the previous bilateral funding agreement between the Commonwealth and NSW Governments show that private schools in NSW were funded at 105.2% of their SRS in 2024 while public schools were funded at 91% after taking account of “accounting tricks” that defraud public schools.
Overall, NSW Independent schools were funded at 83.6% by the Commonwealth in 2023 instead of 80%. The Department figures show that many NSW Independent schools are massively overfunded by the Commonwealth. In 2023, Northern Beaches Christian School was funded at 171% of its SRS by the Commonwealth, over double its legislated entitlement of 80%. MLC School was funded at 158%, Newcastle Grammar at 147%, Pittwater House at 137%, Loreto Kirribilli and Loreto Normanhust at 133% and St Aloysius’ College at 132%.
Other Department figures supplied to Senate Estimates show that there are 52 Independent schools in NSW with a median taxable family income of $200,000 or more and for which funding data are available. They are being over-funded by $353 million from 2022 to 2028 by the Commonwealth Government. Of these, 13 schools will be over-funded by $180 million.
It also notable that the NSW Government is also over-funding private schools. The previous bilateral funding agreement shows that it was funding them at 22.57% of their SRS in 2023 and 22.2% in 2024 instead of 20%.
Other forms of government over-funding
This is not the only form of over-funding Independent and other private schools. They have been and are in receipt of many special funding deals outside the CTC funding model, none of which are available for public schools.
A particularly egregious special deal is the $1.2 billion Choice and Affordability slush fund introduced by the Morrison Government to fund private schools over 10 years from 2019 to 2029. Other special funding deals by the Commonwealth Government have included the Low Growth Funding for private schools and other transitional funding to the new CTC funding method, drought assistance, COVID assistance and, most notably, JobKeeper funding worth $769 million.
Private school funding model is designed to over-fund.
The CTC funding model used by the Commonwealth to fund private schools systematically over-funds private schools. It ignores major sources of family and school income when assessing the financial need of private schools for government funding. In doing so, it over-estimates the financial need of schools and, therefore, their taxpayer funding.
The funding of private schools is determined by the median adjusted taxable income of families with children in private schools. This ignores income received from grandparents (the Bank of Mum and Dad).
Many grandparents pay school fees in part or in full for their grandchildren. Several NSW Independent schools even admit to this. Half of fee invoices at one Sydney Independent school are sent directly to grandparents.
Surveys by financial services firms indicate that a significant proportion do so. For example, the industry superannuation fund, REST, found that almost one-third of grandparents use their superannuation to pay school fees for grandchildren. A survey by the education finance company Edstart, found that only half of families with children in private schools can afford the fees from their income.
The Bank of Mum and Dad also provides a steady stream of income for families for home deposits or purchases, cars, household assets, childcare, holidays. All this frees up family income to be spent on school fees.
The failure to take account of all the income provided to families by the Bank of Mum and Dad means that the capacity of families to pay school fees is vastly under-estimated and that private schools are highly over-funded by the taxpayer.
Another major flaw in the private school funding model is that it ignores hundreds of millions of dollars received by private schools from donations, investment and other sources. Financial statements lodged with the Australian Charities and Not-For-Profits Commission reveal that 50 private schools serving the richest families in NSW received $236.6 million in donations, investment and other income in 2023. For example, Sydney Grammar received $16.4 million from these sources, yet none of it is considered in assessing its need for government funding. As a report by the Productivity Commission said:
An important observation about the CTC model is that government funding for non-government schools is not affected by the actual level of funds schools receive through fees, donations and/or other private contributions. [p. 190]
Private school funding should be overhauled
NSW AIS does not acknowledge its privileged government funding which ensures that Independent schools retain a huge resource advantage over public schools. No amount of bluster or obfuscation can deny the fact that independent schools are vastly over-funded.
A complete overhaul of this failed funding model is long overdue. It is a model specifically designed to over-fund private schools. A new model for funding private schools is necessary to ensure they are funded solely on a needs basis as the Gonski Report originally recommended.