New Report Shows Accounting Tricks Cost Public Schools Over $2 Billion in Lost Funding

A report tabled in Parliament last week has confirmed that public schools lost over $2 billion in funding in 2022 because of accounting tricks in the current Commonwealth-State funding agreements. The Federal Education Minister, Jason Clare, has indicated that the accounting tricks will remain in the new agreements being negotiated with the states and will not be reviewed until the next round of agreements due to operate from 2030. As a result, public schools will miss out on about $13 billion in funding over the next five years.

The report by the National Schols Resourcing Board (NSRB) reviewed state and territory compliance with requirements in the current funding agreements for 2022. The agreements outline funding transition pathways for each year from 2018 until 2023, later extended to 2024. Each state and territory must meet a minimum funding requirement based on the relevant Schooling Resource Standard (SRS) shares specified for their agreed transition pathways for public and private school sectors.

Under the agreements, all states except the ACT can claim expenditures specifically excluded from how the SRS is measured as part of their share of the SRS of public schools. They can claim two types of non-SRS expenditures:

•            Up to 4% of the total SRS for school transport, capital depreciation as well as pre-school in Western Australia and early childhood education in the Northern Territory;

•            Expenditures by regulatory authorities such as curriculum and standards bodies but not in the Northern Territory. NSW can only claim this as part of its 4% allowance.

The Board reported that the states claimed $2.2 billion for these expenditures in 2022. It represents a loss of funding for public schools because the states have used non-SRS expenditures instead of actual SRS funding in meeting their share of the SRS of public schools. The funding loss estimated by the NSRB is the same as that previously estimated by Save Our Schools.

The biggest funding losses were incurred by public schools in NSW, Victoria and Queensland – $613 million, $564 million and $534 million respectively (see Chart 1). Public schools in Western Australia lost $223 million but this is an under-estimate of the full loss because the NSRB report does not include expenditure by the WA Government on education regulatory authorities. Public schools in South Australia lost nearly $150 million.

Public schools can expect similar funding losses in 2023 and 2024, depending on whether governments choose to fund schools above the minimum requirements in their agreements. The actual losses cannot be determined until the NSRB concludes its compliance reports for those years.

Public schools can also expect large funding losses over the life of the agreements being negotiated for the next funding period of 2025-2029. The swindles are retained in the new in-principle agreements between the Commonwealth and Western Australian and Northern Territory Governments. They set a precedent for the negotiations with other states. The Federal Minister for Education, Jason Clare, says the special allowances for the states will be retained in the current agreements and negotiated in the next round of agreements that will operate from 2030. So, the swindles will continue for at least another five years despite the promise of his Oppositin predecessor promising that a future Labor Government would end the “accounting tricks”. SOS estimates the funding loss will be over $13 billion if the states fund public schools at the minimum requirements.

Under an amendment to the Australian Education Act introduced by the Turnbull Government in 2017, Commonwealth Government funding of public schools is limited to 20% of their SRS and the states are responsible for the other 80%. All states except the ACT reported that they were funding public schools at less than 80% of their SRS in 2022 [Chart 2]. However, these shares fail to take account of the accounting tricks. In reality, state governments were funding public schools at far less than 80%. For example, while the reported shares contributed by the NSW and WA Governments of 78% were close to the 80% target, the actual shares were only 74%.

The data provided by the NSRB report allow estimation of the full extent of this under-funding of public schools by state and territory governments in 2022. Based on the report’s figures, SOS now estimates that public schools were under-funded by $5.3 billion in 2022. This is substantially less than the SOS’s previous estimate of $6.9 billion. The difference is largely due to the NSW Government funding its public schools at over $1 billion more than required by its bilateral agreement with the Commonwealth. The report also shows that Queensland, Western Australia, Tasmania and the ACT contributed slightly more funding than required by their agreements. Public schools were under-funded by $1.9 billion in Victoria, $1.6 billion in Queensland and by nearly $850 million in NSW [Chart 3].

The NSRB report also provides data which can be used to estimate over-funding of private schools by state and territory governments. In 2022, the states over-funded private schools by $480 million. This is more than the previous estimate by SOS of $340 million.  The increase was mainly due to the NSW and Victorian governments continuing to fund private schools above the minimum requirements specified in the bilateral agreements.

The NSRB report is official confirmation that the current Commonwealth-State funding agreements are heavily biased against public schools. Public schools are incurring major losses of funding each year because of accounting tricks in the current funding agreements. The report also shows that the states are massively under-funding public schools while over-funding private schools.

It is not too late to change course. The new Western Australian and Northern Territory in-principle agreements show that the Albanese Government is prepared to break with the arbitrary funding limit of 20% of the SRS placed on Commonwealth funding of public schools by the Turnbull Government and play a greater role in the funding of public schools. It offers the prospect of a shorter pathway to full funding of public schools. However, this cannot be achieved while accounting tricks are retained in the agreements. As long as they remain in the agreements, any claim that public schools are fully funded can only be seen as a lie.

One Reply to “New Report Shows Accounting Tricks Cost Public Schools Over $2 Billion in Lost Funding”

  1. Trevor

    These findings are just horrendous for our public schools.
    I note further press today ( 17 April) on inequities in funding.

    What can we do to fix this – which pollies are interested?

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