The Victorian Labor Government likes to label Victoria as “the education state”. This is a joke as far as public schools are concerned. A new schools agreement with the Commonwealth Government continues the longstanding massive underfunding of Victorian public schools by billions while Catholic and Independent schools continue to be overfunded. The continued underfunding of public schools is a barrier to reducing the vast inequity in school outcomes between rich and poor students.
The new funding agreement was published in the weeks before Christmas without any public announcement by the Albanese or Allan governments. The agreement is only for two years, 2025 and 2026, instead of the ten year agreement with the other states and the ACT while the Northern Territory has a five year agreement. The limited agreement is the result of a continuing stand-off between the Commonwealth and Victorian governments over the future funding of public schools.
By contrast with the other states and territories, Victorian public schools do not have their share of the Schooling Resource Standard (SRS) increased. It will remain at their 2023 and 2024 levels for 2025 and 2026 because of the stand-off. The Commonwealth share will remain at 20% of the SRS instead of gradually increasing its share to 25% from 2025 as for the other states and the ACT and the Victorian Government has refused to increase its funding share.
As a result, their SRS funding share will have stayed the same for four years. Four years without an increase in their SRS funding share is diabolical for public schools, especially disadvantaged schools.
The agreement also continues the accounting tricks in the previous Morrison and Albanese government agreements that defrauded public schools of an estimated $3.5 billion over 2019-2024.
The Victorian Government can continue to claim non-SRS expenditures as part of its funding share. It can claim up to 4% of the SRS for capital depreciation and school transport (called the 4% allowance). It can also claim expenditure on the Victorian Curriculum and Assessment Authority and the Victorian Registration and Qualifications Authority as they relate to public schools. These expenditures are specifically excluded from the national agreement on how the SRS is measured.
The Albanese Government has even agreed to an additional accounting trick in the new agreement, although it involves a tiny amount of money. Victoria can now also claim its expenditure on the Victorian Institute of Teaching which was not previously claimable. The Institute of Teaching is funded almost entirely by teacher registration fees. The Institute’s website states: “The VIT is funded solely by teacher registration fees and receives no direct funding from the Victorian Government”. However, it has received small government grants amounting to $316,371 in 2025 according to its annual report for 2024-23, of which about two-thirds relates to public schools on a pro-rate basis. The Federal Minister for Education has clarified that the Victorian Government can only claim funding provided by the Victorian Government as part of its SRS share instead of all expenditure by the Institute which amounted to $23.9 million.
The new agreement purports to show that public schools will be funded at 90.43% of their SRS in the two years. However, this ignores the accounting tricks. The actual share is only 85.8% after adjusting for the accounting tricks. Victorian public schools are the most under-funded systems in Australia in 2026, except for the Northern Territory [Chart 1].
As a result, Victorian public schools remain massively underfunded in 2025 and 2026. Save Our Schools estimates the underfunding at $4.2 billion for the two years – $2.058 billion in 2025 and $2.154 billion in 2026. The loss from the accounting tricks is estimated at $671 million in 2025 and $705 million in 2026, with a total loss of $1.4 billion.
An egregious aspect of the agreement is that these accounting tricks do not apply to Victorian Government funding of private schools. The remit of the Victorian Curriculum and Assessment Authority, the Victorian Registration and Qualifications Authority and the Victorian Institute of Teaching covers both public and private schools and private school students are subsidised for school transport.
The new agreement, as with the previous agreements, blatantly discriminates against public schools by allowing the Victorian Government to claim non-SRS expenditure as part of its share of funding public schools but not for its share of funding private schools. It provides yet another resource advantage for private schools. The governments are prepared to continue to underfund public schools and use accounting tricks to defraud them but they will not touch private school entitlements.
In stark contrast to the underfunding of public schools, private schools in Victoria are overfunded by nearly $100 million in 2025. Data provided to Senate Estimates by the Commonwealth Department of Education last November show that private schools were overfunded by $95.2 million. Catholic schools were overfunded by$39.3 million and Independent schools by $55.9 million.
The new agreement continues the long history of neglect of public schools by the Victorian Labor Government. The public school SRS share (adjusted for the accounting tricks) has increased by only 4.9 percentage points since 2019 – 80.9% to 85.8% [Chart 2]. Part of this increase is due to an increase in the Commonwealth Government share of 2.2 percentage points from17.8% to the legislated target of 20%. The Victorian Government is the primary funding source for public schools but its share increased by only 2.7 percentage points – from 63.1% in 2019 to 65.8% in 2026 – and no increase since 2023.
Total funding increased over 2019-2026 inclusive due to indexation of the SRS and the small increases in the Commonwealth and Victorian SRS funding shares [Chart 3]. However, public schools have been denied a massive amount of funding. The underfunding has amounted to about $2 billion a year from 2019. The cumulative underfunding is estimated at $16 billion.
The Victorian Government has also failed to fully meet its formal obligations under the previous funding agreements in several years. Annual compliance reviews by the National School Resourcing Board found that Victoria failed to meet its funding requirements for public schools in three of the five years from 2019 to 2023. It found a shortfall of 0.99% of the SRS in 2019, 1.11% in 2022 and 1.07% in 2023. It estimated the shortfall at $135.5 million in 2022 and $140 million in 2023. These shortfalls are in addition to the underfunding estimates above.
The Premier, Jacinta Allan, and the education minister, Ben Carroll, like to refer to Victoria as the “education state”. This is a complete sham. If anything, Victoria is a failed education state. High inequality is a feature of school education in Victoria, as it is in other jurisdictions.
First, a very high proportion of disadvantaged students do not achieve national literacy and numeracy standards. For example, the 2025 NAPLAN results show that 56.7% of Victorian Year 9 students whose parents did not complete Year 12 did not achieve the national reading standard,55.6% did not achieve the writing standard and 57.7% did not achieve the numeracy standard. In the case of Indigenous students, 52.6% did not achieve the reading standard, 56.9% did not achieve the writing standard and 57.9% did not achieve the numeracy standard.
Second, there was little to no improvement in reading, writing and numeracy outcomes amongst low socio-economic status (SES) and Indigenous students since the new NAPLAN scale was introduced in 2023. There was no improvement amongst low SES students between 2009 and 2022 on the previous scale and little improvement amongst Indigenous students.
Third, large achievement gaps continue between advantaged and disadvantaged students. Low SES and Indigenous students are 4-5 years behind high SES students in reading, writing and numeracy.
The large proportion of disadvantaged students in Victoria are enrolled in public schools. Seventy-nine per cent of low SES students and 82% of Indigenous students attend public schools. Moreover, 91% of disadvantage schools in Victoria are public schools.
The massive underfunding of public schools is a key factor in the poor outcomes for disadvantaged students and the huge achievement gap between rich and poor. Significant improvement in school outcomes for disadvantaged students is dependent on increased funding for public schools. A plethora of research studies over the past 20 years shows that money matters in school education, especially for disadvantaged students.
It is imperative that Victorian public schools are fully funded to ensure all students have a successful school education. Instead of being the national laggard in funding public schools, the Allan Government should become the national standard beater. It should agree to fully funding of public schools and phase out the accounting tricks by 2029. This would provide a huge advantage for Victoria over other states that have only agreed to fully fund public schools by 2034, a commitment which still retains some accounting tricks.