The new school funding agreements announced over the past few months represent an historic achievement by the Albanese Government. They promise full funding for all public schools after a decade of sabotage of the Gonski funding plan and neglect of public schools by successive Coalition governments. Full funding of public schools offers the prospect of increasing equity in school outcomes. However, there is considerable uncertainty as to whether the promise will be fulfilled.
It is important to understand the state of play of the funding agreements between the Commonwealth and state/territory governments in the context of the Federal election. Will they truly deliver full funding for public schools and when? Is the Coalition’s promise to match dollar-for-dollar genuine? Will the agreements ensure fair funding for all schools? These are pivotal questions.
Unfortunately, they cannot be answered with any certainty given the lack of detail about the agreements and the Coalition’s past record on funding public schools. Much uncertainty remains because there is plenty of opportunity for the promise to be undone and there is little detail about the path to full funding. Moreover, claims by the Education Minister, Jason Clare, that the agreements will ensure that every child will get the funding they deserve and the same chance in life are far from the truth.
Over the past year, three different types of funding agreements were negotiated between the Commonwealth and state and territory governments to apply in different jurisdictions over different time periods from 2025. The main arrangements under the agreements are summarised in the table below.
Heads of Agreement between the Commonwealth and the Western Australian, Tasmanian, ACT and Northern Territory governments were signed during 2024 and included bilateral funding agreements were to apply from 2025 to 2029. The agreements with Western Australia, Tasmania and the ACT are replaced by a new Heads of Agreements negotiated in early 2025. The Northern Territory agreement will continue to apply for 2025-2029.
Interim funding agreements were signed with the New South Wales, Victorian, Queensland and South Australian governments at the end of 2024 to apply for 2025.
A new Heads of Agreement between the Commonwealth and the New South Wales, Victorian, Queensland, Western Australian, South Australian and ACT governments was signed in early 2025 to apply from 2025-2034. This is now the operative agreement for these jurisdictions. In the absence of any further information, it is assumed that the SRS shares agreed for 2025 in the earlier agreements apply under the new Agreement.
There are several sources of uncertainty about achieving full funding for public schools:
- Full funding for public schools will not occur until 2034. This allows much opportunity for future governments, Commonwealth and/or states, to renege on the agreements.
- At this stage, there are no details available on how the increased funding shares will be phased in over the period.
- While the 2025 Heads of Agreement provides for removal of the so-called 4% allowance under which States claimed ineligible spending as part of their SRS share, there are no details on how it will be phased out.
- It is unclear whether the allowance for the states to claim regulatory expenditure as part of their funding share will be removed.
- The 2025 Agreement provides for exceptions to government funding commitments.
- The Northern Territory bilateral funding agreement expands the accounting tricks so that public schools will not be fully funded by the end of the agreements in 2029.
At this stage, there is no certainty that full funding for public schools will be achieved. Meanwhile, private schools will continue to be over-funded until at least 2029 and to be fully funded thereafter.
State of Funding Agreements
Heads of Agreement 2025
The Albanese Government has negotiated a new Heads of Agreement, called the Better and Fairer Schools Agreement – Full and Fair Funding (BFSA), ,with NSW, Victoria, Queensland, Western Australia, South Australia, Tasmania and the ACT. The Agreement sets out several reforms to improve student outcomes, school outcome targets, increased funding of public schools and transparency arrangements. The Agreement operates from 2025 until 2034.
Under the Agreement, the Commonwealth will increase its share of funding the Schooling Resource Standard (SRS) for public schools from 20% to 25% by 2034. The states will contribute 75% by 2034. They have also agreed to remove the allowance in the Morrison Government agreements whereby they could claim non-SRS expenditures up to 4% of their SRS as part of their share and replace it with eligible expenditures by 2034. The Agreement also makes the important commitment that Commonwealth Government funding will be directed to schools with the highest levels of need.
The Heads of Agreement provides the framework for the negotiation of bilateral funding agreements with each jurisdiction. According to the 2025-26 Budget Paper No.2, bilateral funding agreements were signed with New South Wales, South Australia, Tasmania and the ACT before the election was announced. However, these agreements have not been published.
Long phase-in period
While the Agreement is a landmark that offers the prospect that public schools, particularly those most in need, will finally be fully funded, they will remain under-funded for another nine years. That is, public schools will have been under-funded for 23 years after the Gonski Report proposed a model to achieve full funding.
The long phase-in period makes the Agreement and the bilateral funding agreements hostage to several Federal and state and territory elections and changes of government. A change of government(s) could derail the plan.
The Opposition has not committed to full funding for public schools. Its statements are contradictory. The Liberal Party plan to Get Australia Back on Track pledged to match dollar-for-dollar on the school funding agreements. In March, Shadow Education Minister, Sarah Henderson said “a future Coalition Government will match dollar for dollar all school funding agreements entered into with the states and territories”. However, the Leader of the Opposition, Peter Dutton, most recently committed only to honouring the funding outlined in the forward estimates of the Budget Papers which are for four years, not the nine years to 2034.
This has all the hallmarks of the Abbott/Pyne abandonment of the Gonski funding plan in 2013 after Abbott’s infamous pre-election “unity ticket” on school funding with the Rudd Government prior to the 2013 election which he immediately reneged on after the election. The Abbott Government refused to fund the last two years of the Gonski funding plan and released the states from their commitment to increase funding for public schools. As a result, public schools were denied nearly $10 billion in funding by the Commonwealth and the states.
No details on the trajectory of funding increases and removal of accounting tricks
The bilateral funding agreements negotiated under the framework of the Heads of Agreement will specify the trajectory of SRS funding increases over the period to 2034 together with the removal of the 4% allowance that defrauds public schools. As yet, there is no indication as to how the increases in the Commonwealth and state SRS shares are to be phased in over the period. It is not clear whether the SRS shares will increase in equal annual amounts or be backloaded for the last few years as occurred with the Gillard/Rudd debacle. Backloading the increases makes future funding of public schools hostage to change of Commonwealth and state governments. Nor is there any indication of how the 4% allowance will be phased out.
It is preferable to frontload the increases as much as possible over the forward estimates.
Regulatory expenditures
While the Heads of Agreement specifies that the special 4% allowance that allows the states and the Northern Territory to claim non-SRS expenditures as part of their share of funding the SRS of public schools will be removed by 2034, there is no mention of the additional special allowances that have also defrauded public schools. At present, all signatories to the Heads of Agreement 2025, except the ACT, can continue to claim expenditures on school regulatory authorities as part of their share of funding public schools even though these expenditures are specifically excluded from how the SRS is measured, but NSW can only claim these expenditures as part of its 4% allowance.
For example, Victoria can claim all expenditure on curriculum and regulation activity, including the Victorian Curriculum and Assessment Authority and the Victorian Registration and Qualifications Authority. Western Australia can claim all regulatory expenditure on the government and non-government sector by the School Curriculum and Standards Authority and the Department of Education’s regulatory functions. South Australia can claim all expenditure on the Certificate of Education Board and the Education Standards Board.
Save Our Schools estimates that failure to remove this provision would result in a cumulative loss of funding for public schools of about $3 billion over 2025-2034. Consequently, it is important that the bilateral funding agreements clarify whether they will be removed along with the 4% allowance.
Exceptions to the Agreement
The new Agreement allows for “exceptions” to the standard 25/75 split between the Commonwealth and the states that will be detailed in the bilateral agreements. At this stage, there are two exceptions.
- The Commonwealth will increase its share for ACT public schools to 25% and the ACT Government will maintain its share at a minimum of 81.5% from 2030 to 2034.
- The Commonwealth will fund Northern Territory public schools at 40% of their SRS by 2029 and the Northern Territory at 60%.
These exceptions are a positive step towards better and fairer funding for public schools. However, there is no information available on any exceptions that may compromise full funding for public schools by 2034.
Heads of Agreement 2024
Western Australia, Tasmania, the ACT and the Northern Territory signed the previous Heads of Agreement. They also signed bilateral funding agreements with the Commonwealth. These agreements specify the trajectory of SRS funding increases from 2025 to 2029 and determine the funding shares for 2025 until new bilateral agreements are finalised under the 2025 Heads of Agreement. Each government except the ACT can claim the 4% allowance and regulatory expenditures as part of their share of funding public schools.
Under its bilateral agreement, Western Australia agreed to increase its SRS share for public schools from 75% in 2024 to 76.25% in 2025 and to 77.5% in 2026 while the Commonwealth was to increase its share to 21.25% in 2025 and 22.5% in 2026. Tasmania had agreed to increase its share to 75.91% in 2025 and to 77.5% in 2026. However, these arrangements no longer apply as. Under the 2025 Heads of Agreement, both governments will fund a75% share from 2025 and remove the 4% allowance by 2034.
The Northern Territory bilateral funding agreement provides a major funding boost for Territory public schools and disadvantaged students. The Commonwealth Government agreed to double its share of funding the SRS of public schools from 20% to 40% by 2029. The Territory Government will increase its funding share from 59% to 60%.
However, public schools will not be fully funded by 2029 because the Territory Government can continue to claim non-SRS expenditures as part of its share of funding public schools. It can claim expenditure on capital depreciation and direct school transport expenditure up to 4% of the total SRS. The new agreement also includes additional allowance to claim expenditure on the Board of Studies and the Teacher Registration Board. Such expenditures are also specifically excluded from how the SRS is measured.
As a result of these accounting tricks, public schools in the Territory will be funded at 95.5% of their SRS in 2029 instead of 100%. The funding shortfall will be about $60 million.
Interim funding agreements 2025
At the end of 2024, New South Wales, Victoria, Queensland and South Australia signed an Interim School Funding Agreement 2025 because they had not agreed to the Heads of Agreement for 2025-2029. Under these agreements, the Commonwealth funding share would remain at 20% and the Victorian, Queensland and South Australian shares would remain at their 2024 level. The NSW share for 2025 increased from 72.65% in 2024 to 75% in 2025. These states retained the 4% allowance and regulatory expenditure claims from the previous bilateral funding agreements.
School funding remains heavily biased against public schools
The Albanese Government must be congratulated on finally providing for the full funding of public schools, 23 years after it was recommended by the Gonski Report. However, much uncertainty remains as to whether it will be achieved. It is extremely concerning that the bilateral funding agreements and the details of the trajectory to full funding were not published before the announcement of the Federal election. It has made the full funding of public schools hostage to a change of government once again. Nevertheless, the Heads of Agreement creates the prospect of better and fairer funding of public schools. Hope lives on.
Despite the uncertainty about future funding of public schools, the Prime Minister and Jason Clare have made extravagant claims about the new agreements. The Prime Minister claimed:
Today we reach the point for the first time in Australian history where every student, public and private, will be delivered the school funding that they deserve.
[It] makes sure that every child in the country gets the same chance and same great start in life.”
Such claims are far from the truth. They ignore the fact that Australia’s school funding system is heavily biased in favour of private schools, especially those serving the wealthy, and fails to ensure that every child has the same chance in life.
The funding system ensures that private schools have a significant resource advantage over public schools as a result of several factors. First, private schools are significantly over-funded according to the current Commonwealth and state/territory funding arrangements and will remain so until at least 2029. In 2025, private schools are funded at 104.1% of their SRS.
Second, the capacity to contribute (CTC) model used by the Commonwealth to fund private schools systematically over-funds private schools. For example, it does not take account of income received from grandparents (the Bank of Mum and Dad) by parents of children in private schools such as payment of school fees and money for home deposits and other expenditures such as cars, household assets, childcare, holidays, etc. that frees up income to be spent on school fees. Nor does it take account of hundreds of millions of dollars received by private schools from donations, investment and other income. 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]
Another design flaw of the current funding model is that the disadvantage loadings are hugely under-estimated. Extensive overseas research studies show that much higher loadings of double or more the cost of an average SES student in order to make a difference in school outcomes. The current low SES loading is only about 20% of the base SRS. The inadequacy of the disadvantage loadings results in significant under-funding of public schools because over 80% of low SES, Indigenous and remote area students are in public schools.
These flaws in the school funding model mean that the Prime Minister’s claim that the funding agreements will ensure that all students will now get the funding they deserve is incorrect. They also mean that Jason Clare’s claim that all children will now get the same chance in life is also incorrect. These claims cannot be achieved without a complete overhaul of the school funding system.
The agreements also contain another obstacle to achieving these goals. The new national Better and Fairer Schools Agreement between the Commonwealth and state/territory governments fails to clearly define equity or set clear equity goals. The equity objectives and targets in the Agreement do not ensure equity in education and equal life chances for all students.
Nevertheless, the new agreements are a positive step towards full funding for public schools. Indeed, they are the most significant development in the 14 years since the Gonski Report. They also offer some prospect for correcting this the design flaws in the current funding system as they provide for review of way the SRS base and loadings are calculated. The review is planned to begin by md-2027 and to be completed by mid-2029.
In summary, the new funding agreements are a long overdue step forward, but there should be no illusion that they will ensure equity in education even if they are fully implemented. Much more is needed to ensure fair funding and improve the education outcomes and life chances of disadvantaged students.