The wealthiest most exclusive private schools in NSW are raking in millions of dollars in donations and investment income. These millions are ignored in assessing the need for government funding. It exposes a major flaw in how private schools are funded. The flaw means the schools are massively over-funded by the taxpayer. Funding of private schools must be overhauled.
New figures obtained from the Australian Charities and Not-for-profits Commission (ACNC) show that 41 NSW private schools received $287 million in donations and investment income over five years from 2017 to 2021 (see table below). Donations totalled $226 million and investment income was $61 million. Just eight schools received $146 million over the period. The average income from these sources for the 41 schools was $7 million per school over the five years.
SHORE raked in the most donations and investment income at $37.8 million comprised of $25.4 million in donations and $12.4 million in investment income. Other schools with highly lucrative income in these forms were Scots College with $33 million ($31.8 million in donations and $1.2 million as investment income), Cranbrook with $21.4 million ($20.2 million in donations and $1.2 million from investments) and Moriah College with $19.1 million ($18.9 million in donations and $0.2 million from investments).
Three other schools received over $10 million – Loreto Kirribilli $13.2 million; SCEGGS Darlinghurt $11.3 and The King’s School $10.8 million. Ascham also received $9.4 million. Other schools with multi-million donations and investment income include Newington College $7.7 million and St Aloysius’ College $7.5 million.
Donations and investment income of these wealthy exclusive schools dwarf other private income of public schools. The average such income of NSW public schools in 2020 was $154 per student. By contrast the donations and investment income of SHORE averaged $4,533 per student and $3,243 per student at The Scots College.
These 41 private schools also received $330 million in funding by the Commonwealth and NSW governments in 2020. This funding was determined without regard to their donations and investment income.
Under the current Commonwealth funding method, private school funding is determined by the capacity of families to pay fees. This is measured by the adjusted taxable income of families as reported by the Australian Taxation Office. It ignores other very lucrative sources of income for private schools such as donations and investment income.
These schools raise additional funds through multiple tax-exempt organizations such as foundations, building funds, scholarship funds and others. For example, SHORE raises funds through its SHORE Foundation which has assets of $42 million. The King’s School Foundation has building, scholarship and bursaries funds and has assets of $50 million.
It should also be noted that donations to private schools and their foundations and trusts also reduce the tax burden of the donors, so even more money goes to private, not public benefit.
The failure to include donations and investment income in determining Commonwealth funding of private schools is a major flaw in the current funding model. It results in over-estimation of the financial need of private schools and massive over-funding by the taxpayer. However, it is not sufficient to just include other school income in determining the financial need of private schools because there are other major flaws in the model.
A major flaw is the assumption that the parents of students pay the school fees and other charges. This is demonstrably untrue. Many private school students have their fees at least partly paid by their grandparents. The funding model also ignores other income provided by grandparents such as money for house renovations, household assets such as whitegoods, furniture and IT equipment, cars, holidays and medical expenses that free up family income to be spent on school fees. Over 50% of parents help their adult children with a variety of expenses including school fees. The Bank of Mum and Dad is reputed to be the 9th largest home lender in Australia. As a result of this direct and indirect financial support for families, which is not recorded in adjusted taxable income, the capacity of private school parents to pay school fees is vastly under-estimated and private schools are consequently massively over-funded by taxpayers.
Even apart from these flaws, the current funding model is over-funding many wealthy schools according to its own criteria. Private schools are supposed to be funded at 80% of their Schooling Resource Standard (SRS) by the Commonwealth Government and the remaining 20% by the NSW Government. However, many of these exclusive schools are already hugely over-funded by the Commonwealth. For example, Loreto Kirribilli was funded at 143% of its SRS in 2022 by the Commonwealth instead of 80%, St Aloysius’ College was funded at 140% and Newington College at 126%. Cranbrook and The King’s School were funded at 85% of their SRS.
The over-funding of Loreto Kirribilli amounted to $2.3 million in 2022, Newington College $3.2 million, St Aloysius’ College $2.4 million. The total over-funding for 31 of these private schools was $45 million. Seven schools were funded at slightly less than 80% in 2022 but will be funded at 80% in 2023. Figures for the other three schools could not be obtained.
The current funding model for private schools needs a complete overhaul. A new system should be governed by the principle that government funding for private schools should only fill the gap between private income and a revised SRS. The base SRS should be set as the cost of highly successful public schools with minimum disadvantage. Funding for private schools should be conditional on meeting social obligations and education standards. Private schools whose private income is above the SRS should not receive government funding because it extends their resource advantage over public schools.
A significant first step towards this model would be to end all government funding for wealthy, exclusive high fee private schools. They don’t need taxpayer funding. It is a complete waste and simply adds to their huge resource advantaged over public schools. It is funding that would be better used to support disadvantaged students and schools where additional funding will have much greater impact on improving education outcomes than the taxpayer money being squandered on wealthy schools.