Victoria’s wealthiest most exclusive private schools are raking in millions of dollars in donations and investment income. It exposes a major flaw in how private schools are funded. These millions are ignored in assessing the need for government funding. It means the schools are massively over-funded by the taxpayer. It shows that the funding of private schools must be overhauled.
New figures obtained from the Australian Charities and Not-for-profits Commission (ACNC) show that 44 Victorian private schools received nearly $300 million in donations and investment income over five years from 2017 to 2021 (download table below). Donations totalled $215 million and investment income was $84 million. Just nine schools received $175 million over the period. The average income from these sources was $6.8 million per school over the five years. Each of the 44 schools received more than $1 million over the five years.
Melbourne Grammar raked in the most donations and investment income at $43.2 million comprised of $26.7 million in donations and $16.5 million in investment income. Other schools with highly lucrative income in these forms were Geelong Grammar with $32 million ($16.3 million in donations and $15.7 million as investment income), Scotch College with $31.4 million over four years ($30.2 million in donations and $1.2 million from investments) and Caulfield Grammar with $17 million ($10.4 million in donations and $6.6 million from investments).
Five other schools received over $10 million – Wesley College $10.8 million, Ivanhoe Grammar $10.6 million, Bialik College $10.2 million, Korowa $10.1 million and Xavier College $10.1 million.
Donations and investment income of these wealthy exclusive schools dwarf other private income of public schools. The average such income of Victorian public schools in 2020 was $179 per student. By contrast the donations and investment income of Melbourne Grammar was $5,055 per student and $5,784 per student at Geelong Grammar.
These 44 private schools received $484 million in funding by the Commonwealth and Victorian 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 sourced 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, Melbourne Grammar raises funds from its Foundation Endowment Fund with assets of $56 million and a building fund. Geelong Grammar raises funds from its Endowment Trust, with assts of $31 million, a Scholarship Foundation with assets of $40 million, a building fund and a foundation.
Scotch College has numerous trusts and beneficial funds that provide funding for the school. Indeed, it has so many that it had a special Act of the Victorian Parliament passed in 2001 to enable it to pool the investment of those trust funds in one or more common funds to minimise administrative costs of operating each fund and increase its investment income. Scotch College has its own building, library and museum funds. The Scotch College Foundation raises money for the school through numerous funds including scholarships, bursaries, arts, library and endowment funds. The Foundation had current assets of $100 million in 2021 according to its annual information statement to the ACNC.
At the time the Scotch College Common Fund Bill was debated in the Victorian Parliament, the Labor member for the district of Footscray in Melbourne’s west, Bruce Mildenhall, contrasted the huge fund raising success of Scotch College with the inadequate funding of Braybrook College, a public school in his electorate. He said: “It is testament to the inequality in our education systems that those inequalities are being exacerbated and widened.” It is even more evident 20 years later.
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 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 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 its Schooling Resource Standard (SRS) by the Commonwealth Government and the remaining 20% by the Victorian Government. However, many of these exclusive schools are already hugely over-funded by the Commonwealth. For example, Melbourne Grammar was funded at 107% of its SRS in 2022 by the Commonwealth, Geelong Grammar was funded at 93% of its SRS, Scotch College at 92%, Caulfield Grammar at 86%, Wesley College at 89% and Ivanhoe Grammar at 99%.
The over-funding amounts for Melbourne Grammar was $1.7 million, Geelong Grammar $1.1 million, Scotch College $0.7 million, Caulfield Grammar $1.2 million, Wesley College $1.6 million, and Ivanhoe Grammar $2.5 million. The total over-funding for 30 of these private schools was $35 million. Six schools were funded at slightly less than 80% in 2022 but will be funded at 80% in 2023. Figures for the other 8 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.