State Aid for Non-Government Schools: The emerging debate


Current Issues Brief 2 1996-97

Greg McIntosh
Social Policy Group
19 August 1996

Contents

Major Issues

Introduction

'State Aid': the Background

Enrolment Patterns

Funding Pattern

Overseas Comparisons

Threshold Questions Relevant to the Debate

Endnotes

Appendices

  • Table 1: Recurrent Grants: Government Schools - State and Commonwealth Payments
  • Table 2: Recurrent Grants: Non-Government Schools - State and Commonwealth Payments
  • Table 3: Capital Grants: Government Schools - State and Commonwealth Payments
  • Table 4: Capital Grants: Non-Government Schools - State and Commonwealth Payments

Major Issues

The current budgetary environment appears to be contributing to the resurrection of the 'state aid' debate that characterised much of the 1960s and early 1970s. The Commonwealth first began direct funding to non-government schools in 1964, largely in response to the problems being faced (overcrowding, inadequate buildings and poorly trained teachers) by Catholic schools at that time.

More recently there has developed a general consensus that non-government schools should receive 'state aid' and the debate now centres around the level of that 'aid' and particularly the level of such funding relative to that provided for government schools. At present the Commonwealth funds approximately 12% of total spending on government schools and approximately 38% of total spending on non-government schooling. Figures highlighting what appears to be a disproportionate funding share going to the non-government sector (for example, according to the Chair of the Schools Council, Anne Morrow, between 1989 and 1994 total government funding - Commonwealth and State - for non-government schools rose by 30% per student, compared to a rise of only 9% for government schools) has led to a renewed interest in the 'state aid' issue. Analysis of figures comparing funding for 1977 - 78 with that of 1994 - 95 confirm the pattern identified by Ms Morrow. Moreover, a brief analysis of the funding provided to the private education sector in comparable overseas countries does appear to indicate that Australian governmental provision for private schooling is in the average to above average range.

There has been a steady but constant drift of enrolments away from the government sector to the non-government sector - in 1978, 21.2% of full time students were enrolled in non-government schools; by 1985 the equivalent figure was 25.8% and the 1996 figure is estimated to be 29.4%. Changes mooted by the Coalition Government to the New Schools Policy (which limits Commonwealth funding to new non-government schools that satisfy certain criteria) may well have the effect of exacerbating this drift to the non-government sector.

The fact that the Commonwealth provides in excess of 65% of all government recurrent and capital expenditure going to the non-government sector means that as enrolments move in that direction there is cost shifting, in terms of financing schools, from the States to the Commonwealth. In a purely budgetary sense it is advantageous for the States and Territories to encourage the growth of non-government schools.

There would appear to be a series of questions that go to the core of the 'state aid' debate that need to be considered by the various interests and groups involved with the funding of schools in Australia :

  1. What is an appropriate level of funding for the schooling systems in Australia?
  2. What is an equitable and appropriate split of funding for government and non-government schools? How should this split be decided? Is the present system of needs based funding for non-government schools fair and equitable?
  3. What specific roles should State/Territory and Commonwealth governments have on policies/funding for government and non-government schools?
  4. Are present accountability mechanisms required of both government and non-government schooling systems for Commonwealth and State funding adequate and appropriate?
  5. What restrictions, if any, should be placed on the establishment of new schools, particularly new non-government schools?
  6. To what extent should market forces be allowed to determine enrolment patterns in schools?

Introduction

It would appear that the divisive 'state aid' debate that characterised much of the 1960s and early 1970s is about to re-emerge. According to one observer...

After a decade in the wings the bitter State aid debate is about to be revived. The old players - Federal and State governments, teacher unions, independent schools, parents' spokesmen - are already taking up position. There is talk of a public campaign for State schools.(1)

The essential reason for the re-emergence of this debate is changed patterns of school funding over time and the apparent decline in funding for schools relative to rising educational costs, especially costs involved in emerging fields such as information technology. In particular, the highlighting of government funding patterns showing that the growth in funding over recent years has gone disproportionately to the non-government sector has led some supporters of government schools to question the existing funding framework. As well, the Government's plans to scrap the existing New Schools Policy (which limits Commonwealth funding to new non-government schools that satisfy certain criteria) and abolish the Schools Council have been underlined by the supporters of government schools as indicators of continuing government policies which put that sector at risk.

Leaders in the non-government sector have also entered the debate. For example, the Chair of the Catholic Education Commission, Gerry Gleeson, has called on the Prime Minister to maintain funding for Catholic schools. Mr Gleeson is concerned that funding will be reduced to the Catholic sector.(2)

The danger, particularly in times of economic restraint, is that the apparent goodwill and co-operation that has existed between the schooling sectors could become a thing of the past:

The resource cutbacks and limitations in some States condition the debate. Growing cooperation among those involved in schooling, both government and non-government and teachers and parents, is unlikely to continue if these cutbacks persuade interest groups to think it is necessary to fight for a better share of a shrinking pool of schooling resources.(3)

This paper begins by providing the historical background to 'state aid' for non-government schools in Australia and its early political character. It goes on to show the pattern of enrolment and funding over the years and illustrates the increase in funding for the non-government sector. It looks briefly at some comparisons with other countries and concludes with some questions for policy makers. The paper does not attempt to address the philosophical issue of whether or to what degree governments should give aid to non-government schools, or some non-government schools, or the influence this may have on the growth of that sector. It does however, note one consequence of the current funding arrangements: because the Commonwealth funds in excess of 65% of all government recurrent and capital expenditure going to non-government schools any proportionate growth in enrolments for this sector represents a cost shifting from the States and Territories to the Commonwealth.

'State Aid': the Background

Whilst primary and secondary education is essentially the responsibility of the States, the Commonwealth Government has nevertheless become more involved in schooling, both government and non-government, in Australia. Uncertainty over the legality of the Commonwealth being directly involved in education led the Government in 1946 to propose amendments to the Constitution. Acceptance of the Government's proposals in a national referendum allowed Section 51 (xxiiiA) of the Constitution to be amended to give the Commonwealth power to make laws 'with respect to the provision of benefits to students' in all States of Australia. The Commonwealth has also used Section 96 of the Constitution, which allows for the Federal Parliament to 'grant financial assistance to any State on such terms and conditions as the Parliament thinks fit', to extend its involvement in education.

It is only in relatively recent times that direct funding has gone to both government and non-government schools. In the 1870s and 1880s most of the colonies passed legislation that effectively excluded the non-government sector from public funding. This legislation established the tradition that government funding should go only to free and secular government schools. The tradition maintained that non-government schools should be fully funded from private sources only. However, by the 1960s various pressures were building up that led to the Commonwealth and then the States to become directly involved with the funding and support of non-government schools.

The 1950s and 1960s saw a rapid expansion in school enrolments, an expansion that State governments found increasingly difficult to resource adequately. The predominant non-government sector was the Catholic sector and these schools were particularly suffering from overcrowding, inadequate buildings and shortages of properly trained teachers. As the Commonwealth government was the jurisdiction with the best revenue base it was to this level that parents, educators and others forcefully put the case that the Commonwealth should make up the shortfall in school funding, not only to government but also to non-government schooling. The problem however, with 'state aid' to private schools, was that many associated this with aid to Catholic schools - they were the sector that would get the most 'state aid'. Further, opponents of 'state aid' believed that the Church and State should be completely separate and thus general taxpayer support for church schools was totally inappropriate. The pressures on the schooling sectors and the fact that education had become a significant electoral issue led to a changing political atmosphere.

The two major political groupings at the federal level, both of whom opposed 'state aid' in the late 1950s and early 1960s, had changed their policy positions by the mid to late 1960s. R.G. Menzies, Prime Minister and leader of the Liberal/National Party Government from 1949 to 1966, had initially opposed general funding of government (and non-government) schooling on the grounds that schooling was a State constitutional responsibility. However, it was his government in 1964 that began the process of direct Commonwealth aid to schools. The ALP had been consistently opposed to 'state aid' since the 1957 split when much of its Catholic support went to the Democratic Labor Party (DLP). However, by 1966, after much infighting, the ALP had changed its policy platform to include the provision for federal aid to non-government schools. E.G. Whitlam, then deputy leader of the federal ALP, was firmly of the view that schools needed support from the Commonwealth and that this support had to go to both sectors or neither sector.(4)

Prior to 1964, the States funded government schools directly and the Commonwealth provided general revenue grants to the States, a portion of which was used by the States to supplement their funding for government schools. There was some minor support given by the Commonwealth to non-government schools in the 1950s - allowance of tax deductibility of school fees and gifts to school building funds - but it was not until the 1960s that direct support was provided. In 1964 direct Commonwealth funding for government and non-government schools began - the passage through the Commonwealth Parliament of the States Grants (Science Laboratories and Technical Training) Act 1964 enabled funding for science laboratories and equipment for secondary schools. Since that time, Commonwealth funding for schools has increased markedly with in excess of $3b being allocated in 1996 to both government and non-government schools.

Since the mid to late 1960s there has been a general consensus that non-government schools should receive 'state aid' - both the major political groupings have supported this principle and non-government schools have been financially supported by successive governments. The debate now centres around the level of government funding for non-government schools and in particular the level of such funding relative to that for government schools.

Enrolment Patterns

The latest statistics show that as at August 1995 there were 9648 schools in Australia - 7122 government schools and 2526 non-government schools. The total number of full-time students attending these schools was 3 109 337 - of these, 2 207 853 (71% of total) were in government schools and 901 484 (29% of total) were in non-government schools.(5)

Over the longer term, with some fluctuations, there has been a steady but constant drift of enrolments away from the government sector to the non-government sector - in 1978, 21.2% of full time students were enrolled in non-government schools; by 1985 this figure had increased to 25.8% and the 1996 figure is estimated to be 29.4%.(6) Graph 1 shows school enrolment patterns over time.

Graph 1

Graph 1: Government/Non-Government School Enrolment Shares for Selected Years

There appear to be a variety of reasons for this drift in enrolments including the fact that private schools tend to put more effort into advertising and extolling their virtues than do government schools, increasing affluence among certain sections of Australian society leading to more parents being able to pay the fees asked at private schools and perceptions (whether they be based on hard evidence or not) that the government sector is more volatile in areas such as industrial disputation and the maintenance of standards and discipline. However, according to the Chair of the Schools Council the key reason is the increasingly generous funding provided to the non-government sector :

A consequence of increased government funding is that non-government schools become more affordable for their clients. The increase in government expenditure on non-government schools has resulted in the transfer of students from government to non-government schools(7)

Funding Patterns

The vast majority of Commonwealth funding to both government and non-government schooling comes under the ambit of the States Grants (Primary and Secondary Education Assistance) Act 1992. The Commonwealth presently funds approximately 12% of the total spending on government schools, the balance of the funding coming from the State/Territory jurisdictions. Approximately 38% of total spending on non-government schooling is provided by the Commonwealth, with 18% being provided by other governments and 44% coming from private sources.(8)

According to one analysis there has been a dramatic increase in the proportion of government funding going to the non-government sector. The Chair of the Schools Council, Anne Morrow, maintains that between 1989 and 1994 total government funding (Commonwealth and State) for non-government schools rose by 30 per cent per student, compared to a rise of only 9 per cent per student for government schools.(9)

If one looks at the situation over the longer term the pattern alluded to by Ms Morrow is confirmed. A comparison of recurrent and capital spending (the two major components of funding for schools) and enrolment shares in 1977 - 78 and 1994 - 95 shows that the non-government sector has done well relative to the government sector.

In 1977 - 78 total Commonwealth/State expenditure (excluding Commonwealth joint programs) was $4351m, $3949m of that amount (90.8%) went to government schools and $402m (9.2%) went to non-government schools.(10) In 1978 the enrolment share for each sector was: government 78.8% and non-government 21.2%.(11)

Recent recurrent and capital funding levels provided by both Commonwealth/State governments to the government and non-government schooling sectors in 1993 - 94 and 1994 - 95(12) are illustrated in Tables 1 - 4 at Appendix. From the Tables it can also be seen that in 1994 - 95 a total of $11 770m ($10 607m from the States and $1162m from the Commonwealth) was provided for recurrent purposes to government schools and a total of $2 644m ($923 m from the States and $1721m from the Commonwealth) was provided to non-government schools for recurrent purposes. In that same period (note the figure for non-government capital funding applies to the 1994 calendar year not the 1994-95 financial year) a total of $912m ($704m from the States and $208m from the Commonwealth) was provided for capital purposes to government schools and $155m ($49.5m from the States and $105.5m from the Commonwealth) was provided for capital purposes to non-government schools.

Calculations show that in 1994 - 95 the government sector received 81.9% of total recurrent and capital funds provided by both levels of government and the non-government sector received 18.1% of those funds. In 1995 the relevant figures for enrolment share by each sector was as follows: government schools 71% and 29% for non-government schools.(13) Further analysis shows that, comparing 1977 - 78 with 1994 - 95, there was a 321% increase in expenditure per student for government schools and a 393% increase in expenditure per student for non-government schools. These figures do confirm that the relative position of the non-government sector has improved markedly over the period analysed.

Graph 2

Graph 2 Commonwealth/State Expenditure (recurrent and capital) on Schools 1977-78

Graph 3

Graph 3: Commonwealth/State Expenditure (recurrent and capital) on Schools 1994-95

Graphs 2 and 3 show the proportions of total government spending going to the two sectors for 1977 - 78 and 1994 - 95.

Tables 1 to 4 also clearly show the importance of Commonwealth funding to the non-government sector - in excess of 65% of all government recurrent and capital expenditure going to that sector comes from the Commonwealth. This fact means that as enrolments in non-government schools grow there is cost shifting in terms of financing schools away from the States to the Commonwealth. Thus, in a purely budgetary sense it is advantageous for State/Territory governments to encourage the growth of non-government schools and enrolments. According to the Minister for Schools, Vocational Education and Training (Dr Kemp) every child educated at a non-government school saves the relevant State government an average of $1800 per child.(14) The abolition of the existing Commonwealth New Schools Policy, if it leads to further growth in the non-government sector, will further exacerbate this trend.

The evident increase in the share of funding going to the non-government sector has almost certainly been the result of Commonwealth funding priorities. A previous study (covering the period 1976 to 1993) undertaken by the author found that whilst total Commonwealth funding (both government and non-government) increased over the period by 82%, funding for non-government schools (excluding joint programs) increased by 189.8%, whilst funding for government schools (excluding joint programs) increased by only 28.2%.(15)

Overseas Comparisons

It would appear that, in comparison with other developed countries, Australian governments provide a substantial level of financial support for the non-government sector.(16) A report released by the Organisation for Economic Co-operation and Development (OECD) in 1992 analysed public subsidies to private education in 12 countries over the period 1970 - 1988.(17)

With respect to the subsidisation of all education sectors (including tertiary and pre-primary), the Report found that in 1987 only 3 of the 12 countries studied that had higher levels of government support for private education than Australia. According to the Report, the 12 countries were ranked as follows on real public subsidies to private education as a percentage of real public current expenditure on education (1987): the Netherlands 69.6%; Belgium 55.3%; France 12.5%; Australia 11.3%; Germany 7.8%; Switzerland 7.4%; Japan 6.1%; Norway 5.9%; the USA 4.6%; New Zealand 1.0%; Canada 1.0%; and Sweden 0.1%.(18) Over the period 1970 to 1988, the Report found that the countries with the highest rates of growth in public subsidies for private education were Japan, with an average annual growth rate of 11.4% (most of which occurred in the 1970s); Norway 9.1%; Germany 7.9% and Australia 7.2%.(19)

Comparisons between the 12 countries on the primary and secondary schooling sectors were less comprehensive because differing countries used different methods in the way they aggregated the data. Three of the countries studied (Australia, Sweden and Switzerland) aggregated the primary and secondary sectors thus enabling at least a comparison with two other jurisdictions. On this basis it was found that 17% of all public subsidies on primary and secondary schooling went to the private schooling sector in Australia in 1987 compared to 7.7% in Switzerland and 0.2% in Sweden.(20)

Whilst these figures are limited and somewhat dated they do indicate that Australian governmental provision for private schooling is in the average to above average range when compared to similar developed nations.

Threshold Questions Relevant to the Debate

The main thrust of the argument by the proponents of a strong government schooling sector is that the funding balance has skewed too far in favour of the non-government sector. Unless the size of the total 'pie' available for schooling, both government and non-government, is increased this sentiment is likely to be continually and forcefully expressed. Of course, if there are cuts in funding going to the schooling sector by the Commonwealth Government and/or by the various State/Territory Governments then in all likelihood a very divisive 'state aid' debate similar to that which characterised the 1960s and early 1970s could re-emerge.

In this context it is perhaps worthwhile posing a series of questions at the core of the 'state aid' issue that will need to be considered by the various interests and groups involved with the funding of schools in Australia :

  1. What is an appropriate level of funding for the schooling systems in Australia?
  2. What is an equitable and appropriate split of funding for government and non-government schools? How should this split be decided? Is the present system of needs based funding for non-government schools fair and equitable?
  3. What specific roles should State/Territory and Commonwealth governments have on policies/funding for government and non-government schools?
  4. Are present accountability mechanisms required of both government and non-government schooling systems for Commonwealth and State funding adequate and appropriate?
  5. What restrictions, if any, should be placed on the establishment of new schools, particularly new non-government schools?
  6. To what extent should market forces be allowed to determine enrolment patterns in schools?

Government policy responses at both the Commonwealth and State/Territory level to these and related questions will largely determine the tenor of the debate on 'state aid' and the extent to which it may again become a divisive debate in Australia.

Endnotes

  1. Slattery, Luke, 'Private school aid puts education policy to the test', The Australian 23 May 1996.
  2. The Canberra Times, 3 May 1996.
  3. McKinnon, Ken, Review of the New Schools Policy-Final Report (April 1996), Canberra, DEETYA, 1996, p. 2.
  4. Whitlam, Gough, The Whitlam Government 1972-75, Ringwood, Viking, 1985, pp. 299-300.
  5. Schools, Australia, ABS Catalogue No. 4221.0, April 1996.
  6. ABS Schools various; and Dr David Kemp, 'Kemp confirms Labor's New Schools Policy to go', Press Release (Minister for Schools, Vocational Education and Training), 21 May 1996.
  7. Morrow, Anne, Schools Funding In Australia-The Need for Change, Speech to the Australian Council of Social Service, 24 May 1996.
  8. Budget Paper No. 1 1995-96, pp. 3-85, 3-86.
  9. Morrow, op. cit..
  10. Figures adapted from chapter 8 of Australian Students and Their Schools, Canberra, ABS & Schools Commission, 1979.
  11. ABS Catalogue No. 4202.0 (1979).
  12. Figures provided to the Senate Employment, Education and Training Legislation Committee by the Department of Employment, Education and Training (in the Committee's Additional information received, vol. 4, January 1996).
  13. ABS Catalogue No. 4221.0 April 1996.
  14. House of Representatives Hansard, 21 May 1996 p. 930.
  15. McIntosh, Greg, Commonwealth Funding for Schools, Parliamentary Research Service Background Paper No. 14, 1994, p. 33.
  16. This level of support is probably a consequence of the importance of the Catholic sector and the fact that historically it has been poorly resourced compared to other parts of the schooling sector.
  17. Public Educational Expenditure, Costs and Financing: An Analysis of Trends 1970-1988, Paris, OECD, 1992.
  18. ibid, p. 178.
  19. ibid, p. 179.

    ibid, p. 185.

Appendices

Table 1: Recurrent Grants: Government Schools - State and Commonwealth Payments

Table 1: Recurrent Grants: Government Schools - State and Commonwealth Payments

Table 2: Recurrent Grants: Non-Government Schools - State and Commonwealth Payments

Table 2: Recurrent Grants: Non-Government Schools - State and Commonwealth Payments

Table 3: Capital Grants: Government Schools - State and Commonwealth Payments

Table 3: Capital Grants: Government Schools - State and Commonwealth Payments

Table 4: Capital Grants: Non-Government Schools - State and Commonwealth Payments

Table 4: Capital Grants: Non-Government Schools - State and Commonwealth Payments 1993

Table 4: Capital Grants: Non-Government Schools - State and Commonwealth Payments 1994