The future of school funding

Marilyn Harrington, Social Policy

Key issue
Australian Government funding arrangements for schools will change from 2018. Speculation about this change is taking place amid a national and international debate about what matters most in improving school outcomes and whether more funding is the answer.

Australian Government funding for schools explained

The Review of Funding for Schooling (the Gonski Review) argued that a significant increase in funding by all governments was required to lift the performance of school students, particularly those from disadvantaged backgrounds.

The then Labor Government developed a new school funding system based on the Gonski Review’s recommendations for a new schooling resource standard (SRS) comprising per student funding and loadings to address student and school disadvantage. The long-term goal was for all schools to be at least funded at 95 per cent of their SRS by 2019.

The total amount of additional funding ($14.5 billion) to achieve this goal was to be phased in over six years, with the Australian Government contributing $9.8 billion (65.0 per cent) and state and territory governments the remainder. Most of the Australian Government’s funding was to be provided in the last two years of the transition period.

By the time of the 2013 election, however, only three state and territory governments had concluded agreements with the Australian Government to implement the new system (the non-government school sector automatically became part of the new system).

The Coalition Government and school funding

Following its election in 2013, the Coalition Government committed only to the first four years (2014 to 2017) of Labor’s school funding plan. It also applied the new funding arrangements to all state and territory government education systems, including those that had not concluded, or had rejected, agreements with the previous government. These jurisdictions were not required to meet the original agreement’s terms nor contribute additional funding.

The Government has indicated that it will change how schools are funded from 2018. Its vision for the future is outlined in its pre-budget statement, Quality Schools, Quality Outcomes. However, no detail about distribution arrangements, which will be a matter for negotiation with the states and territories, has been provided. Nevertheless, the process has already begun with the Government announcing that a new indexation rate, which is lower than the current rates, will apply to school funding from 2018.

Figure 1: Australian Government funding for schools, 1999–00 to 2019–20 (real prices)

Australian Government funding for schools, 1999–00 to 2019–20 (real prices)

Source: Parliamentary Library; Australian Government, Budget strategy and outlook: budget paper no. 1: 2016–17; Australian Government, Final budget outcome, various years.
Notes: * Estimates and projections. Spike in expenditure from 2009–10 to 2010–11 was the result of the Building the Education Revolution (BER) stimulus program.

Does funding matter in improving educational outcomes?

Those who question the benefit of additional expenditure in improving educational outcomes (including the Government in Quality Schools, Quality Outcomes) highlight the declining performance of Australian 15-year-olds in the Programme for International Student Assessment (PISA) vis-a-vis the significant increases in school funding.

The Australian Council for Educational Research (ACER) summary report on PISA 2012 shows the significant declines in mean mathematical and reading literacy performance. The former declined by 20 score points on average between PISA 2003 and PISA 2012 and the latter declined by 16 score points from PISA 2000 to PISA 2012. At the same time, Australian Government expenditure on schools grew by 70.0 per cent in real terms from 2000–01 to 2012–13 (see figure above).

The evidence

Both the proponents of increased school education expenditure and those that question its value in improving educational outcomes, can draw upon a substantial body of research to support their cases.

The proponents of ‘Gonski’ funding, such as the Australian Education Union in its report Getting Results, point to evidence that shows the importance of increased investment in improving educational outcomes, particularly for disadvantaged students. A number of anecdotal reports provide similar evidence.

International research also supports the argument for increased funding. A recent major review of this research, Does Money Matter in Education, concluded: ‘aggregate measures of per-pupil spending are positively associated with improved or higher student outcomes’. This review also found that schooling resources that cost money are ‘positively associated with student outcomes’.

In contrast, a PISA analysis, Does Money Buy Strong Performance in PISA?, concludes that higher expenditure on education does not guarantee better student performance. What is more important among high-income countries is how the resources are used.

This finding aligns with the tenor of recent Australian reports and commentary which examine strategies for improving educational outcomes, particularly for those from disadvantaged backgrounds. One example is the Grattan Institute’s Orange Book 2016: Priorities for the Next Commonwealth Government, which suggests that the key reforms to lift student outcomes are ‘well known’. These include focusing more on student progress and not just achievement, improving teaching practice in the classroom, and making ‘trade-offs’ to improve how and where money is spent.

A recent ACER report, Five Challenges in Australian School Education, concurs with the widely accepted view that what is important is how funding is targeted. However, the report does not completely reject the notion of increased funding:

... whether or not increased funding makes a difference depends on how it is applied. Our national challenge is to maximise the impact of government expenditure by targeting it on evidence-based strategies to improve performances in Australian schools.

The future

The Government has proposed that future funding should be contingent upon state and territory governments maintaining their funding effort and committing to specific education reforms. The proposed new conditions for funding relate broadly to improving literacy and numeracy outcomes and the quality of teachers and teaching, including a focus on disadvantaged schools and science, technology, engineering and mathematics (STEM) subjects; and providing more foreign language teachers and access to languages education. There has been a mixed response to these proposed reforms and initiatives similar to these reforms have been endorsed by the Council of Australian Governments’ (COAG) Education Council and are already being implemented.

The proposed reforms and distribution arrangements for school funding will have to be negotiated through COAG, which has agreed that ‘discussions on new funding arrangements should be concluded by early 2017’.

Given the recent history of school funding reform efforts, it is likely that negotiating and implementing the new arrangements for school funding will be difficult.

Further reading

M Harrington, Funding the National Plan for School Improvement: an explanation, Background note, Parliamentary Library, Canberra, 26 June 2013.

M Harrington, ‘School education’, Budget review 2016–17, Research paper series, 2015–16, Parliamentary Library, Canberra, 2016.


Back to Parliamentary Library Briefing Book

For copyright reasons some linked items are only available to members of Parliament.

© Commonwealth of Australia

Creative Commons

With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.