History of Australian Government funding of schools
The 2014-15 Budget was widely regarded as marking the end of the school
funding reforms introduced by the Rudd/Gillard Governments in response to the
Gonski Review recommendations. With the announcement of the funding
arrangements in the 2014-15 Budget, Abbott Government funding arrangements for
schools changed for the third time since 2009.
In December 2011, the Gonski Review Report commented that:
considered holistically, the current funding arrangements for schooling are
unnecessarily complex, lack coherence and transparency, and involve a
duplication of funding effort in some areas. There is an imbalance between the
funding responsibilities of the Australian Government and state and territory
governments across the schooling sectors.
The Gonski Review was initiated in April 2010 and the funding for
schools prior to 2009 was a chief focus of the review's scrutiny. The review provided
'one of the most exhaustive reviews of schooling that we [Australia] have had
for decades, going back to the mid-1970s';
a means of assessing the effectiveness of the approach to Australian Government
school funding which had been in place since the 1970s.
Outlining the history of school funding arrangements is essential as a
guide through the complexity of the funding paid by states, territories and the
Commonwealth. The difficulties of tracking the actual funding, especially under
the recent changes to school funding policy, are examined in the following
Funding prior to 2009
Prior to the States Grants (Science Laboratories and Technical
Training) Act 1964 (States Grants Act), there was no direct Australian
Government funding for schools in the states. Government assistance under the
States Grants Act was gradually extended to include financial assistance for
library facilities and then capital expenditure, at the same time extending the
assistance to non-government schools.
Commonwealth recurrent funding for schools began in 1970 with the States
Grants (Independent Schools) Act 1969. In 1973 the Interim Committee for
the Australian Schools Commission, chaired by Professor Peter Karmel, advocated
a needs-based funding model to ensure that all schools could achieve similar
standards. The implementation of the recommendations were a major turning point
in school funding:
As a result of the Karmel Committee's recommendations,
Australian Government recurrent funding was extended to government schools in
1974. In the same year, special funding programs (targeted programs) were
introduced, which provided additional funding for disadvantaged schools,
special education, teacher professional development and innovation.
The Schools Commission was established in 1974 to administer school
funding and payments to states, including recurrent funding. Grants for
targeted programs for government and non-government schools, were made
triennially under the States Grants (Schools Assistance) Acts.
Until 2008, this basic legislative and funding structure remained,
notwithstanding changes in funding formulae and the abolition of the Schools
Commission in 1988:
From 1985 to 2008, most Australian Government funding for
government and non-government schools was provided on a four-yearly basis under
the one Commonwealth Act. Specific purpose payments (SPPs) continued with
general recurrent grants (GRGs), which were allocated differently for
government and non-government schools, capital grants for targeted programs.
Over that period there were different resource standards that determined the
amount of per student recurrent funding. From 1995, GRGs, (which constituted
the majority of ongoing Australian Government funding for schools), were
provided on a per student basis as a percentage of the resource standard known
as Average Government School Recurrent Costs (AGSRC).
Funding from 2009 to 2013
From 2009 until the commencement of the Australian Education Act 2013,
most Commonwealth funding for school education was provided under the National
Schools Specific Purpose Payment, which had two components—one for government
schools and one for non‑government schools. Other funding for school
education was provided through National Partnerships and the Australian
Government's own school education programmes (known as Commonwealth Own-Purpose
Figure 5 below provides an overview of Australian Government school
funding arrangements utilised between 2009 and 2013.
Schools Specific Purpose Payment—government schools component
The National Schools Specific Purpose Payment (SPP) for government
schools was provided through the Intergovernmental Agreement on Federal
Financial Relations. The National Schools SPP was indexed each year, according
to a formula based on increases in the Average Government School Recurrent
Costs (AGSRC) primary and secondary amounts (converted to a weighted average)
and growth in full‑time equivalent enrolments.
Table 5 below shows that the average growth rate of the AGSRC over 1999–2012
was 5.8 per cent. Over that period, combined primary and secondary school
enrolments increased by 340 415 full time students, equivalent to a 0.8 per
cent annual increase.
National Education Agreement
The National Education Agreement between the Australian Government and
State and Territory governments was formulated under the Intergovernmental
Agreement on Federal Financial Relations. This Agreement sets out the agreed
objectives and outcomes for schooling, the roles and responsibilities of each
level of government, performance indicators and benchmarks, reporting
mechanisms and 'policy and reform directions'. State and Territory government
education authorities had discretion as to how to spend the National Schools
SPP funding to achieve the agreed outcomes.
Schools Specific Purpose Payment—non-government schools component
Funding for the non-government schools component of the National Schools
SPP was provided under the Schools Assistance Act 2008.
The National Schools SPP for non-government schools included targeted
programmes such as the Literacy, Numeracy and Special Learning Needs Programme,
the English as a Second Language—New Arrivals Programme, the Schools Languages
Programme, and the Country Areas Programme. The Schools Assistance Act 2008
also provided for additional recurrent funding for indigenous students in
non-government schools, non-government schools in remote areas and distance
Government school funding arrangements, 2009–2013
Payments to non-government school education authorities could not be
made until an authority had signed an agreement with the Australian Government.
The agreements prescribed the conditions with which an education authority must
comply in order to receive funding. The conditions included educational and
financial performance and accountability requirements.
General recurrent funding for
non-government schools—the Socioeconomic Status (SES) system
Australian Government general recurrent per student funding for non‑government
schools was based on a measure of need. Since 2001, the rate at which non-government
schools receive general recurrent funding was determined by the estimated
capacity of a school's community to support its school—that is, its SES. The
SES Index included three dimensions—income, education and occupation.
A non-government school's SES score determines its per student general
recurrent funding rate, as a percentage of AGSRC. In total, there were 46 SES
funding scores, with funding rates ranging from 13.7 per cent to 70.0 per cent
those non-government schools with the lowest SES scores (85 or
less) were funded at 70.0 per cent of AGSRC;
those non-government schools with the highest SES scores (130 or
greater) were funded at 13.7 per cent of AGSRC; and
those non-government schools with an SES score between 85 and 100
were funded along a continuum, with each single point change in the SES score
resulting in a change in funding.
Some non-government schools automatically received the maximum rate of
funding, regardless of their SES score. These schools were:
non-government special schools—schools that cater for students
Special Assistance Schools—schools that mainly cater for students
with social, emotional or behavioural difficulties; and
Majority Indigenous Student Schools—schools with 80 per cent or
more indigenous enrolments or, for very remote schools, 50 per cent or more indigenous
When the SES system was introduced in 2001, the then Australian
Government made a commitment that no school would be financially worse off
under the new system. As a result not all non-government schools were funded
according to their SES score. Under the SES system, non-government schools
were funded according to the rate for their SES score with
had funding maintained at their year 2000 rate with indexation;
had funding maintained at their year 2004 rate with indexation;
had funding guaranteed at their year 2008 without indexation.
As at 1 January 2012, of the 2722 non-government schools funded by the
60.3 per cent (1642 schools) were funded according to their SES
39.5 per cent (1075 schools) had their funding maintained at
either their year 2000 or year 2004 rate with indexation; and
0.2 per cent (5 schools) had their funded guaranteed without indexation
at their year 2008 per student amount.
Senator Penny Wright (Deputy Chair) and Senator the
Hon Jacinta Collins (Chair) with Ms Emily Sayer (Deputy Principal) during the
committee's site visit at the Immaculate Heart of Mary School, Adelaide, 30
Additional funding for government and non-government schools was
provided through a number of special purpose National Partnerships. Most
National Partnerships were formulated through COAG and had as their basis an
agreed national goal. The structure and conditions of the National Partnerships
varied, and included, in some cases, co-payments with State and Territory
government and non-government education authorities, performance rewards and
the creation of pilot programmes.
Examples of National Partnerships are provided in Figure 5 above.
There are other Commonwealth school education programmes which are
referred to as 'Commonwealth Own-Purpose Expenses'. Examples include:
Grants and awards;
National School Chaplaincy and Student Welfare Programme;
National Trade Cadetships; and
the Quality Outcomes Programme (elements of which include Schools
National Projects, Community Festivals, Parliament and Civics Education Rebate,
the Australian Government Quality Teacher Program, civics and citizenship
education, the Australian Institute for Teaching and School Leadership and the
Australian Curriculum Assessment and Reporting Authority).
Government School Recurrent Costs
Average Government School Recurrent Costs (AGSRC) were the basis for
calculating Australian Government recurrent funding for government and non‑government
school students. There was a different primary and secondary AGSRC amount
because of the differences in the costs associated with educating primary
school students and secondary school students.
The Australian Government's per student (government and non‑government)
recurrent funding was provided at a percentage of the AGSRC. In the case of the
National Schools SPP for government schools, the base amount was calculated on
the basis of 10 per cent of the AGSRC for per student recurrent funding.
Per student recurrent funding for non-government school students ranged
along a continuum from 13.7 to 70.0 per cent of the AGSRC.
In 2013 the AGSRC amounts were $10 411 (primary) and $13 032 (secondary).
Calculation of the AGSRC amounts
The AGSRC amounts were based on State and Territory government recurrent
expense data, which included both Australian Government and State and Territory
government funds, maintained by the Standing Council on School Education and
Early Childhood. The recurrent expense data included:
out-of-school expenses (such as teachers based in a regional
office and the costs of regional and central administration);
redundancies (including payments of accrued leave, other
entitlements, superannuation and special incentives);
other operating expenses (such as student transport, cleaning,
utilities, repairs and maintenance, minor stores, plant and equipment, rentals
and leases, etc.); and
grants and subsidies paid directly to schools for any school
The final primary and secondary AGSRC amounts for any one year were
calculated by dividing the total of these expenses for each level of education in
the previous financial year by the average of government school primary and
secondary enrolments for the previous two years.
Variability of the AGSRC
Table 1 below shows that the annual rate of increase in the AGSRC was
quite variable, and not necessarily uniform between the primary and secondary
amounts. However, the average annual rate of growth was 5.8 per cent in nominal
Reviews of School Funding
The Gonski Review
In April 2010 the then Commonwealth Minister for Education, the Hon
Julia Gillard MP, announced a review, chaired by Mr David Gonski AC, to examine
government funding for schools and the role of private funding in school
The Gonski Panel conducted a comprehensive consultation process:
meeting with 71 education groups across Australia;
considering 1290 submissions in response to its discussion paper
'Review of Funding for Schooling: Emerging Issues Paper';
visiting 39 schools and campuses across all states and
considering 118 submissions received in response to its second
paper 'Review of Funding for Schooling: Paper on Commissioned Research'; and
commissioning four pieces of research:
'Assessment of current process for targeting of schools funding
to disadvantaged students' by the Australian Council for Educational Research;
'Assessing existing funding models for schooling in Australia' by
Deloitte Access Economics;
'Feasibility of a national schooling recurrent resource standard'
by the Allen Consulting Group; and
'Schooling challenges and opportunities' by a consortium led by
the Nous Group which included the Melbourne Graduate School of Education at the
University of Melbourne and the National Institute of Labour Studies at
In conducting its review the Panel considered the funding requirements
...students from all schools across the government, Catholic
and independent school sectors. It considered the current arrangements for
providing Australian Government and state and territory funding to schools, as
well as other sources of school income.
The Panel noted:
The task of understanding and responding to the challenges of
the current funding arrangements for schooling is complex. There are
significant differences in the way Australian schools are organised across
sectors, as well as differences in the demographics of the student bodies and
the challenges faced by sectors and states.
The Panel found a range of deficiencies of the school funding
arrangements that existed at that time:
When considered holistically, the current funding
arrangements for schooling are unnecessarily complex, lack coherence and
transparency, and involve a duplication of funding effort in some areas. There
is an imbalance between the funding responsibilities of the Australian
Government and state and territory governments across the schooling sectors.
There is a distinct lack of coordination in the way
governments fund schooling, particularly in relation to directing funding to
schools based on student need across jurisdictions and sectors...
It is not always clear which level of government is providing
funding, nor what role the Australian Government and state and territory
governments should play in funding particular educational priorities.
Table 1—AGSRC 1999–2012,
dollars per student and per cent increase
The Gonski Review highlighted the declining standards of achievement
over the past decade:
...the performance of Australian students has declined at all
levels of achievement, notably at the top end...
In addition to declining performance across the board,
Australia has a significant gap between its highest and lowest performing
students. This performance gap is far greater in Australia than in many
Organisation for Economic Co-operation and Development countries... A concerning
proportion of Australia’s lowest performing students are not meeting minimum
standards of achievement. There is also an unacceptable link between low levels
of achievement and educational disadvantage, particularly among students from
low socioeconomic and Indigenous backgrounds.
Based on these findings, the Gonski Review made 41 recommendations,
geared towards creating and implementing a needs-based and sector-blind school
The Gonski Review's core recommendation was that the level of recurrent
funding for all school students should be determined by a Schooling Resource
Standard (SRS). The SRS would include a benchmark per student amount (with
different amounts for primary and secondary school students).
The Review also recognised that increased concentration of disadvantaged
students in certain schools has a significant impact on educational outcomes.
Accordingly it recommended the introduction of loadings for various
student-based and school-based sources of disadvantage (socio-economic status
(SES) background, disability, English language proficiency, indigenous status,
and school size and location).
The per student SRS would be based on the resources used by
high-achieving schools, as identified by their performance in the National
Assessment Program – Literacy and Numeracy (NAPLAN), and indexed annually.
Government schools would receive the full amount of the per student SRS, while
the SRS amount for non‑government schools would be adjusted according to
the community's capacity to contribute to supporting the school. Some non-government
schools, such as special schools and those that do not have the capacity to
charge fees, would receive the full SRS per student amount. The Review
recommended that a minimum public contribution per student for every
non-government school be applied, set at between 20 and 25 per cent of the SRS,
excluding loadings. The loadings for disadvantage would apply to all eligible
students regardless of the school they attended.
The Gonski Review estimated that its proposals would require an
additional $5 billion
in annual recurrent funding spread across both tiers of government. This
estimate did not include the Gonski Review's recommendations for expanded
Rudd/Gillard Governments response to the Gonski Review
The previous government responded to the final report of the Gonski
Review in September 2012. Through its 'National Plan for School Improvement'
(NPSI) the Rudd/Gillard Governments accepted the core recurrent funding
recommendations of the Gonski Review; that is, an SRS for all school students
supported by various loadings for disadvantage. The proposed new funding model was
accompanied by an improvement framework for schools and teaching, with five
areas of reform identified for implementation.
In total, the Rudd/Gillard Governments expected that the NPSI, when fully implemented
by 2020, would see an additional $6.5 billion spent on schools each year
by the Commonwealth and State and Territory Governments, in line with the
estimates in the final report of the Gonski Review.
Implementation of the previous government's response to the Gonski
Review findings is described in detail in Chapter 5.
National Commission of Audit
findings on school funding
In the context of advising the Abbott Government on its long-term fiscal
strategy, the National Commission of Audit (NCOA) argued that school funding
has increased under the AGSRC model, and would increase further with the
implementation of the NPSI, by 'over 9.2 per cent per year over the next 10
Figure 2 below is taken from the NCOA report and shows the projected increase
of funding under the NPSI.
Figure 2—Growth of Commonwealth
expenditure on school funding
Issues relating to school funding
as identified by the National Commission of Audit
The NCOA identified the following issues with education funding:
Duplication and complexity of the roles of the Commonwealth and
the States in schools funding; and
That the assertion that increased funding would lead to improved
student outcomes is incorrect.
On this latter point the NCOA stated:
...increasing funding does not necessarily equate to better
student outcomes. There is no clear, consistent correlation in the academic
literature between increased funding (including through reducing class sizes)
and school outcomes (Hanushek and Woessmann, 2010; Hanushek, 2006; Hoxby, 2000;
Krueger, 1999 is an example which does show a small positive effect).
Areas identified for reform by the
National Commission of Audit
The NCOA report recommends that policy and funding responsibility for
education funding be transferred from the Commonwealth to the states, returning
to the model in place before the 1970s':
Commonwealth funding would have far fewer conditions
attached, and those conditions would be focused on monitoring and transparency,
including requiring the States to identify and publish their own needs-based
formula for allocating funding between schools in all sectors, publish data on
school outcomes on a consistent basis and continue to participate in national
and international testing and the national curriculum.
The NCOA report also suggests that Commonwealth funding could be simplified
and potential growth in funding capped:
Growth in Commonwealth funding could be reduced and
streamlined by setting funding for the government and non-government sectors in
each State and Territory at 2017 per student levels for each sector in that
State or Territory, indexed annually by an appropriate measure to reflect
reasonable inflation in school costs. Indexation could be simply done using a
weighted average of the Consumer Price Index and the relevant Wage Price Index
for the schools sector.
Abbott Government response to the
findings of the National Commission of Audit
On 13 May the Treasurer, the Hon Joe Hockey MP, and the Minister for
Finance, Senator the Hon Mathias Cormann, outlined the Abbott Government's
response to the findings of the NCOA in a joint press release. The ministers
stated that the 'National Commission of Audit was an important input to the Abbott
Government's considerations and many of the policy issues raised in the
National Commission Audit have been considered by the Abbott Government when
preparing the 2014-15 Budget'.
The 2014-15 Budget contains some measures, such as indexation of school
funding from 2018, which appear to flow from the findings of the National
Commission of Audit.
However, with regards to the introduction of indexation of school funding
post-2017, the Budget measure differs greatly from the NCOA recommendation.
Recommendation 23 of the NCOA regarding schools funding recommends,
amongst other things, that Commonwealth funding from 2018 onwards should be
consistent with 2017 funding levels with:
...annual funding for each sector in each jurisdiction
calculated as the per student amount, adjusted for the number of students
enrolled in that year and indexed by a weighted average of the CPI and the
relevant Wage Price Index.
As discussed further in Chapters 6 and 7, the 2014-15 Budget introduces
indexation for school funding post-2017, however this indexation is based on
'CPI enrolment growth'.
Mr Cook from the Department of Education explained that that, on average, CPI
would be 2.5 per cent and enrolment around two per cent, making a rate of 4.5
Neither the Abbott Government nor the Commonwealth Department of
Education provided an explanation as to why the Abbott Government has chosen
CPI indexation rather than using the recommendation of the NCOA.
The ministers' media release explained that the Abbott Government would
'continue to methodically consider and review the issues raised in the National
Commission of Audit report that are not addressed in the 2014-15 Budget'.
The ministers' media release also provided a table of NCOA recommendations and
the vehicle for their future consideration. In this table, school funding is to
be considered further in the Federation White Paper.
On 28 June 2014, the Prime Minister released the Terms of Reference for
the White Paper on the Reform of the Federation. The objectives of the White
Paper will be:
reduce and end, as far as possible, the waste, duplication and
second guessing between different levels of government;
achieve a more efficient and effective federation, and in so
doing, improve national productivity;
make interacting with government simpler for citizens;
ensure our federal system:
better understood and valued by Australians (and the case for reform
clearer allocation of roles and responsibilities;
governments’ autonomy, flexibility and political accountability; and
Australia’s economic growth and international competitiveness.
The areas to be considered in relation to the allocation of roles and
responsibilities of the different levels of government are health, education,
housing and homelessness, and other areas within scope.
The White Paper process will be a standing item on the COAG agenda. Work
on the White Paper will be overseen by a Steering Committee comprising: 'the
Secretaries and Chief Executives of the Commonwealth Department of Prime
Minister and Cabinet, State/Territory First Ministers’ departments and the
Australian Local Government Association.'
Issues papers on health, education, and housing and homelessness are due
to be released in the second half of 2014, followed by a Green Paper in the
first half of 2015 and the White Paper by the end of 2015.
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