How are schools funded in Australia?

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School education in Australia's federation

States and territories have been responsible for schooling in their jurisdiction since Australia became a Federation. However, as Australian society and the economy have changed over time, the Australian Government has taken on a greater role in education funding and policy.

These days, states and territories still have overarching responsibility for schools in their jurisdiction. This includes the registration and regulation of allschools in their jurisdiction (whether government or non-government) and the operation of public schools. The Commonwealth does not run any schools nor does it employ any teachers.

However, funding responsibility is shared with the Australian Government and national education policy is decided by all governments working together through the Council of Australian Governments system.

States are responsible for the delivery of school education

In line with their responsibility for the delivery of school education, states and territories are the majority public funder of government schools (with 65.4 per cent of students) and the Australian Government is a minority public funder of the government sector.

The Australian Government has historically been the majority public funder for non-government schools (with 34.6 per cent of students) reflecting its commitment to supporting parental choice and diversity in the schooling system. State governments are minority public funders of the non-government sector.

Australian Government funding to non-government schools takes into account the capacity of school communities to contribute to their school's operating costs, for example the ability of parents to pay school fees.

National average government per student funding by sector, 2016

national average government per student funding by sector, 2016

Source: Australian Curriculum, Assessment and Reporting Authority (ACARA) (2018). My School Finance Data Collection, as published on ACARA's National Report on Schooling in Australia: Data Portal

The Commonwealth share of school funding has been increasing over time

Total combined Commonwealth and state / territory funding per student has grown in real terms by 15.1 per cent over the decade from 2006-07 to 2015-16. At the same time, Commonwealth funding has grown in real terms by 46.1 per cent.

This means that Commonwealth school funding has grown at a much faster rate than state funding over this time, with the Commonwealth share of total public funding increasing from 72.5 per cent in 2006-07 for non-government schools to 75.1 per cent in 2015-16 and 8.8 per cent in 2006-07 to 13.8 per cent in 2015-16 for government schools.

Growth in recurrent funding for government schools 2006-07 to 2015-16

Bar chart of growth in recurrent funding for government schools for 2006-07 to 2015-16

Source: Productivity Commission (2018). Report on Government Services. Table: 4A.14.

Consistent Commonwealth funding arrangements

From 2018, the Australian Government is delivering a funding model that is simple, transparent and based on need. Unlike the previous inconsistent arrangements where the Commonwealth contribution of the Schooling Resource Standard (SRS) varies between states, the Australian Government will move towards consistently funding:

  • 20 per cent of the total SRS for government systems, reflecting its role as a minority public funder of this sector, and
  • 80 per cent of the total SRS for non-government schools and systems, reflecting its role as a majority public funder of this sector.

Schools and systems currently attracting less than the consistent Commonwealth share of their SRS will move to the consistent share by 2023, to ensure they get the support they need faster.

Schools and systems that are currently funded above the consistent Commonwealth shares will transition to the consistent share by 2029.

This will ensure that students with greater needs will attract higher levels of funding from the Commonwealth, regardless of the state where they live, and students with the same need within the same sector will attract the same support from the Commonwealth, regardless of the state where they live.

State and territory funding requirements

Under section 22A of the Australian Education Act 2013 (the Act), the state must meet or exceed its total funding contribution requirements for the government sector and the non-government sector as a condition of receiving Commonwealth funding. State and territory governments have discretion to fund above their minimum funding requirements.

Minimum state and territory funding requirements from 2018 to 2023, which reflect the respective funding levels between the Australian Government and the states and territories, are outlined in bilateral reform agreements signed by the Australian Government and each state and territory, with the exception of Victoria. The bilateral agreements also outline state-specific reform activities to improve student outcomes and sit alongside the National School Reform Agreement that sets out long term national goals for education. All agreements commence on 1 January 2019 with the exception of funding arrangements, which will apply from the 2018 calendar year. These agreements are available at: https://www.education.gov.au/national-school-reform-agreement-0

These agreements allow the Commonwealth's record and growing levels of funding to flow to schools. Under the Commonwealth's funding arrangements, all schools will continue to move to being funded at consistent Commonwealth shares of the Schooling Resource Standard (SRS) by 2029 (20 per cent of the total SRS for government systems and 80 per cent of the total SRS for non-government schools and systems).

The Australian Government and Victoria have signed an interim agreement while bilateral negotiations on Victoria's funding and reform requirements continue. The interim agreement enables the Australian Government's record funding to start to flow to every school in Victoria. Both parties have committed to finalising a full bilateral agreement as soon as practicable in the first half of 2019.

The state funding requirements are also set as a percentage of the SRS. The SRS is calculated at school level and may change annually based on enrolment numbers, indexation and student or school characteristics. Consequently, state funding dollar contributions will vary from year to year, the same as Commonwealth funding.

The SRS is a measure of recurrent school funding and is not intended to be a complete measure of all school-related expenditure. States invest in a range of other activities, programs and services beyond recurrent funding that support and deliver educational services.

The agreements address requests from the states and territories that the funding requirements recognise:

  • varied jurisdictional economic and fiscal circumstances (e.g. costs and wages growth)
  • state and territory's broad investment in schools, including expenditure that is currently not included in the SRS.

Under section 128 of the Act, the National School Resourcing Board (the Board) must undertake an annual and independent review of each state's compliance with requirements under section 22A of the Act and bilateral agreements relating to total funding for the government and non-government sectors. The Board will commence its first review of state compliance with section 22A of the Act to assess 2018 funding once verified data is available.

The Board's assessment will inform the Minister for Education and Training's considerations in relation to a possible compliance response. If the Minister is satisfied a state or territory is not compliant, under sections 108 and 110 of the Act the Minister has discretion to determine compliance and any sanction action, including conditional approval, delaying and reducing funding.