Funding formula needs reform, but not at expense of private schools

THE yet-to-be-released report of the Review of Funding for Schooling chaired by David Gonski was delivered to the federal government before Christmas. Perhaps, as with the Henry tax review, the Minister's copy of this report has become a bit waterlogged and affected by the sand as he ploughs through the chapters during his summer break.

If there were one lesson from the Henry tax review -- there were, in fact, many -- it is that governments are unwise to sit on potentially contentious reports. Timely release and response are preferable, for political and policy reasons.

This time around, the government has committed to announcing its planned actions in response to Gonski early in the school year. And Minister for School Education, Peter Garrett, has insisted no school will "lose a dollar per student under any new funding arrangement", which does not rule out real funding cuts.

There is a certain irony to the comparison between the two reviews. Many parts of the taxation review were narrow and arcane; they were of interest to a handful of tax lawyers, tax accountants and chief financial officers of large companies.

By contrast, a very large slab of the population takes an interest in school funding because they have children or grandchildren at school -- there were more than 7000 submissions to the Gonski review panel. State aid for schools has been an important electoral issue in Australia. Prime minister Robert Menzies first took up the matter in the 1963 federal election, which he won.

Some years later, prime minister Gough Whitlam commissioned Peter Karmel to investigate the state of non-government schools, in particular small Catholic parish schools.

This led to a further extension of the role the commonwealth government played in funding non-government schools, with bipartisan commitment. But who can forget the infamous hit list created by the leader of the opposition Mark Latham in 2004? A number of independent schools (picture shooting ranges and indoor swimming pools) were nominated for government funding cuts.

The consensus at the time was that this policy position was political poison, as the public predicted further cuts to the funding of all non-government schools.

There is a lot of mythology surrounding government funding of non-government schools, mythology that is promoted by the Australian Education Union, which represents teachers in government schools.

While it is true that the commonwealth government provides more funds per student to non-government schools than government schools, the latter are overwhelmingly funded by state governments.

Take 2007-08 as an example. Total per student government funding for government schools was $12,639 and for non-government schools, the figure was $6607. Government funding is sourced from both the commonwealth government and state governments.

For non-government schools, commonwealth government funding makes up 72 per cent of all government funding, in contrast with only 9 per cent for government schools. But note that state governments provide $11,546 a student to government schools.

It is also useful to understand the split of students between government and non-government schools. In 2010, two-thirds of students attended government schools. The remainder in non-government schools was divided between Catholic schools (20 per cent) and independent schools (14 per cent).

Over time, the proportion of students attending non-government schools has increased significantly. Between 2005 and 2010, enrolments in independent schools rose by 14 per cent, in Catholic schools by 6 per cent and in government schools by less than 2 per cent.

Another common myth about non-government schools is that most of them are selective, taking only students with above-average academic ability or other skills.

To be sure, there are some non-government schools that operate selective enrolment policies.

But this is also true of some government schools, particularly in NSW. Most non-government schools operate on a non-selective basis.

The main purpose of the Gonski Review is to recommend a funding system for the period beyond 2013 that is "transparent, fair, financially sustainable and effective in promoting excellent educational outcomes for all Australian students".

This may sound like a straightforward task. The reality is that past and current funding arrangements have embedded strong incentives for schools that, in turn, have affected decisions about capital expenditure, resourcing and fee levels, among other things. This is one of the reasons that radical change is difficult and also why the transition to a new system will need to be handled carefully.

Non-government schools receive funding from the Australian government according to the estimated socioeconomic status of the families of the students.

The basic idea is that students are provided with a family income-related quasi-voucher, paid to the school. Using data from the five-year census at the collector district level, the average income of households is matched with the addresses of students.

While there are some question marks over the accuracy of these estimates -- particularly for boarders, where the SES of the district from which they come will often significantly underestimate their families' actual income -- the real problem with the system is the extent of grandfathering.

When the SES-based funding was introduced in 2001, schools that were found to be worse off were protected from any reduction in real government funding. It is estimated that just under half of non-government schools are funded at a higher rate per student than their SES score would justify.

The course of the review has been somewhat clouded by the release of a number of controversial commissioned research studies. The suggestion of one of the studies that the non-government school sector should effectively be merged with the government school sector to form one system needs to be quickly dismissed.

One of the best aspects of school education in Australia is the autonomy of non-government schools and the choice and competition they afford. In many other countries, religious schools have been swallowed into the public education system, with considerable loss of independence and distinctiveness.

There is absolutely no way that Australia would want to fall into this trap. The evidence is very clear that schools that command autonomy over hiring and firing, as well as other educational matters, pro duce superior outcomes to schools bound by systemwide rules and regulations. Government policy in Sweden and Britain has picked up on this evidence.

The commonwealth government will need to approach the overhaul of the funding of non-government school with a high degree of sensitivity. Faced with tight budgetary constraints, it is unlikely that it will be able to spray around enough money, using the proposed new formula, to keep everyone happy.

There are likely to be some losers. There will need to be some careful and thorough explanations of the benefits of the changes.

In the meantime, we are still waiting for Gonski.