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Birmo's Funding Scheme Fails The Commonsense Test

Posted on 12 June 2018
Birmo's Funding Scheme Fails The Commonsense Test

Simon Birmingham erred in having Catholic schools bear the brunt of federal cuts

Federal Education Minister Simon Birmingham tells us he's a "confident kind of guy". Yes, I recall that type of student happy-go-lucky but often doomed to fail.

This can be the only explanation for someone who initiated the greatest binge of federal taxpayers' money on schools (an extra $24.5 billion across the next decade) and still managed to get some of the most important players offside, particularly the Catholic education system. That takes real skill.

(Note that about 20 per cent of school students attend Catholic schools. Another 13 per cent attend independent schools. Public school attendance makes up the rest.) Birmo - as Malcolm Turnbull likes to call him - has been desperately trying to paper over the cracks by commissioning company director Michael Chaney to conduct a review of the socioeconomic status methodology that largely determines the allocation of federal funding to nongovernment schools. The principal conclusion of Chaney's panel already has been leaked.

Everyone has known for yonks that the present SES model is flawed. It even rated a mention in the first Gonski report on school funding released in 2011.

The recommendation was that the model should be reviewed and replaced by a more reliable means of establishing parents' capacity to pay fees. But there was no follow-through by the then Labor government or the incoming Coalition government.

The SES model uses census data on income at the statistical area level (about 125 households) and links the averages for these areas to the addresses of the parents of the students of non-government schools. After some adjustments are made - there is some standardisation for occupation and education levels - an index is calculated for each nongovernment school.

The average is 100, with the highest figures close to 130. Figures significantly below 100 indicate relatively low incomes on the part of the parent body of the school. The lower the index, the more money a school receives per student from the commonwealth.

But here's the thing: many of the recorded figures make no sense at all.

Many schools with lavish facilities and that charge fees of more than $20,000 a year have relatively low SES scores, while other schools with very modest facilities and that charge low fees have high SES scores.

The King's School in Parramatta has an SES of 116 whereas Our Lady of Perpetual Succour in West Pymble on Sydney's upper north shore has an SES of 127. Geelong Grammar School has an SES of 115 whereas Our Holy Redeemer School in Melbourne's Surrey Hills has an SES of 122. The Haileybury School, with its various campuses in Melbourne and close to 4000 students, has an SES of 111, whereas St Aloysius in Caulfield has an SES of 118.

The take-home message is that the recorded SES scores often bear little relationship to the true capacity of parents to pay fees or the resources of the school. Note also that many of the Catholic parish schools, including those recording relatively high SES scores, have small numbers of students - often fewer than 200 - whereas some of the elite independent schools have substantial numbers of students. Economies of scale matter for schools.

One of the factors that makes the SES model so unreliable relates to schools with boarding houses. The statistical areas in which the parents of these boarders live often will contain pockets of rural poverty, yet these parents are able to stump up $50,000plus a year to send their children to elite independent schools. The average income levels for these statistical areas are highly misleading for the purpose of allocating school funding.

But the problems with the SES model extend beyond the issue of boarding houses. Indeed, the reliability of using census income data is questionable, including the unhelpful presentation of the two highest income boxes - between $2000 and less than $3000 a week and more than $3000 a week.

The word is that Chaney's panel will recommend that the present SES model be ditched in favour of using the parents' tax file numbers and linking this to information on taxable income held by the Australian Taxation Office.

There are several advantages to this approach, including the fact people are used to providing their TFNs and the income information will be more up-to-date. (The census is undertaken only every five years and there is a lag before income information is released.)

Bear in mind that a lot potentially hangs on the transition to a new model. In all likelihood, it will reveal that many independent schools are overfunded. Across time, they should have the growth of taxpayer money they receive reduced. In some cases, there should be an absolute cut to their allocations.

So here's where it gets tricky for our confident minister: giving with the one hand and taking with the other tends to involve picking a fight. Thus far, he has picked a fight with the Catholic education system - his own bureaucrats admitted that Catholic schools stood to lose $4.6bn across a decade under the legislated deal.

But diluting what has been a sweet deal for independent schools is likely to lead to howls of protest and indignation. In fact, there already have been some pre-emptive responses from the potential losers.

The NSW Association of Indel pendent Schools has declared: t"We are not going to accept transfers of money from one system to  the other." This is code for declaring that the government can give more money to the Catholics but  not at our expense.

Independent Schools Victoria has been whipping up fears about an invasion of parental privacy if  TFNs must be supplied even though TFNs already are required  in many contexts.

The quest by the eager but anxious Education Minister is now to find sufficient money in a hollow log - a colloquial term for a hidden source of government funds - to appease the Catholics without upsetting his friends in the independent school sector.

There are several problems with this approach. The first is whether there are sufficient funds in the hollow log to achieve the outcome. In addition to some extra short-term funding for the Catholics of about $1bn, an extra $3bn across the decade is being contemplated. This may not be enough to placate them.

There is also the complicating factor of whether this funding top-up can be done without changing the legislation. (The change to the SES model definitely will require legislative amendment.) Getting Senate approval for anything these days is a challenge.

If there is one skill in which the minister does excel it's putting the cart before the horse. It was complete madness to lay out a school funding arrangement for the next decade before the SES model had been reviewed and improved.

(Another debacle is the gaming of the disability loadings, particularly by independent schools, which he should have anticipated and prevented.)

He should have realised that what he was implementing would destroy the business models of many small Catholic parish schools in middle-income areas, areas in which many state schools are full to overflowing. Think: lower north shore in Sydney and inner and southeast Melbourne, in particular, but other areas across Australia are affected. There are seat-by-seat political implications that the minister overlooked.

He also has achieved an unlikely alliance between theVictorian, NSW and Queensland Catholic education systems, which all strongly object to what has been put in place and are seeking to have the funding arrangements changed.

The bottom line is that the much vaunted (by the minister, at least) Gonski 2.0 "needs based" school funding system remains a complete mess. It seems unlikely that Birmingham will be able to dig himself out of this hole, at least without picking some more fights.

Unimpressed must surely sum up the attitude of the Prime Minister and his parliamentarian colleagues. And this is before Birmo answers the question: what will be achieved by spending all this extra money?

Giving with the one hand and taking with the other tends to involve picking a fight

From: 09 Jun 2018

Weekend Australian, Australia
Author: Judith Sloan

Tags: Government Funding

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