‘To those who have, more will be given’: Largesse to private schools continues

Trevor Cobbold / October 11, 2020 / Funding

In line with the adage “never let a good crisis go to waste”, the Morrison Government has taken the opportunity of the COVID pandemic to extend its largesse to private schools. The Budget Papers reveal that private schools received over a billion dollars in advance payments in 2019-20 to re-open their schools.

Some of the wealthiest private schools in the country have reaped millions from Jobkeeper. They include The King’s School, St Joseph’s College, Frensham and The Armidale School in NSW as well as Geelong Grammar, Trinity Grammar, Wesley College and Bialik College in Victoria.

The Government also gave $10 million to private schools to offset COVID-19 hygiene costs for items such as soap, hand sanitiser, classroom cleaning products and additional cleaning services. Similar funding was not provided to public schools. 

All this adds to the largesse the Morrison Government has showered on private schools. The main component of this largesse is $3.7 billion in additional funding for Catholic schools over the next ten years as a result of a new method of funding private schools introduced this year. Independent schools lose from this measure but are partially compensated by special funding deals. 

These include a $1.2 billion slush fund for Catholic and Independent schools called the Choice and Accountability Fund, some $172 million for schools to transition to the new funding method and $46 million for ACT private schools to adjust to higher levels of funding….yes, really! None are based on the Gonksi principle of needs-based funding.

The new funding model for private schools is based on a measure of the direct income of families called Adjusted Taxable Income (ATI). It is used to assess their capacity to contribute to private school income and thereby determine the level of Commonwealth funding for each private school.

However, ATI is a deeply flawed measure that will result in massive over-funding of private schools because it ignores several sources of family and school income as well as family and school wealth. As a result, the financial need of schools is over-estimated and consequently they receive more government funding than warranted.

A fundamental flaw in the funding model based on ATI is that it assumes that the parents of children pay the school fees. There is widespread evidence that many higher income grandparents pay at least part of the fees. Research by the industry superannuation fund, REST, shows that almost one-third of grandparents draw down on their superannuation to pay school fees for grandchildren. Other research indicates that about 60% of private school students have their fees at least partly paid by their grandparents.

However, grandparents partially or wholly paying school fees is only part of the story. Grandparents financially support their children in a myriad of ways such as deposits on houses, house renovations, household assets, cars, holidays, etc.

The REST research shows that 72% of people aged 50 of over planned to help their children financially with such purchases with 28% reporting they helped their children pay for holidays, 21% helped with house deposits and 23% helped fund house renovations.

Income provided for these purposes frees up family income to be used to pay school fees. It increases the capacity to contribute of families but because it is non-taxable gift income it is not included in ATI. 

ATI also under-estimates the total disposable income of families who receive a capital gain because only 50% of the gain is recorded as taxable income. The capital gains tax discount is worth over $10 billion a year and over 80% of this goes to the top 20% of income earners. Many high income families with children in private schools are likely to be recipients of this non-taxed income.

There is also no accounting of non-disclosed income in Australia or held in overseas bank accounts and tax havens. The use of both to hide income is mainly used by high-income earners who, by and large, send their children to private schools.

The ATI also ignores the wealth of families which is a significant factor in capacity to contribute. Assets such as shares, securities and other investments are just as much part of capacity to contribute as direct income. The assets of schools are also ignored in assessing their financial need.

Private donations are a significant source of income for private schools, especially high fee schools.

The billionaire owner of Canberra Airport, Terry Snow, recently donated a record-breaking $20 million to Canberra Grammar School to fund a new auditorium, a music department and library. In September last year, Loreto Kirribilli in Sydney invited families to donate $1 million each in a campaign to raise $100 million.

Many schools even receive donations from overseas. The Australian Independent Schools USA Foundation raises donations in the US and Canada for 24 elite Australian private schools.

Yet these donations are simply not counted when it comes to the federal government’s calculations for funding private schools.

Government funding of private schools based on the capacity to contribute of families is inherently flawed because it ignores all these sources of family and school income as well as family and school wealth. The insuperable problems demand a new approach to funding private schools.

Instead, the basic principle behind the government funding should be that every school would operate with sufficient resources required to provide an adequate education for all students. Governments have the responsibility to ensure that children should not be deprived of an adequate education because they attend an under-resourced school.

Government funding would only fill the gap between the income from fees, donations and other sources a private school receives and the community standard. Schools with private income above the community standard are not entitled to baseline government funding because such extra funding simply extends their advantage over public schools.

Under this model, government recurrent funding for private schools would incorporate three features:

•  Baseline component that varies between schools to take account of the funding obtained from private sources such as fees and donations;

•  Baseline funding would be discounted according to the extent to which private schools meet the same social obligations of public schools; and

•  Funding loadings for schools with disadvantaged students.

This model would finally provide a genuine needs-based funding model that ends the extraordinary over-funding of private schools.

This article was originally published by Michael West Media.