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Review of Funding for Schooling

Following the release in late 2010 of the PISA 2009 results, the Australian government, unhappy with how the nation stacked up against other high performing countries in Asia and Europe, commissioned a report to determine what changes, if any, were necessary in how schools in Australia are funded.  The Review of Funding for Schooling Final Report, delivered to Australia’s Prime Minister Julia Gillard last month, is the first comprehensive review of Australia’s school funding system in almost 40 years.

The focus was on funding because, although Australia has for years been among the top performers on the PISA assessments, it has not fared well on the OECD rankings for equity.  The commission’s remit was to find a way to make Australia’s funding for the schools more equitable.

Up until now, the states have had the main responsibility for funding the regular public schools, and their formulas for doing that have been quite different.  About half of the schools in Australia are private—mainly Catholic—schools. The federal government has been supplementing their funding, mostly in the form of funding for particular programs.  The result has been a crazy quilt funding pattern.

The Commission started from the position that a modern advanced industrial economy has to educate all children—not just some—to a much higher standard than was formerly thought either possible or necessary.  It costs more to educate some children to a high standard than others, the Commission observed, so it follows that a fair, equitable and effective funding system would have to find a way to put more funds behind students who cost more to bring them to a high standard than it does behind students who can be brought to the same high standards more easily.

That reasoning brought the Commission to propose a form of pupil-weighted funding for Australia, in which all students would receive the same base amount of foundation funding, and amounts would be added for each student answering to certain specified criteria, such as language status, socio-economic status and disability status.

As with all such systems, the state could, in theory, simply redistribute the money currently available, in which case, for every school that received more, there would be another that got less, or government could “level up,” so that no school loses anything, most schools get more money, everyone is happy, and the treasury goes bankrupt.

The Commission chose a middle course, proposing to increase total school funding by $5 billion.  But not all of that would come from the federal government.  Some would come from the states.  And there would be a complicated dance done in order to make sure that all students would be served by the same funding formula, with different amounts being contributed by the different states and by the private schools’ constituents.

Australia is, of course, not the first nation to come to these conclusions, nor would it be the first to implement such a plan.   A growing number of countries have led the way.  As elsewhere, the reaction has been swift and predictable.  Although the Commission is proposing to add $5 billion Australian to the pot, that is not enough to “level up,” so there would be winners and losers.  Predictably, the elite private schools are upset because they could potentially lose if this proposal succeeds.

The Commission report signals that the members were very much aware that redistributing school funding would not by itself solve the equity problem in Australia’s schools.  They realized that it would be no less important to ensure that any additional resources are used effectively.  They urged the government to move away from the creation of a plethora of government programs mandating particular kinds of changes in the schools, often for narrow purposes or constituencies, and toward giving schools clear goals and much more discretion in how they use the funds allocated to them for the achievement of those goals.

How Australia’s School Funding System Works
Under the current system, which the authors of the report feel “lacks coherence and transparency” and is “unnecessarily complex,” money is allocated to schools based on the school’s socio-economic status.  As in the United States, the Australian states and territories are primarily responsible for funding their school systems.  This funding is allocated in a variety of ways depending on the state; each has a formula that enables the state to determine how much money each school or system should receive; states also can determine whether – and how – this funding must be spent. The federal government is responsible for providing funding for things like capital improvements and major education initiatives, and, unlike most other countries, is also the primary funder of non-government schools.  When funding non-government schools, under the current system, the government does not take into account what schools charge for tuition or other revenue streams.

What the New Report Proposes
In the proposed system, the authors would put in place what they call the Schooling Resource Standard to be uniform across Australia.  School funding to meet this standard would be achieved through several separate funding streams.  These streams include per student funding, with differentiated amounts for primary and secondary students and “loading,” which is additional funding for students and schools based on socioeconomic status, school size and location, special needs, English language learners and indigenous students.  And finally, they include a funding stream for capital improvements.  Every government school would be funded to the Schooling Resource Standard plus any applicable loadings.  All non-government schools would be funded to the Schooling Resource Standard as well, although in this case, the standard will be achieved through a combination of private and public funding.  Depending on the socioeconomic makeup of the students in each non-government school, the school would be expected to contribute between 10 and 80 percent of the standard, with the balance provided by the government, though the panel recommends that the minimum contribution per student be set at between 20 and 25 percent of the Schooling Resource Standard, excluding loadings, which will be fully publicly funded in all schools, government and non-government alike.

The federal government would be expected to bear about 30 percent of the overall $5 billion increase annually.  The central change that the new system would make is that the money would follow the student, not the school, which is expected to be a major step towards educational equity.


Public Reaction
As mentioned earlier, the proposal outlined in the panel’s final report has received mixed reactions in Australia.  Peter Garrett, the School Education Minister, has stated that the proposed model is not government policy, but has provided the states and territories with the modeling tool used in the report to enable them to test the model using current budgets.  The reform plan faces opposition from some state governments, concerned that the plan is too expensive, and from proponents of non-government schools, who feel that the reforms would mean that many of the elite non-government schools would lose funding and require greater outlays from private partners and parents.  While it is too early to tell if the report’s recommendations will be adopted in Australia, the report describes the education funding system in Australia today and provides a detailed approach to designing a weighted student funding system that may have implications for other countries interested in moving in this direction.

Other reports of note:

OECD (2012). Equity and Quality in Education: Supporting Disadvantaged Students and Schools. Spotlight Report: Netherlands. This report was released as part of the OECD’s Overcoming School Failure: Policies that Work project, which provides evidence from OECD countries on policies that effectively reduce school failure.  This spotlight report draws from the OECD’s study, Equity and Quality in Education: Supporting Disadvantaged Students and Schools, and provides a country overview of PISA scores, the degree to which students’ socio-economic background predicts student performance, and employment rates as related to degree attainment. The report examines some of the current issues and related school policies in the Netherlands including the country’s higher than average grade repetition rates, their policy that allows students to be tracked at 12-years old, their efforts to ensure equity in their school choice procedures, their school funding formula that is weighted for disadvantaged students and their strategies to prevent high school dropouts, improve low-performing schools, and increase parental engagement, particularly among migrant families. To prevent school failure, the report authors recommend using two parallel approaches: eliminating education policies and practices (such as grade repetition and early tracking) that hinder equity and targeting low-performing disadvantaged schools.

OECD (November 2011). Background Report for the Netherlands. This report is also part of the OECD’s Overcoming School Failure: Policies that Work project. It offers an overview of the Dutch approach for ensuring education equity, overcoming school failure and reducing drop out rates. The report describes that the number of high school dropouts in the Netherlands decreased from 71,000 in 2002 to 41,800 dropouts in 2009 and targets a 25,000 decrease in dropouts for 2016.  The report reviews the Netherlands’ education structure, governance system, and approach to fair and inclusive education practices and resourcing.  The last chapter provides an overview of Dutch educational policies including developing an ambitious learning culture; changing the amount, intensity and quality of learning time; learning from results and performance oriented cultures in schools; and improving teacher quality by, for example, developing more teachers to the master’s level.  The final chapter also analyzes the current and foreseeable causes of education failure (such as helping students overcome disadvantaged backgrounds) and reviews “Aanval op de uitval”, the Dutch dropout prevention program which is committed to activities to reduce the number of early leavers as well as systematic changes to prevent student failure.