What's going on

with school funding in Australia?

To date, unfortunately, the Catholic school employers and peak representatives have chosen to not engage with the IEU on this matter.

IEUA Federal Secretary Chris Watt explains how school funding to the non government education sector works – and the problems arising from the current and new models.

One of the key elements of the current and next school funding arrangements by the Australian Government is the allocation of federal government recurrent funding on the basis of a school’s SocioEconomic Status (SES).

While the SES measure has directly impacted on the funding of non government schools for the last decade and a half, some school systems (the Catholic system is the largest, but also Lutheran, Anglican and Seventh Day Adventist) have been funded using a weighted SES average. But this is about to change, and this change will significantly impact on the relative funding that Catholic systemic schools receive compared to independent schools.

It is also worth noting that government schools are funded as a system irrespective of actual or average SES scores.

How has the SES model worked?

The SES index for a school is calculated using data that measures three dimensions: occupation, education and income (with the latter a combination of household income and family income).

It is important to note that these measures are not of individual pupils/school families attached to each school but an average of these measures from what is known as a Census Collection District (approximately 200 households ‘surrounding’ each pupil’s home address).

Both the quality of the SES measure and its application have long been a cause of concern for some, and in fact the IEUA has argued since its introduction (in 2000) that a more sophisticated measure needs to be developed.

The SES index is used to establish the ‘capacity to contribute’ for each non government school community and therefore, the percentage of the Schooling Resource Standard (SRS) a school gets for each student.

The ‘capacity to contribute’ essentially indicates the expected fee (or other school community contributions such as fundraising and donations) that a school will be required to raise. Or put another way, the ‘capacity to contribute’ is the proportion by which a non government school’s base funding is discounted on the basis of the school community’s estimated capacity to contribute to school costs.

So, if the SES measure is problematic, then the expectations on ‘capacity to contribute’ can be wrong, and the consequent federal government recurrent funding dollars could be incorrectly determined.

Key problems in the calculation of the SES index

As early as 2000, when the SES measure was first used to determine funding, initial research in Adelaide showed that the side of the street a person lived on could significantly impact on the SES score that each pupil brought to their school and hence impact on the funding level. A paper written by the Association of Independent Schools described one example.

“Depending on which side of the boundary street a student lives, their address will return a score of either 133 or 87 – a difference of 46 SES points. As you can appreciate, this would significantly influence a school’s SES score if one or more students were inaccurately geocoded”. The consequent ‘cost’ in recurrent funding if the SES was over estimated is significant.

From the other side of the ledger, another example was given in 2007. “The local community’s SES may not reflect the individual student’s SES in a particular non government school.”

Some students may come from the wealthiest home in a disadvantaged area. Barry McGaw has recently described this phenomenon as “relatively advantaged students from disadvantaged communities carry[ing] with them to a non government school a government voucher based on the students they leave behind in their communities”.

So, if the SES index is not reliable and robust then there is a risk that the decision on recurrent per student funding from the federal government could be substantially too little or even too much.

Unfortunately there have been a number of recommendations for a review of the SES index which, to date, have not been acted upon.

The Review of Funding for Schooling 2001, the basis of the current and new funding model foundations, recommended that school SES scores be used only in the short term, with the Government advised to “commence work as a priority to develop, trial and implement a better measure of the capacity of parents to contribute in consultation with the non government sectors” and further stated: “The current SES measure is … subject to a potentially large degree of inaccuracy as the students attending a particular school are not necessarily representative of the socioeconomic averages of the areas in which they live. A more precise measure of the SES of a school would be more accurate and credible”.

What the review was highlighting was the fact that SES scores are not based on each family – they are based on the family’s neighbourhood, and on the assumption that each household in a neighbourhood is exactly the same.

Interestingly, one of the architects of the SES model originally introduced in 2000, Associate Professor Stephen Farish, stated that “the SES scoring system is outdated and needs to be reviewed … It is clearly not working at the top end for the more prestigious schools … It is clearly time to overhaul it”.

Other critics of the SES index, as it is currently constructed and used, point to issues including:

the education and occupation dimensions in SES scores are not relevant to capacity to contribute

there is no consideration of family/household wealth in SES scores

nil and negative income households are misclassified, and

there is no consideration of family/household size.

The other area of concern is that even if the index is correct (reliable and robust) the assumption that ‘capacity to contribute’ is easily assigned and able to be ‘paid’ by a school community can be an unreasonable expectation.

The SES index simply measures the average. In addition, the Index of Community Socio-Educational Advantage (ICSEA) data on MySchool illustrates that school communities will have significantly different levels of capacity to contribute within their own cohort.

Changes to the model

The significant change proposed to the arrangements for systemic school funding clearly illustrate the problems that some low fee schools will face, with potentially significantly fewer dollars ‘attracted’ to the system by many schools and the need for systems and schools to seriously review school fee levels. This is a highly contentious outcome of the arrangements for the new funding model from 2018, and the Catholic school system has made it clear that they have and will continue to challenge this outcome.

To date, unfortunately, the Catholic school employers and peak representatives have chosen to not engage with the IEUA on this matter and not provided any detail about their understanding or modelling of the anticipated changes and impacts.

As non government school advocates indicate, the distribution of socioeconomic advantage found in all school sectors indicates that choice of schooling is more complex than just capacity to pay. These choices will reflect priorities around values, religious beliefs and educational philosophy.

Despite the contested space that continues to exist in school funding – and it would be fair to say that Education Minister Simon Birmingham was naïve at best in declaring the “funding wars over” – there has been for many years and remains (perhaps now even more urgently), the need to review the SES index, and its operation as a determinant of ‘capacity to contribute’, to ensure credibility and fairness.

The Federal Government ignored the requirement to do so under the previous Education Act, it is now time to simply act.