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Commonwealth funding for schools.

CONTENTS

Executive Summary

Introduction

A Brief Note on the Scope of the Paper

Overview

Modest Beginnings - 1964 to 1975

1964 - 1969

1969 - 1975

Expanded Involvement - 1976 to 1987

Separate Programs

General Recurrent Grants; Capital Grants Program; The Computer Education Program; Primary Basic Learning Program; Participation and Equity Program; English as a Second Language Program; Disadvantaged Schools Program; Special Education Program; Early Special Education

Joint Programs

Ethnic Schools Program; Professional Development Program; Education Centres Program; Projects of National Significance Program; Participation and Equity Grants for National Projects; Early Special Education; Multicultural Education Program; Country Areas Program; Children in Residential Institutions Program; Severely Handicapped Children's Program

A More National Approach - 1988 to 1996

Separate Programs

General Recurrent Grants; Capital Grants Program; English as a Second Language Program; Disadvantaged Schools Program; Special Education Program; Students at Risk Program; Transition Support for Disabled

Joint Programs

Ethnic Schools; Education Centres; Award Restructuring Assistance Program; Projects of National Significance Program; Early Special Education; Special Education; Country Areas Program; Residential Institutions Program; Severely Handicapped Program; Rural Hostels; School Language and Literacy; Gifted and Talented Students; Gender Equity; Recurrent Grants for Rural Hostels

Government/Non Government Funding Split 1976 - 1993

A Note on Commonwealth Schools Programs as Administered by the Department of Employment, Education and Training

Current Issues Related to Schools Funding

The level of funding for schooling in Australia

The education expenditure versus educational performance debate37

The tied/untied debate and the nature of Commonwealth funding for schools

Conclusion

Appendices

Appendix 1showing full details of Commonwealth funding for schools over the period 1964-65 to 1974-75

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Appendix 2 showing summary details of Commonwealth funding over the period 1976 to 1993, including projections to 1996

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Appendix 3 showing total school enrolments (government/non government) for selected years

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Appendix 4 showing apparent retention rates (year 12) for selected years

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Appendix 5 showing Commonwealth funding and school enrolments 1977 to 1992

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Figures

Figure 1Capital Grants for Science Laboratories 1964-65 to 1974-75

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Figure 2School Libraries Capital Grants 1968-69 to 1974-75

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Figure 3General Recurrent Grants 1969-70 to 1974-75

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Figure 4General Capital Grants 1971-72 to 1974-75

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Figure 5Grants for Disadvantaged Schools 1973-74 to 1974-75

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Figure 6Grants for Schools for the Handicapped 1973-74 to 1974-75

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Figure 7Grants for Other School Programs 1973-74 to 1974-75

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Figure 8Commonwealth Funding and School Enrolments 1977 to 1988

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Figure 9Commonwealth Recurrent Funding for Schools 1976 to 1987

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Figure 10Commonwealth Capital Funding for Schools1976 to 1987

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Figure 11Commonwealth Funding and School Enrolments 1988 to 1992

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Figure 12Commonwealth Recurrent Funding for Schools 1988 to 1996

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Figure 13Commonwealth Capital Funding for Schools 1988 to 1996

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Select Bibliography

Executive Summary

The Commonwealth Government has been providing funding for specific purposes for schools in Australia since 1964. Since that time both the scope and size of Commonwealth outlays for schooling have increased substantially. Expenditure on schooling via the various States Grants Acts has grown from $9.9 million in 1964-65 to approximately $3 billion in 1993.

Although total Commonwealth funding has increased over recent years, (Commonwealth budget outlays on education as a proportion of total Commonwealth budget outlays have risen from 7.0 per cent in 1984-85 to 8.3 per cent in 1994-95) the total amount of government spending on education in Australia, as a proportion of total government outlays, has in fact decreased in recent years: the States/Territories overall are contributing less. In 1980-81 combined Commonwealth/State education outlays as a percentage of total outlays was 25.2 per cent. By 1991-92 this figure had declined to 21.9 per cent.

From 1964 to 1969 all funding provided by the Commonwealth was for capital purposes and consisted of grants for science laboratories and equipment in government and non-government schools. In 1970 recurrent grants were introduced for non-government schools and these grants were extended to include government schools in 1974.

A major turning point in terms of Commonwealth involvement in schooling was the establishment of the Commonwealth Schools Commission in December 1973. From 1974 onwards, the Commonwealth's financial commitment to schools expanded rapidly. In 1973-74 Grants for Disadvantaged Schools, Grants for Schools for the Handicapped and grants for Other School Programs were introduced.

From 1974 to September 1985 the Commonwealth Schools Commission was responsible for the administration of Commonwealth programs for schools. From September 1985 administration of the general recurrent and capital programs became the responsibility of the Commonwealth Department of Education leaving the specific purpose programs under the control of the Commission. With the disbanding of the Schools Commission in late 1987, all programs became the administrative responsibility of the Department of Education. In 1988, the National Board of Employment, Education and Training (NBEET) was established and support to NBEET includes the Schools Council which is the main source of independent advice on schooling available to the Commonwealth Minister for Education.

The period following the demise of the Schools Commission has seen a continual and expanding role for the Commonwealth in schooling. The Hobart Declaration on Schooling (October 1988) saw the adoption, for the first time, of Common and Agreed Goals for Australian Schooling. Another important development in the move towards a more national approach was the April 1989 decision by the Australian Education Council to provide comprehensive and systematic information on the expenditure by governments on education. From 1989 onwards there has been an annual National Report on Schooling which contains detailed information on schooling in Australia. Various moves have also been made towards a national curriculum framework and other initiatives such as the National Strategy for Equity in Schooling and the National Project on the Quality of Teaching and Learning are indicators of a trend towards a more national approach to schooling.

Commonwealth involvement in schools funding continued to accelerate from the late 1970s to the present. For example, in 1976 $1.619 billion (1993 prices) was provided for schools programs; in 1993 the equivalent figure was $2.948 billion (1993 prices). As well as recurrent and capital funding, the Commonwealth also provides a range of targeted programs for schools aimed to achieve specific objectives such as helping disadvantaged students, providing funds for ethnic programs and encouraging the development of literacy and gender equity.

Over the last twenty years non-government schools have been 'more generously' funded than government schools when a comparison is made between real Commonwealth funding and school enrolments. Over the period 1976 to 1993 funding for non-government school programs (excluding joint programs) increased by 189.8 per cent (with an enrolment increase of 39.4 per cent) compared to an equivalent funding increase of 28.2 per cent (with an enrolment decline of 5.2 per cent) for government schools. If locally based cuts to school funding being experienced in many States and Territories continue then it is possible that the contentious state-aid debate that characterised the late 1960s and early 1970s could be reignited.

The role, scope and nature of the Commonwealth's involvement in schooling has been the subject of considerable debate in recent years. An analysis of the figures shows that, on the surface at least, the Commonwealth has 'pulled its weight' in terms of funding schools - over the last twenty years, except for 1979-80 and 1986-87, it has provided ongoing funds to the States in excess of both inflationary growth and the increase in student numbers (see Appendix 5). However, this conclusion needs to be qualified by the fact that with factors such as increasing retention rates and the greater use of expensive technology (for example, computers) there is an argument for increasing the real level of funding just to cater for such changes.

It is clear that the funding cutbacks that have occurred in recent years, most especially in Victoria, Tasmania and the ACT, are as a result of cuts initiated by the States and Territories themselves, although it can be argued that Commonwealth reductions in general revenues grants to the States/Territories has been one of the factors putting pressure on Treasurers in those jurisdictions cutting funds going to schools.

The argument over funding being waged in most of the States and Territories is muddied by the fact that there appears to be a lack of a clearly demonstrated nexus between inputs (expenditure) and outcomes (standards) in the educational environment. The lack of an adequate and generally accepted measurement tool that would allow a comparison to be made between inputs and outcomes has made it easy for those advocating spending cuts to run, if not win, the funding debate. Until such a measure or series of measures is/are developed, the debate on education funding will be characterised by a high degree of conflicting claims and contradictory statements.

One of the most discussed features of the current state of Commonwealth/State financial relations is that of vertical fiscal imbalance. Vertical fiscal imbalance refers to the imbalance between the Commonwealth and the States with respect to responsibilities and funding. The Commonwealth raises approximately two-thirds of total government funds yet its outlays make up only slightly in excess of half of total (Commonwealth and State) government outlays. In this context several of the States have in recent times argued that the Commonwealth should "untie" schools funding to allow spending priorities to be determined at the local level. The Commonwealth Minister for Employment, Education and Training (Mr Crean) has strongly opposed the push for untied grants. According to Mr Crean, the move to untied grants would cause the Commonwealth to lose its leverage in terms of influencing outcomes in public education and that, as the Commonwealth levies, collects and distributes most of the taxes in the federation, it should exercise some control over the way those taxes are spent. The efficacy and effectiveness of tied grants in general is currently being examined by a Commonwealth parliamentary committee: the Joint Statutory Committee of Public Accounts is investigating the issue of "Specific Purpose Payments" (tied grants), grants that are estimated to total $16.7 billion in 1993-94. As well, the Senate Standing Committee on Employment, Education and Training is currently investigating, amongst other things, the accountability of Commonwealth/State authorities for the funds provided under the Commonwealth Schools program and the implications of funding arrangements for the quality and equity of access for students to primary and secondary education.

The appendices attached to the paper provide a variety of data relevant to the paper's contents including details of funding of Commonwealth schools programs 1964 to 1996; school enrolments and retention rates for selected years and a comparison of funding and school enrolments over the period 1977 to 1993.

Introduction

A Brief Note on the Scope of the Paper

The aim of this paper is to give an overview of funding levels and trends with respect to the Commonwealth's involvement in schooling. Not all financial information is provided (for example, State by State breakdowns of all programs) due to the sheer volume of that information, but rather the aim has been to provide a broad picture of the nature and scope of the Commonwealth's involvement. As well, the paper attempts to briefly overview some of the main current issues arising in the context of funding for school education in Australia. The three issues discussed are, firstly, the overall level of funding for schools, secondly, the education expenditure versus educational performance debate and thirdly, the issue of tied versus untied grants. For convenience, various funding programs can be categorised as either recurrent, capital or targeted, as set out in Appendix 2.

The paper deals only with Commonwealth funding for schools that is allocated via States Grants legislation. The first piece of such legislation was passed in 1964. It should be noted that the Commonwealth also funds other aspects of schooling not covered by States Grants legislation. For example, at present the Commonwealth, through its annual appropriations, funds the secondary school elements of the Open Learning Initiative, curriculum development activities, education counselling and the Australian Student Prize. From 1993 to 1996 the Commonwealth is also providing an additional $60m to establish a National Teachers Professional Development Program and a further $20m is also being provided over the same period to help implement the key competencies identified in the Mayer Report of 1992. 1 The 1994-95 Budget stated that the Commonwealth will be providing, over the next several years, $57.2m as part of its contribution to the National Asian Languages and Asian Studies Strategy. 2 Funding is also provided for the Aboriginal Education Strategic Initiatives Program (AESIP) which grants supplementary funding to improve education for Aborigines and Torres Strait Islanders - $83.9m is provided for AESIP in the 1994-95 Budget. 3 As well, the Commonwealth provides funds for student assistance (essentially AUSTUDY, ABSTUDY and assistance for migrants) that is not covered under the ambit of the States Grants legislation. This assistance is provided to the individual as opposed to the States Grants funding which goes to school systems.

Overview

According to the latest statistics 4 there are 9,865 schools operating in Australia - 75 per cent of which are government and 25 per cent of which are non-government. Attending these schools are 3.098 million full time students (2,228,000 government and 870,000 non-government). If parents are added to the latter figures it is clear that the issue of funding for schools directly impinges on a very significant proportion of the Australian population.

Whilst primary and secondary education is essentially the responsibility of the States, the Commonwealth Government has nevertheless become more and more involved in schooling in Australia. Uncertainty over the legality of the Commonwealth being directly involved in education led the Government in 1946 to propose amendments to the Constitution. Acceptance of the Government's proposals in a national referendum allowed Section 51 (xxiiiA) of the Constitution to be amended to give the Commonwealth power to make laws 'with respect to the provision of...benefits to students' in all States of Australia. Notwithstanding the absence of the word 'education' in the amendment, the wording of the amendment has allowed the Commonwealth Government considerable scope for involvement in education. The Commonwealth has also used Section 96 of the Constitution, which allows for the Federal Parliament to 'grant financial assistance to any State on such terms and conditions as the Parliament thinks fit', to extend its involvement in education.

The Commonwealth first began direct funding of schools in the 1964-65 financial year. The States Grants (Science Laboratories and Technical Training) Act 1964 provided $9.9 million 5 to the States for science laboratories and equipment in secondary schools. Since that time the Commonwealth has greatly increased its involvement and funding of schools in Australia - the 1994-95 Federal Budget earmarked $3125 million for schools funding. 6 The Commonwealth now meets approximately 12 per cent of the total cost of running government schools and approximately 37 per cent of the total cost of running non-government schools. 7

Although total Commonwealth funding has increased over the period, (Commonwealth budget outlays on education as a proportion of total Commonwealth budget outlays have risen from 7.0 per cent in 1984-85 to 8.3 per cent in 1994-95. 8 ) the total amount of government spending on education in Australia, as a proportion of total government outlays, has in fact decreased in recent years. In 1980-81 combined Commonwealth/State education outlays as a percentage of total outlays was 25.2 per cent. By 1991-92 this figure had declined to 21.9 per cent 9 . Commonwealth outlays on schools and pre-schools accounted for 0.81 per cent of Gross Domestic Product (GDP) in 1982-83 but by 1992-93 this figure had declined to 0.68 per cent of GDP. 10 It should be noted here that the total amount of funding can still increase even with a declining proportion of GDP being devoted to education. If the 'cake' is growing then the actual amount of funding going to a particular area may still increase at the same time as the proportion of GDP being allocated to that area decreases. Another factor that needs to be considered is the level of enrolments in schools. If funding is not keeping up with enrolments then it can be argued that 'real' funding for education is declining. The whole debate about education funding and educational quality is hampered by the fact that no one has yet been able to directly link increased education expenditure with improved educational performance. This issue, including an analysis of school enrolment levels over time, is examined later in this paper.

The issue of the nature of the Commonwealth's involvement in schools funding has recently been raised in the context of the Council of Australian Governments (COAG). Several State Ministers of Education have called for the scrapping of tied grants and argued that all Commonwealth funding for state school education should be provided as one untied block grant. The efficacy and effectiveness of tied grants in general is currently being examined by a Commonwealth parliamentary committee. The Joint Statutory Committee of Public Accounts is investigating the thorny issue of 'Specific Purpose Payments' (tied grants) - grants that are estimated to total $16.7 billion in 1993-94. According to the Committee Chair (Mr Les Scott, MHR) the inquiry was precipitated by an Auditor-General's Report released in 1993 which stated that accountability in Commonwealth-State agreements needed improvement and that a reduction in duplication between the Commonwealth and the States could lead to a reduction in overall spending. 11 The issue of tied grants and accountability with respect to education is also examined later in this paper.

On 24 February 1994 the Senate Standing Committee on Employment, Education and Training was given a reference directly related to Commonwealth funding of schooling in Australia. The Committee is investigating, amongst other things, the accountability of Commonwealth and State/Territory authorities for the funds provided under the Commonwealth Schools Program and the implications of funding arrangements for the quality and equity of access for students to primary and secondary education. The Senate Committee is due to report by the end of 1994 and its deliberations are also likely to generate further debate on funding and related issues with respect to Australian schooling.

Modest Beginnings - 1964 to 1975

1964 - 1969

From 1964 to 1969 all funding provided by the Commonwealth was for capital purposes and consisted of grants for science laboratories and equipment in government and non-government schools. The grants began in 1964 with the passage of the State Grants (Science Laboratories and Technical Training) Act 1964. (This program continued until mid 1975 with subsequent States Grants (Science Laboratories) Acts of 1965, 1967, 1968 and 1971). Of the $9.905m allocated in the 1964-65 financial year, $7.238m was granted to government schools and $2.667m was granted to non-government schools. The basis for this allocation was determined by August 1963 enrolment levels for government and non-government schools respectively. The distribution of funds between the States was related to their populations. Specific funding for school science laboratories and equipment ended on 30 June 1975 when funds for the provision of such facilities was included in other programs administered by the Schools Commission.

Figure 1 shows Commonwealth capital grants for science laboratories over the period 1964-65 to 1974-75. As is evident from the graph, funding was relatively constant, in nominal terms, over this period with an annual average allocation of approximately $11m. (For full details of funding under this program, including State allocations and the split of grants between government and non-government schools see Appendix 1.)

1969 - 1975

The late 1960s and early 1970s saw an expansion of Commonwealth grants to schools including the beginning of recurrent grants for non-government (begun in 1970) and government (begun in 1974) schools.

In 1969 the Commonwealth provided funds to the States to finance buildings and associated capital facilities for libraries in both government and non-government secondary schools. These grants were made from 1969 to 1974 under the States Grants (Secondary School Libraries) Acts of 1969 and 1971. In 1974-75 a total of $33.939m was allocated for capital grants for secondary school libraries - $28.921m for government schools and $5.018m for non-government schools. Figure 2 shows capital grants for secondary school libraries over the period 1968-69 to 1974-75. (For full details also see Appendix 1.)

Recurrent grants for non-government schools commenced in 1970. The States Grants (Independent Schools) Act 1969 authorised payments to non-government schools at the rates of $35 per primary student and $50 per secondary student from the beginning of 1970. The rates were increased to $50 and $68 respectively from the beginning of 1972 by the States Grants (Independent Schools) Act 1972. (The States Grants (Schools) Act 1972-73 changed the system of payment so that in 1973 non-government schools received grants equivalent to 20 per cent of the cost of educating a child in government schools.) In 1974 recurrent grants were extended to government schools. In the 1974-75 financial year a total of $199.354m was allocated for general recurrent grants -$100.918m for government schools and $98.436m for non-government schools. Figure 3 clearly shows the rapid growth in recurrent grants to the States, particularly in 1973-74 and 1974-75. Full details are contained in Appendix 1.

By 1972, then, the Commonwealth had extended its scope of capital grants beyond science laboratories and libraries. The States Grants (Capital Assistance) Act 1971-72 authorised $20m for capital expenditure on government primary and secondary schools in the States over the period from January 1972 to July 1973. (In September 1972 a further $167m was allocated for the period 1973-78.) The grants under this legislation were additions to the interest free capital grants made as part of the States annual Loan Council programs as a substitute for loan raisings. In 1973 these capital grants were extended to cover non-government schools and a total of $48m was allocated to this sector for the period 1973-78. Figure 4 shows general capital grants over the period 1971-72 to 1974-75 - also see Appendix 1.

In December 1972 the Interim Committee for the Australian Schools Commission, chaired by Professor Peter Karmel, was established. The Karmel Committee was asked to examine the needs of schools, to work towards establishing acceptable standards in schools, and to advise on school financing. The Schools Commission was established as a statutory body by the Schools Commission Act 1973, which was assented to on 19 December 1973. Payments to the States for the Commission's grant programs were authorised by annual States Grants (School Assistance) Acts and are still the main legislative vehicle used for schools funding by the Commonwealth.

In 1973-74 three other specific programs for schools were introduced -Grants for Disadvantaged Schools, Grants for Schools for the Handicapped and Grants for Other School Programs. Full funding details for these three programs are contained in Appendix 1.

The grants for disadvantaged schools were aimed at providing additional recurrent resources to schools which contained students from disadvantaged neighbourhoods as well as refurbishing buildings in those schools. In 1974-75 a total of $33.008m was provided to disadvantaged schools, the vast majority ($27.520m) of which went to government schools - see Figure 5.

The grants for schools for the handicapped were provided to allow for an increase in the number of trained teachers in government schools for the handicapped; to improve standards in existing State special schools; to assist the States to take over voluntary handicapped schools where that was their wish and to establish new special schools and upgrade existing ones. A total of $14.416m was provided under this program in 1974-75 - see Figure 6.

The funds provided under the "other school programs" were for the establishment of Education Centres as part of expanding teacher in-service training opportunities, for special projects and for providing better information about schools and school systems. A total of $15.951m was provided under this program in 1974-75 - see Figure 7.

Figures 2 to 7 clearly show that the expansion of Commonwealth funding for schools began in the 1974-75 financial year, coinciding with the establishment of the Schools Commission in December 1973. Total Commonwealth grants for government and non-government schools amounted to $433.917m in 1974-75 compared to $161.637m in 1973-74 and a mere $9.905m in 1964-65. 12

Expanded Involvement - 1976 to 1987

Commonwealth involvement in schooling continued to accelerate in the late 1970s and early 1980s. In 1976, total Commonwealth grants to schools amounted to $1.619 billion (1993 prices); by 1986 the equivalent figure was $2.169 billion (1993 prices). A very approximate measure of whether the Commonwealth is maintaining its funding commitment to schools is to analyse the level of real funding and compare that to total school enrolments over time. Figure 8 shows the percentage increase in Commonwealth real funding for schools over the period 1977 to 1987. Figure 8 also shows the percentage increase in total school enrolments over the same period. Real funding increased over the period in all years except 1980 and 1987 and enrolments increased in all years except 1979, 1980, 1985 and 1986. When funding and enrolments are compared - see Figure 8 - it can be seen that Commonwealth funding outstripped or matched enrolments (in percentage growth terms) over the period except for 1979-80 and 1986-87.

From 1974 to September 1985 the Commonwealth Schools Commission was responsible for the administration of Commonwealth programs for schools. From September 1985 administration of the general recurrent and capital programs became the responsibility of the Commonwealth Department of Education leaving the specific purpose programs under the control of the Commission. With the disbanding of the Schools Commission in late 1987, all programs became the administrative responsibility of the Department of Education. In 1988, the National Board of Employment, Education and Training (NBEET) was established and support provided to NBEET includes the Schools Council which is the main source of independent advice on schooling available to the Commonwealth Minister for Education.

Over the period in review (and to the present) successive State Grants (School Assistance) Acts or their equivalents have divided Commonwealth payments for schooling into three categories of programs: government school programs, non-government school programs and joint programs. Brief details of the grants for both government and non-government schools on a program basis for the period 1976 to 1987 are summarised below. It should be noted the Commonwealth was involved in some areas of education, for example, child migrant education, prior to the dates and programs listed here. In such cases the funding came from non States Grants legislation which, as was stated earlier, is not covered by the scope of this paper.

Separate Programs

General Recurrent Grants

General recurrent funds, which were first introduced in 1969-70, are the most important, in dollar terms, of the programs funded by the Commonwealth. These grants provide financial support for both government and non-government schools and are designed to assist with the recurrent costs of schools such as teachers' salaries, professional development of teachers, curriculum development and general operational requirements. Figure 9 shows the level of recurrent funding between 1976 and 1987. In each year over that period the real level of recurrent funding increased. The increasing importance of recurrent grants over the period is illustrated by the fact that in 1976 these grants accounted for 62.4 per cent of total spending on Commonwealth schools programs and by 1987 general recurrent grants accounted for 76.0 per cent of total spending on Commonwealth school programs. 13

As at 1987 recurrent grants to government schools were provided as block grants at the rate of $180 per primary school student and $230 per secondary school student. Grants to approved non-government schools are provided on a per student basis. Since 1985 non-government schools have been ranked into twelve subsidy categories, with those in category twelve receiving the most assistance and those in category one the least. Schools are placed in the twelve categories on the basis of the Education Resources Index (ERI) which compares a school's private income with a standard level of resources.

Capital Grants Program

In terms of the total quantum of funding provided by the Commonwealth for schooling, the capital grants program is second only to the recurrent program in terms of importance. As mentioned earlier the first capital grants commenced in 1964-65 for secondary school science laboratories. Figure 10 shows details of capital grants over the period 1976 to 1987. These grants peaked in 1977-78, but in 1980 as the figure shows, there was a marked reduction in capital funding, partly due to the evident levelling out of government school enrolments. This lower level of funding persisted through the mid 1980s with 1986 and 1987 showing further declines in real capital funding. Capital grants, in proportionate terms, became far less important over the period in review. In 1976 capital grants accounted for 27.6 per cent of total Commonwealth spending on school programs; by 1987 this figure had declined to 12.6 per cent. 14

The Computer Education Program

The Computer Education Program (CEP) operated from 1984 to 1986 (see Appendix 2) and was aimed at improving the technological awareness skills of students in schools. The CEP was envisaged as a broad educational program rather than simply the provision of computer hardware. The program was particularly aimed at the use of computers in teaching and across the curriculum, access to the program by girls and disadvantaged students, the economic use of resources and the professional development of teachers. In each of the three years of its operation the CEP provided $7.867m (1993 prices) to government schools and $1.967m (1993 prices) to non-government schools.

Primary Basic Learning Program

This program, established for a three year period, operated from 1985 to 1987 and provided funds to improve basic learning in primary schools, particularly for those groups which were perceived to be having difficulty in acquiring learning skills in the early stages of school. In each of the three years of its operation this program provided $8.314m (1993 prices) to government schools and $2.196m to non-government schools.

Participation and Equity Program

The Participation and Equity Program (PEP) was funded from 1983 to 1987. Funds were provided under the States Grants (Education Assistance - Participation and Equity) Act 1983. The objective of PEP was to encourage young people over the school leaving age to participate in useful and fulfilling education and training activities in schools and TAFE. Particular attention was paid to students with disadvantaged backgrounds and schools with low retention rates in order to foster more equal outcomes of schooling. The peak funding year for PEP initiatives was 1984 when government schools received $62.538m (1993 prices) and non-government schools received $7.326m (1993 prices).

English As A Second Language Program

This program began in 1976 and still operates today. Since 1982 it has been divided into two main elements - the general support element which supports schools and education authorities in the provision of services specifically directed at improving the English language competence of students from non-English speaking backgrounds; and the new arrivals element which funds education authorities on a per student basis for intensive English language programs for newly arrived students of non-English speaking backgrounds. In 1987 a total of $56.176m (1993 prices) was allocated to government schools and a total of $16.575m (1993 prices) was allocated to non-government schools under the program - see Appendix 2 for full funding details.

Disadvantaged Schools Program

The Disadvantaged Schools Program (DSP) is another ongoing program. It began in 1974 and is aimed at assisting schools serving socio-economically disadvantaged communities, characterised by low educational attainment related to poverty. Only declared disadvantaged schools are eligible to participate in the program. State Education Ministers determine which government schools will be declared disadvantaged. The Commonwealth Minister for Education declares non-government schools disadvantaged following recommendations from State committees. In 1987, $44.997m (1993 prices) was allocated to government schools and $8.740m (1993 prices) to non-government schools under this program - see Appendix 2 for full details.

Special Education Program

The Special Education Program (SEP) began in 1976 and is still in operation today. It aims to provide assistance to education authorities and non-government agencies in providing intervention services to improve the quality and coverage of educational services for children with disabilities or living in residential care. For non-government schools the funding provided under this program is split between a general component, a support services component and, from 1986, a capital support component - see Appendix 2. In 1987 government schools received $25.856m (1993 prices) and non-government schools received $28.291m (1993 prices) under SEP.

Early Special Education

This program ran for only two years (1985 and 1986) and from 1987 it was absorbed into the joint Early Special Education Program. In each year of its operation $2.49m (1993 prices) was provided to government schools and $0.639m (1993 prices) was provided to non-government schools. The program was aimed at promoting more effective learning and development for disabled children below school age.

Joint Programs

Grants for the nine programs described above, were or still are, provided separately to both government and non-government schools. In addition there were, over the period 1976 to 1987, ten Commonwealth programs providing funds to government and non-government schools.

Ethnic Schools Program

This program commenced in 1981 and provided grants to help maintain the languages of people from non-English speaking backgrounds. It aims to assist ethnic community organisations to operate classes in the languages and cultures of their communities. In 1987, $9.675m (1993 prices) was allocated to this program - see Appendix 2.

Professional Development Program

This program operated from 1976 until 1986 and provided grants for the development of teachers and educational support staff. The program included the Schools Exchange and Travel Scheme which funded short term working visits by teachers and parents to other schools. Funding for this program progressively declined over the years of its operation and total funding in the final year (1986) was $16.931m (1993 prices) - see Appendix 2.

Education Centres Program

Commenced in 1975, the Education Centres Program provides courses, resources and facilities for the professional development of teachers and parent involvement in schools. Funding under this program has included the establishment of a series of Commonwealth supported Education Centres throughout Australia. In 1987 the total funding provided under this program was $2.412m (1993 prices), a figure that has remained constant in real terms to the present - see Appendix 2.

Projects of National Significance Program

This program also commenced in 1976 and funds activities such as applied research and dissemination of ideas in areas considered to be of national significance. For example, in 1987 this program allocated funds for, among other things, arts in education, aboriginal education, education for girls, professional development, multicultural education, technology in schooling and innovations in school organisation. In that year $2.724m was allocated to this program - see Appendix 2. As is evident in Appendix 2, the 1987 funding figure represents a marked decline from the funding provided in the early years of the program.

Participation and Equity Grants for National Projects

As part of the PEP the Commonwealth provided, over the period 1984 to 1987, a small amount of funding for national projects related to the objectives of the PEP. Projects included were related to the investigation and review of credentialling and assessment arrangements, organisational change in schools, improving community attitudes to secondary education and the sharing of information on successful school and system initiatives. In 1987 $1.274m (1993 prices) was allocated to this program - see Appendix 2.

Early Special Education

The joint component of this program operated from 1985 to 1990. In the latter year the program was absorbed by the Special Education Program. In 1985 a total of $2.67m (1993 prices) was allocated to this program; in 1987 the equivalent figure was $5.803m (1993 prices) - see Appendix 2.

Multicultural Education Program

The Multicultural Education Program, which ran from 1976 to 1986, provided support for educational programs which encouraged students to understand and value Australia's cultural diversity. In 1986, the final year of its operation, this program was allocated $7.149m (1993 prices) - see Appendix 2.

Country Areas Program

Begun in 1977 the Country Areas Program provided grants to help alleviate the educational disadvantages of country children. In 1987 a total of $14.695m (1993 prices) was allocated to this program - see Appendix 2.

Children in Residential Institutions Program

This program commenced in 1977 and provided supplementary educational support for children living in institutions conducted by government or voluntary organisations. In 1987 a total of $3.430m (1993 prices) was allocated to this program, a figure that was virtually constant for each year of the program's operation - see Appendix 2.

Severely Handicapped Children's Program

The Severely Handicapped Children's Program provided assistance for educational programs for severely handicapped children. The program commenced in 1981. In 1987 a total of $5.600m (1993 prices) was allocated this program, again a figure that in real terms was very constant over the life of the program's operation.

It can be seen that over the period 1976 to 1987, not only did the total amount of funding provided by the Commonwealth for schools increase in real terms for all years except 1980 and 1987, but also that there was an increasing emphasis on recurrent funding and less emphasis on capital funding. Targeted funding, as outlined in Appendix 2, remained relatively constant as a proportion of total funding over the period - in 1976 it represented 9.8 per cent of total funds, in 1981 it represented 12.3 per cent of total funds and in 1987 it represented 11.3 per cent of total funding.

A More National Approach - 1988 to 1996

The period following the demise of the Schools Commission in 1987 has seen a continual and expanding role for the Commonwealth in schooling in Australia. Moves for a more national approach to be taken to schooling initially began in the years of the Whitlam Government with the establishment of the Karmel Committee but it was in the late 1980s that real impetus was given to a national approach to schooling. For example, in July 1988 the Australian High School Principals Association, the National Catholic Education Commission, the National Council of Independent Schools, the Independent Teachers Federation of Australia and the Australian Council of Trade Unions agreed to participate in the development of national goals and priorities for Australian schools. The Hobart Declaration on Schooling (October 1988) saw the adoption, for the first time, of Common and Agreed Goals for Australian Schooling. The Hobart meeting of the Australian Education Council (comprising Federal and State Ministers for Education) and the adoption of the Declaration on Schooling was a key indicator of the increasing trend towards national cooperation in schooling.

Another important development in the move towards a more national approach was the April 1989 decision by the Australian Education Council to provide comprehensive and systematic information on the expenditure by governments on education. Prior to this decision being made States/Territories had reported individually to the Commonwealth on how federal grants for education were expended. From 1989 onwards there has been an annual National Report on Schooling in Australia which contains detailed information on schooling in Australia, including a comprehensive statistical annex. Various moves have also been made towards a national curriculum framework (including the establishment of the Curriculum Corporation and the development of various subject specific statements and profiles) and other initiatives such as the National Strategy for Equity in Schooling and the National Project on the Quality of Teaching and Learning are indicators of a trend towards a more national approach to schooling in Australia. 15

A brief analysis of Commonwealth funding and the level of enrolments over the period 1988-92 shows that in all years the percentage increase in funding exceeded the percentage increase in enrolments - see Figure 11. Thus, in very approximate terms it can be said that, over the period, the Commonwealth has had funding levels that have exceeded the growth in demand (student numbers).

Brief details of the main grants for both government and non-government schools on a program basis for the period 1988 to 1993 are summarised below.

Separate Programs

General Recurrent Grants

In all years from 1988 to 1993 (and projected funding for 1994 to 1996) the level of recurrent grants to both government and non-government schools increased in real terms - see Figure 12. These grants continued to be by far the most important source of Commonwealth funds for schools - in 1993 government schools were actually allocated $857.171m and non-government schools were actually allocated $1,403.484 million. (Note - the latter two figures differ slightly from those in Appendix 2 because original allocations often change due to enrolment variations). Over the period the importance of recurrent grants has remained constant in proportional terms - in 1988 recurrent grants accounted for 77.6 per cent of total Commonwealth programs for schools; by 1993 this figure was 76.8 per cent. 16

In 1993 general recurrent grants continued to be provided to State government authorities as block grants calculated on a per student basis - $319 per primary student and $472 per secondary school student. These grants are adjusted in line with movements in average government school recurrent costs. Grants to non-government schools continued to be provided on a per student basis, with the level of funding being dependent upon the number of students enrolled, the distribution of those students among the schools with the varying funding categories (ranging from 1 to 12) and on adjustments related to shifts in average government school recurrent costs.

Capital Grants Program

The level of capital grants, in real terms, was relatively constant over the 1988-93 period - see Figure 13. The large increase in funding granted in 1993 is largely explained by a one-off injection of funds for refurbishment of secondary school facilities. In 1991 and 1992 (and 1993 for government schools only) specific capital funds were provided to secondary schools to assist them in meeting the additional pressures that rising retention rates have put on school facilities. In 1993 total Commonwealth capital funding for government schools was $271.058m and $129.150m for non-government schools. Capital grants continue to be second only to the recurrent grants in terms of total funding provided to school systems in Australia. Like the situation with recurrent grants the proportion of funds devoted to capital grants remained relatively constant over the period - in 1988 capital grants accounted for 12.1 per cent of total Commonwealth programs for schools; in 1993 the equivalent figure was 13.6 per cent 17 - see Appendix 2.

English As A Second Language Program

Appendix 2 shows that the level of funding under this program has fluctuated over the period 1988-93 - the highest level of funding for government schools being in 1992 and the peak year for non-government schools funding being in 1993. In the latter year government schools received a total of $71.626m and non-government schools were allocated a total of $25.584m. The reason for the fluctuations in the funding for ESL is because of the per capita nature of its New Arrivals component.

Disadvantaged Schools Program

Commonwealth funding to non-government schools for this program has essentially remained static at about $8.8m (1993 prices) per annum over the period 1988-93 whilst Commonwealth funding for government schools has risen, in real terms, from approximately $44.9m (1993 prices) for each year 1988-90 to approximately $54.2m (1993 prices) since that time - see Appendix 2.

Special Education Program

The funding of the Special Education Program for government schools has basically remained static (about $26m in 1993 prices) over the period 1988 to 1993. The funding for non-government schools has fluctuated over the period from a peak of $29.384m in 1990 (1993 prices) to a low of $27.667m (1993 prices) in 1992 - see Appendix 2.

Students at Risk Program

This program began in 1993 and is aimed at increasing the participation and retention of 'high risk' students, for example, those experiencing homelessness, young offenders, Aboriginal and Torres Strait Islanders, students with disabilities and those from low socio-economic backgrounds. $5.180m was provided to government schools and $2.072m was provided to non-government schools in 1993 under this program - see Appendix 2. (Note: this program ran from 1990 to 1992 as part of the Youth Social Justice Strategy but, at that time, was not funded from the States Grants (School Assistance) legislation).

Transition Support for Disabled

This program, commenced in 1994, assists in the transition of students with disabilities from mainstream schooling to further education, employment and adult life. It supports a range of projects which involve the employment of school transition officers placed in government schools to serve regions and/or clusters of both government and non-government schools. A total of $2.07m (1993 prices) was allocated to this program in 1994.

The above programs are provided separately to both government and non-government schools. Over the 1988 to 1993 period there has also been a number of joint programs providing funds to government and non-government schools.

Joint Programs

Ethnic Schools

This program ran from 1981 to 1991 and expanded rapidly during this time as the number of eligible students increased. The national allocation and the per capita rate were capped at the 1986 levels. In 1990, this per capita rate was increased from $35 to $38.50. In the final year of its operation the Ethnic Schools program was allocated $8.04m (1993 prices). In 1992 the program was replaced by the Community Languages Element of the Schools Language and Literacy program.

Education Centres

As mentioned earlier the Education Centres Program has been in operation since 1975 and over the period 1987 to the present funding (in real terms) has remained constant at $2.412m per annum - see Appendix 2.

Award Restructuring Assistance Program

This program operated for two years (1991 and 1992) and was a mechanism for the Commonwealth to meet its share of costs associated with teacher restructuring. In 1991 total funding under this program was $82.412m (1993 prices) and in 1992 it was $110.243m (1993 prices). The government decided that, from 1993 onwards funds associated with award restructuring would be included in the General Recurrent Grants Program.

Projects of National Significance Program

Funding for this program has remained relatively constant at about $2.5m (in real terms) per annum over the period 1987 to 1993 - see Appendix 2. In 1993 the objectives of the program were to promote change and innovation in primary and secondary schools as well as improving the skills, knowledge and experience of primary and secondary teachers.

Early Special Education

This program was wound up in 1990 and became part of the new Special Education Program that commenced in 1991.

Special Education

The Special Education Program (joint) commenced in 1991 and combined three earlier joint programs (Early Special Education, Children in Residential Institutions and Children with Severe Disabilities), all of which were wound up in 1990. When commenced in 1991, the allocation of funding to the States for this program was based on the sum of the allocations that would have been made had the three former program still been in operation. $16.7m (in real prices) was allocated to this program in each of 1992 and 1993 - see Appendix 2.

Country Areas Program

Funding for this program has remained constant at $14.6m (1993 prices) per annum over the period 1987 to 1993. However, for 1992, 1993 and 1994, a special allocation (called the Country Areas National Component) of $3.5m (1993 prices) has been allocated - see Appendix 2. The National component aims to improve the educational opportunities and outcomes for rural and isolated secondary school students, specifically through increasing the number of these students completing Year 12 and expanding the opportunities available to school leavers. Funds are provided for a range of projects including those which involve interstate, cross sector and inter-school collaboration, use technology in cost efficient ways to widen access to mainstream curriculum, and target secondary schools in country areas serving students from low socio-economic backgrounds.

Residential Institutions Program

This program, as a separate entity, was wound up in 1990 and subsumed by the Special Education (joint) Program - see above.

Severely Handicapped Program

This program was also wound up in 1990 and subsumed by the Special Education Program.

Rural Hostels

This program was a sub-element of the general capital grants program and only operated for three years - 1990 to 1992. Its purpose was to provide capital funding for hostels for rural school students. $3.77m was allocated in 1990 (1993 prices), $2.9m (1993 prices) was provided in 1991 and $1.4m (1993 prices) was allocated in 1992 - see Appendix 2.

School Language and Literacy

The School Language and Literacy Program comprised four elements -the Priority Languages Incentive Element which supported courses of study in nominated priority languages other than English; the Community Languages Element (formerly the Ethnic Schools Program) supporting the teaching of community languages; the Literacy and Learning General Element (see above) and the Literacy and Learning National Element, which supported a range of strategies to help develop literacy and learning in the early years of schooling. Appendix 2 shows that the Community Languages Element has received the bulk of the funds under this program - $10.216m (1993 prices) per annum since 1992.

The Literacy and Learning Elements became part of the National Equity Program for Schools when it was introduced in 1993. The two elements supporting studies in languages other than English formed the renamed School Language Program.

Gifted and Talented Students

The Gifted and Talented Component is one component of the National Priorities Element of the National Equity Program for Schools. This component, which commenced in 1993, aims to enrich the learning experiences of gifted and talented students who are disadvantaged by poverty, isolation, poor English proficiency, or by disability. $1.036m was provided for this component in 1993 - see Appendix 2.

Gender Equity

The Gender Equity Component is one component of the Incentives Element of the National Equity Program for Schools. The component, which commenced in 1993, aims to enhance the learning experiences of girls in schools which are isolated or characterised by concentrated levels of students disadvantaged by low socio-economic status. Funds are provided on the basis of the number of girls studying physics and/or highest level maths in Years 11 and 12. As Appendix 2 shows, a total of $1.533m was provided for this component in 1993.

Recurrent Grants for Rural Hostels

Commenced in 1994, this program provides recurrent support for rural hostels for government and non-government school students. An estimated $1.554m (1993 prices) has been provided for 1994 - see Appendix 2.

In sum, it can be said that over the period 1988 to 1993 the total amount of Commonwealth funding for schools more than kept pace with inflation and the growth in total student numbers. The lower level of capital funding that commenced in 1980 -see Figure 10 - was essentially continued in this period, except for the one-off substantial increase in funding in 1993. The relative shares of each of the three main categories of funding (recurrent, capital and targeted) remained relatively constant over the period -in 1988 recurrent grants accounted for 77.6 per cent of Commonwealth funding compared to 76.8 per cent in 1993; in 1988 capital grants accounted for 12.1 per cent and in 1993 the equivalent figure was 13.6 per cent and for targeted programs the 1988 figure was 10.2 per cent and in 1993 it was 9.6 per cent.

Government/Non-Government Funding Split, 1976 to 1993

In terms of the funding split between government and non-government schools a brief analysis of the figures contained in Appendix 2 shows that whilst total funding (both government and non-government) increased over the period by 82 per cent, funding for non-government schools (excluding joint programs) increased by 189.8 per cent, whilst funding for government schools (excluding joint programs) increased by only 28.2 per cent. Over the same period total (government and non-government) enrolments increased by 5.1 per cent; non-government enrolments increased by 39.4 per cent and government school enrolments declined by 5.2 per cent. Thus, even if enrolment fluctuations are taken into account it can be seen that non-government schools have benefited the most from the increasing Commonwealth commitment to schools funding.

A Note on Commonwealth Schools Programs As Administered by the Department of Employment, Education and Training from 1993

Begun in 1993, and fully introduced in 1994, a new National Equity Program for Schools (NEPS) has subsumed many of the 'old' targeted programs including English As A Second Language, Special Education, Disadvantaged Schools, Country Areas, Literacy and Learning, Students at Risk, Gifted and Talented, Gender Equity and Students with Disabilities programs. The NEPS incorporates four elements -

The Access Element - comprising an ESL component and a Special Education component

The Equity Element - comprising a Disadvantaged Schools component, a Country Areas General component and a Literacy and Learning General component

The National Priorities Element - comprising a Country Areas National component, a Literacy and Learning national component, a Students at Risk component and a Gifted and Talented component

The Incentives Element - comprising a Gender Equity component and a Students with Disabilities component.

Current Issues Related to Schools Funding

The level of funding for schooling in Australia

It would appear from the foregoing analysis that in terms of overall funding for schooling in Australia the Commonwealth has 'pulled its weight' over the last twenty years in that, except for 1979-80 and 1986-87, it has provided ongoing funds to the States in excess of both inflationary growth and the growth in student numbers - see Appendix 5. However, this conclusion needs to be qualified by the fact that with factors such as increasing retention rates (see Appendix 4) and the greater use of expensive technology (for example, computers) there is an argument for increasing the real level of funding just to cater for such changes. Moreover, given the critical importance of education to the economy and the social structure in Australia it can be argued that education's share of the 'cake' - GDP - should at least remain constant over time. As mentioned in the Introduction, Commonwealth outlays on schools and pre-schools have decreased from 0.81 per cent of GDP in 1982-83 to 0.68 per cent of GDP in 1992-93.

Given that the Commonwealth has at least maintained its funding in real terms and kept funding levels (in percentage terms) ahead of enrolment increases most of the calls for increased spending on schools are aimed at the States and Territories, the majority of which have been involved with significant cutbacks in funding for schooling in recent years. According to the Schools Council there has been a 4.5 per cent decline in State government expenditure on school education between 1987 and 1992 18 and that between 1986 and 1992 spending by the States on school education as a proportion of total outlays fell from 20 per cent to 15 per cent. 19 It is also argued by those advocating spending increases on education that, compared to relevant countries overseas, Australia is lagging in the provision of education resources.

The South Australian Public Sector Unions sum up the calls for increased spending on education ...

For most of Australian history the growing importance of education has been matched by a growing commitment of public resources. Public spending on education, only 2 per cent of GDP at the beginning of the 1960s, reached a high point of 6.4 per cent in 1977-78, about average for OECD nations. But during the 1980s, while participation in education rose, there has been a continuous decline in public education funding as a proportion of GDP, declining to 4.7 per cent by 1989-90. The notion that Australia is a big spender on education is somewhat of a myth. In 1989 only five of the 26 OECD countries spent less than Australia on government education as a proportion of GDP, in spite of the fact that we had a higher proportion of school-age children than the OECD average. Revenue from the Commonwealth, which makes up just under half of state income, is lower now than at any other time in the last decade, which clearly underlines the problems associated with funding, the single biggest factor affecting educational provision. We recognise that while the revenue base remains undermined, States will continue to be more reliant on their own revenue and pressure to constrain all public sector activity, including education, will intensify. This is further intensified by Federal Government moves towards 'benchmarking' within Commonwealth/State financial relations ie. the notion that the States could collectively save $3 billion a year by reducing expenditure on public services such as education, health and transport to the levels of the smallest spending state, Queensland. While arguments are couched in terms of achieving cost reductions "without sacrificing education standards", the comparisons made tend towards the lowest common denominator and/or use arguments related to the 'standardised expenditure' data calculated by the Commonwealth Grants Commission and ignore the varying balances which have led to the current situation...The result of the decline in Australia's commitment to education is an escalating crisis of resources and educational quality. 20

The Australian Education Union, in February this year, called on the Commonwealth Government to increase schools funding by 6 per cent so as to compensate for recent spending cuts in the States. The Union argued that State cutbacks in education funding were beginning to show in indicators such as increased student/teacher ratios and class sizes, a fall in retention rates in some areas and increased disparity of outcomes between affluent and poor areas. 21

It has also been argued that reductions in Commonwealth general revenue grants have been one of the key causes of State Government cutbacks in education funding...

The Federal Labor Government...has used its leading role in fiscal policy to ensure that reductions in State spending (rather than reductions in its own Federal spending) have been the principal means of reducing the size of government in Australia. Under Labor, Commonwealth general revenue grants to the States - one of the two main sources of State education funding, the other being State taxes - have been cut from $19.8 billion in 1983-84 to $14.1 billion in 1992-93, in constant 1992-93 prices. In other words, during the last ten years Federal funding to the States has been cut by almost one third in real terms. 22

Thus, even though the Commonwealth has maintained or increased its real funding for specific schooling programs, its reductions in general revenue grants to the States have put pressure on State Treasurers to cut funds going to schools.

In recent years State education cutbacks have occurred most particularly in Victoria, Tasmania and the ACT. As well, significant cutbacks are being mooted in Western Australia and by the new government in South Australia. Perhaps the most well known example of reduced State spending on education is that of Victoria. In that State, the Kennett Government has substantially reduced its expenditure on education and the consequent public debate has canvassed many of the issues related to education funding in the Australian context. According to the Federated Teacher's Union of Victoria...

cuts made in 1992-93 were equivalent to $171m in a full year"... (and) "the 1993-94 budget has confirmed a cut to the schools sector of $145m by 1994-95. 23

Official budget figures released by the Victorian Government show that budget sector outlays on education as a percentage of total budget outlays have dropped from 26.8 per cent in 1989-90 to an estimated 18.2 per cent in 1993-94. 24

The actual effects of the cuts have been disputed with the Victorian Minister for Education arguing that cuts can be made without a drop in the quality of educational provision whilst others, most notably the teacher unions, have highlighted the detrimental consequences of funding cutbacks. In the latter category a recent report, which surveyed 148 schools, found that approximately 70 per cent of government schools have scaled down some of their programs because of the cuts and that class sizes had gone from being the best in Australia to among the worst. 25

Overall, it is clear that expenditure on schooling in Australia, essentially as a result of cutbacks by the States, which in turn may well have been influenced by a reduction in Commonwealth general revenue grants, has declined in recent years. The big question is the extent to which this decline in outlays has affected or will affect the quality of education provided.

The education expenditure versus educational performance debate

The argument over funding being waged in most of the States and Territories is muddied by the fact that there appears to be a lack of a clearly demonstrated nexus between inputs (expenditure) and outcomes (standards) in the educational environment. It is apparently evident that there is no solid body of hard evidence to show that increasing education expenditure will necessarily improve educational standards (or that reducing education expenditure will not impair educational standards) although anecdotal evidence is often provided by those on both sides of the debate.

A visiting Professor of Education from the USA, Eric Hanushek, who has undertaken extensive research on educational expenditure and outcomes, recently called for the introduction of standardised testing so as to provide an effective measure of student achievement in Australia. Professor Hanushek maintained that the absence of any reliable data on student achievement meant that it was very difficult for educators to prove a link between additional expenditure and improved educational outcomes. He further argued that increased spending on education in the USA over the past 30 years had not been matched by increases in the educational performance of students. 26 Anne Morrow, head of the Schools Council, agrees that there is an urgent need to establish a uniform set of achievement benchmarks for use in Australian schools. Ms Morrow believes that such indicators would be useful in defending the role and purpose of public education. 27

However, not all players in the education field agree that there is no connection between educational expenditure and outcomes. Roy Martin, Federal Research Officer for the Australian Education Union, maintains that...

It is important that all those concerned with developing and protecting education assert in the strongest possible terms that the connection between expenditure and outcomes in education is irrefutable, (though clearly that money has to be applied wisely), and that the evidence that class sizes, for instance, make a difference, is now so overwhelming that to suggest it makes no difference is just plain dishonest. Any indicators of system performance which are developed must be able to measure things that really matter in education, not just the costs. 28

Notwithstanding the views put by Roy Martin, the lack of an adequate and generally accepted measurement tool has made it easy for those advocating spending cuts to run, if not win, the funding debate. For example, according to a consultant who recently led a team reviewing the Tasmanian education system ...

An assignment to reduce expenditure on education in Tasmania has to be seen in the context of the times. If the 1980s were the decade when state governments (mostly Labor ones) spent money on essential services in the belief that more money necessarily meant better quality services, then the '90s hopefully will be the decade when the public sector finally rids itself of that misguided and expensive notion...In many states in the 1980s expenditure on education grew dramatically with often no significant impact on the quality of education. 29

This issue is best illustrated by a specific example. It is difficult to say, given the research data, that educational standards have dropped because class sizes have increased. Studies in the USA, conducted by Glass and Smith, which gathered the findings of 77 studies on achievement and class size, found that "significant improvements in academic achievement occurred only when classes were cut to 15 or fewer students...when classes of between 20 and 40 students were reduced the increase in achievement was less significant". 30 Similarly, the Director of the Australian Council for Education Research is reported as saying that "the difference in effectiveness of school classes with more than 20 students was small. However, at uneconomic sizes below 20 students per teacher the benefits increased markedly". 31

Opposed to this view on class sizes is anecdotal evidence to the contrary. There is no doubt that teachers would prefer a class of 20 or 25 students to that of a class of 35 or 40. The smaller class involves less correction and preparation time and would, in most cases, involve less stress and management than if the class had 10 more students. Obviously, teacher inputs and work levels are not measured in research done on class sizes and academic achievement. As well, the recent initiatives with respect to mainstreaming (where physically and mentally challenged students are placed in mainstream classrooms) has placed additional pressures on teachers even in classes that have remained the same size. The difficulty for the advocates of increased educational expenditure (or at least the maintenance of current levels of expenditure) is that, in the absence of evidence other than the anecdotal, it is difficult to attack spending cuts on the grounds of increasing class sizes. This is especially the case when spending cuts lead to an increase in class sizes of only one or two students.

The challenge for the schooling system in Australia, and especially those lamenting the evident decline in funding in recent years, is to develop a comprehensive, acceptable and effective measure that compares educational expenditure and student/teacher/school achievement. Until such a measure or series of measures is/are developed, the debate on education funding will be characterised by a high degree of conflicting claims and contradicting statements. It is all too easy at present to select "evidence" to suit a particular argument or line and the key decision makers (bureaucrats and politicians) have no clear mechanism or guide on which they can base their decisions.

The tied/untied debate and the nature of Commonwealth funding for schools

As mentioned earlier the Commonwealth meets approximately 12 per cent of the total costs of running government schools and approximately 37 per cent of the total cost of running non-government schools. Much of the funding provided to the States and Territories is tied - they are obliged to spend the money in areas as directed by the Commonwealth, for example, on buildings, for computer education, for special education and so on.

One of the most discussed features of the current state of Commonwealth/State financial relations is that of vertical fiscal imbalance. Vertical fiscal imbalance refers to the imbalance between the Commonwealth and the States with respect to responsibilities and funding. The Commonwealth raises approximately two-thirds of total government funds yet its outlays only make up slightly in excess of half of total (Commonwealth and State) government outlays. 32 Put another way, it means that the States are responsible for nearly half of total outlays but only raise one quarter of total government funds. Thus, they rely heavily on Commonwealth funding assistance, much of which is tied, to fund their responsibilities. This 'power of the purse' held by the Commonwealth gives it significant leverage in terms of determining many State priorities and the direction of policy in those jurisdictions. As would be expected the Commonwealth and the States tend to have varying views on the problems and benefits of vertical fiscal imbalance...

The States see a reduction in vertical fiscal imbalance as being the most important area of reform for Commonwealth-State financial relations. Alleviating the imbalance could reduce uncertainty regarding the level of Commonwealth funding; ease State budget inflexibility associated with the high proportion of specific purpose assistance; reduce the duplication and waste of resources associated with many programs financed through tied grants; and overcome the lack of consultation and the exercise of Commonwealth executive power regarding decisions affecting the programs and finances of the sub-national governments. The Commonwealth, on the other hand, considers that some degree of vertical fiscal imbalance is desirable since it enables the imposition of national priorities and standards; the provision of grants to equalise the fiscal capacities of the States; and the facilitation of macroeconomic policy making. 33

In recent times several of the States, via their Education Ministers, have argued that the Commonwealth should "untie" schools funding to allow spending priorities to be determined at the local level. The Western Australian Minister for Education, Norman Moore, has put this view arguing that there should be a funding system for schools that is based on priorities being determined at the local level. The Victorian Education Minister, Mr Hayward, has advocated that the Commonwealth should abandon its "extraordinarily inflexible" method of allocating school grants to the States in favour of one where schools would have greater control. The Victorian Minister argues that schools should be allocated grants on a per capita basis where factors such as whether students come from poor socio-economic backgrounds or have physical or intellectual handicaps would be included in the general formula for distributing funds. 34 This viewpoint has in turn been condemned by others involved in schooling most notably the Schools Council and the Australian Education Union. The Schools Council has warned that a move towards untied grants would risk a dramatic lowering of the standard and quality of public education.

The Commonwealth Minister for Employment, Education and Training (Mr Crean) has strongly opposed the push for untied grants. According to Mr Crean, the move to untied grants would cause the Commonwealth to lose its leverage in terms of influencing outcomes in public education and that, as the Commonwealth levies, collects and distributes most of the taxes in the federation, it should exercise some control over the way those taxes were spent. Moreover, he believed that, if untied grants for schools were implemented, it would leave the Commonwealth making identifiable grants only to non-government schools, opening the way for a revival of the sectarian debate about state aid to non-government schools. 35 As well, the Schools Council warned that there was a risk of a lowering of the quality of public education if tied grants were abandoned and that it is in the national interest for the Commonwealth to maintain its leadership role in national schools policy due to the evidence that State/Territory governments were not fulfilling their constitutional responsibilities to provide school education. 36

The issue of the nature and type of Commonwealth involvement in schooling has been examined before. In the late 1970s the Australian Schools Commission released a discussion paper 37 that, without endorsing any particular approach, briefly examined a number of options with respect to how the Commonwealth funds schools. Several of the options included a retention of the status quo with only minor variations but several options entailed quite radical changes to existing arrangements. For example, ...

Block funding of government schools: retention of present programs for non-government schools.

Present Commonwealth allocations for general recurrent, general capital and specific purpose programs for government schools could be amalgamated into block grants...[and]...would be disposed to schools as the States saw fit. The Commonwealth would retain its present programs for financing the recurrent, capital and special needs of the non-government schools. This approach would involve dismantling the Commonwealth's joint programs. There could be other variations of this option; for example, the general recurrent and capital funds for government schools could be in one block and the specific purpose funds in another. Joint programs could be financed by means of the third block and applied to both government and non-government schools. Such block funding of specific purpose programs might quickly obscure the "national" purposes of such programs. It might also be more difficult to ensure that the funds actually served the intended special purposes. However, this would be a practical option, even though it would result in a much diminished specifically identifiable role for the Commonwealth in government schools and would involve quite different approaches to the funding of government and non-government schools.

Relinquish Commonwealth general recurrent and capital programs for government schools.

The general recurrent and capital programs for government schools...could be abolished, with appropriate increased payments to States as offsets through the general income tax-sharing arrangements. Non-government general recurrent and capital funding by the Commonwealth could be retained on the present or revised bases. Specific purpose Commonwealth programs could also be retained for both government and non-government schools...

Relinquish all Commonwealth programs except those dealing with specific populations.

This option would, involve the Commonwealth, by agreement with the States, withdrawing from all general recurrent and capital programs for government and non-government schools. Appropriate adjustments would be made to the tax-sharing formula, and the States would have to agree to accept responsibility for allocating funds to government and non-government schools. The Commonwealth would retain a monitoring role in respect of national education standards, and a particular responsibility for specific purpose programs directed at special populations (such as those for migrants, refugees and Aborigines). Non-government schools would receive all their general recurrent and capital subsidies from the States...

The Commonwealth, by agreement with the States, to withdraw completely from all forms of school funding.

The Commonwealth, by agreement with the States, and with appropriate adjustments to tax sharing arrangements, could withdraw from all direct forms of financing schools, yet at the same time maintain a monitoring and influencing role in respect of education standards as a whole and the particular needs of special populations. 38

All the more radical options for change suggested by the Schools Commission entailed a withdrawal in some fashion of the role of the Commonwealth in schooling in Australia. Of course, another option not canvassed by the Commission, is that of the Commonwealth providing all funds to the States under Section 92 of the Constitution. This would mean that the Commonwealth would "tie" all funds going to government and non-government schools as opposed to the present situation where the majority of funds are "untied" general recurrent and capital grants. This would give the Commonwealth much more leverage over just how schooling is conducted in the States and Territories. It is highly likely that such a strategy would be vigorously opposed by the States and Territories.

The question of tied versus untied grants has been around for a long time and is often discussed in the context of "States Rights" and just what is an appropriate role for the Commonwealth. In theory the provision of untied grants for schooling sounds attractive (it brings decision making closer to the people) but in practice it could lead to unintended consequences. For example, the provision of untied grants to the States and Territories could lead to substantially different standards of schooling systems in Australia and could hinder any Australian-wide effort in terms of achieving national economic and social goals or accepted national standards on national curriculum. In the final analysis however, it is likely to be one's view of how the Australian federation should operate and whether one tends towards a "States Rights" or "Centralist" approach to that federation that will determine whether one favours mainly tied or untied grants as far as Commonwealth schools funding is concerned.

Conclusion

Commonwealth funding for schools has expanded significantly since the mid 1960s. Expenditure on schooling via the various States Grants Acts has grown from $9.9 million in 1964-65 to approximately $3 billion in 1993. Commonwealth funding increased rapidly following the establishment of the Schools Commission in December 1973 and this expansion has continued under a succession of governments. Over the period 1976 to 1993, Commonwealth funding in real terms has exceeded the growth in school enrolments in all years except 1980 and 1987. This indicates that the Commonwealth has, on this very approximate yardstick, sustained its financial commitment to Australian schools.

It is also worthy to note that non-government schools have been 'more generously' funded than government schools if this very approximate yardstick is applied separately to non-government and government schools - over the period 1976 to 1993 funding for non-government school programs (excluding joint programs) increased by 189.8 per cent (with an enrolment increase of 39.4 per cent) compared to an equivalent funding increase of 28.2 per cent (with an enrolment decline of 5.2 per cent) for government schools. If locally based cuts to school funding being experienced in many of the States and Territories continue then it is possible that the contentious state-aid debate that characterised the late 1960s and early 1970s could be reignited.

The whole issue of the level and type of funding for schools (Commonwealth and State/Territory) is likely to be at the forefront of public debate over the next few years and the challenge for participants in the education system is to develop a comprehensive, acceptable and effective measure that will enable better comparisons to be made between educational expenditure and educational outcomes. Until and unless this happens the debate will continue to be characterised by an over reliance on anecdotal evidence.

Select Bibliography

A Report by Research Officers to the Federal Conference of the Australian Education Union 1994, The Funding of Public Schools : Australia, States and Territories

Australian Education Council, National Report on Schooling in Australia, various

Australian Education Council, Statistical Annex to the National Report on Schooling in Australia, various

Commonwealth Schools Commission, In the National Interest -Secondary Education and Youth Policy in Australia, Canberra 1987

Commonwealth Schools Commission, Quality and Equality -Commonwealth Specific Purpose Programs for Australian Schools, Canberra, December 1985

Commonwealth Schools Commission, Some Aspects of School Finance in Australia -A Discussion Paper, Canberra October 1978

Commonwealth Schools Commission, Annual Reports, various

Department of Employment, Education and Training, Annual Reports, various

Department of Employment, Education and Training, Commonwealth Programs for Schools, various

James, D. Intergovernmental Financial Relations in Australia, Australian Tax Research Foundation Information Series No. 3 1993

Guilfoyle, P. Legislating for Excellence - National Education Curriculum in England and Wales, New Zealand and Australia, Background Paper No. 9 1992 Parliamentary Research Service, Canberra

Jackson, K. Commonwealth Involvement in Education, Basic Paper No. 2 1985, Parliamentary Research Service

Lindsay, M. An Overview of Current Issues in Primary and Secondary Education : National and State Perspectives, Background Paper June 1990, Parliamentary Research Service

Report of the Review Committee, Quality of Education in Australia, Australian Government Printing Service, Canberra 1985.

1Commonwealth Budget Paper No. 1, 1993-94: 3.60.

2Commonwealth Budget Paper No. 1, 1994-95: 3.57.

3Commonwealth Budget Paper No. 1, 1994-95: 3.56.

4Australian Bureau of Statistics, 1994, Schools Australia 1993 Preliminary, Cat. No. 4220.0: 1.

5Commonwealth Budget Paper No. 7, 1975-76: 194.

6Commonwealth Budget Paper No. 1, 1994-95: 3.44.

7Commonwealth Budget Paper No. 1, 1994-95: 3.46.

8Commonwealth Budget Paper No. 1, 1994-95: 3.278.

9Submission to the South Australian Commission of Audit, SA Public Sector Unions, February 1994: 32.

10Australia. House of Representatives. Hansard, 17 August 1993: 85.

11 The Canberra Times, 24 April 1994.

12Commonwealth Budget Paper No. 7, 1975-76: 45.

13Figures calculated from information contained in Appendix 2.

14Figures calculated from information contained in Appendix 2.

15For an overview of the moves towards a national curriculum see Legislating for Excellence, Pam Guilfoyle, Parliamentary Research Service (Background Paper No. 9 1992).

16Figures derived from information contained in Appendix 2.

17Figures derived from information contained in Appendix 2.

18 The Age, 9 February 1994.

19 The Australian, 25 February 1994.

20Education Submission to the South Australian Commission of Audit, February 1994: 6-8.

21 The Australian, 23 February 1994.

22Marginson, S. 'Public Education : leaping the abyss' in The ACT Teacher, 13May 1994.

23M. Kronemann, in The Funding of Public Schools : Australia, States and Territories - A Report by Research Officers to the Federal Conference of the Australian Education Union 1994: 13.

24Victorian Budget Paper No. 2, 1993-94: 3-11.

25 The Age 17 March 1994.

26 The Australian, 18 March 1994.

27 The Australian, 18 March 1994.

28'Funding Public Education - the debate goes on', in The ACT Teacher, 13May1994.

29Richards, M - 'Cutting Costs Without Cutting Quality' in Education Monitor, Autumn 1991.

30 Sydney Morning Herald, 22 February 1994.

31 The West Australian, 23 February 1994.

32James, D. Intergovernmental Financial Relations in Australia. Australian Tax Research Foundation Information Series No. 3 1993: i.

33James, D. Intergovernmental Financial Relations in Australia. Australian Tax Research Foundation Information Series No. 3 1993: ii.

34 The Age, 25 February 1994.

35 The Age, 8 March 1994.

36 The Australian, 9 February 1994.

37 Some Aspects of School Finance in Australia, Australian Schools Commission, October 1978.

38 Some Aspects of School Finance in Australia, Australian Schools Commission, October 1978: 80-82.

Acknowledgment

The author would like to thank Consie Larmour, Paul Mackey, Kim Jackson, Dale Daniels, Geoff Winter, Adrienne Millbank and other researchers in the Parliamentary Research Service for commenting on a draft of this paper. Thanks also to Kate Matthews and Jane Chapman for their word processing and clerical assistance and to Paul Kay and Marion McIntosh for their help with the graphs contained in the paper. The author also thanks and acknowledges the support and assistance of the Department of Employment, Education and Training especially Shelley Skinner and Bill Daniels.

ISSN 1037-2938

Copyright Commonwealth of Australia 1994

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Published by the Department of the Parliamentary Library, 1994.