An extra $15b was spent on Australian government schools in the last decade — where did the money go?

Funding for Australian government schools has increased substantially over the last decade. School funding is a contentious issue that many people from all parts of life feel strongly about. Each year when budgets are announced you hear familiar arguments. One side argues that there’s not enough money for public education while others say that the existing money is already being wasted.

This article seeks to understand where the increase in funding has gone.

School funding to government schools increased mainly due to inflation and additional students

The analysis shows that the increase in real funding (adjusted for inflation) per student has gone almost equally to

This analysis builds on the work of the Grattan Institute’s School funding — where the money went and the Productivity Commission’s Report on Government Services 2019 — Chapter 4 Education. While the Grattan report focused on the differences in funding between government and non-government schools, this article will focus on funding of government schools only.

$15b feels like a lot of new money? Where did it go?

Nominal funding of government schools increased 52% from $29 billion in FY08 to over $43 billion in FY17

Nominal funding is the amount of funding in the year that it was given. These are the numbers that we hear and talk about in day to day life, e.g. the prices as marked in a store. These numbers aren’t adjusted to account for inflation or other impacts. Given that inflation (the increase in the cost of goods and services over time) is generally positive you should expect nominal figures to also increase over time.

Funding for government schools is largely the responsibility of State Governments. However over the last 10 years to FY17 the Commonwealth has significantly increased its contribution as part of ‘Gonski’ funding models. From looking at the data in table 4A.11:

When accounting for inflation, real funding increased by a still sizable $7 billion

To more accurately see the effect on spending you need to strip out the effects of inflation (CPI) so that you are comparing figures in terms of the same buying power, i.e. $1b 10 years ago was worth more than $1b today. From Table 4A.10:

So where did this $7.7b in additional real funding go?

Half of the real increase ($3.8b) was due to an extra 243 thousand students (11%) entering government schools

State and Commonwealth governments need to fund each student in the public system. As the number of school students grows so too does the amount required to be spent. It should not be surprising that if we purchase twice as many things that it will cost twice as much.

Notes: The PC report did not break down the FY08 student numbers between primary and secondary. To estimate FY08 numbers I assumed the split between primary and secondary students was the same as in FY17.

On a per student basis real funding per student increased by 11% to $17.4k

When stripping out the growth in enrolments, real funding has increased much less. Real funding per Full Time Equivalent (FTE) students (across primary and secondary) increased from $15.8k to $17.4k. This amounted to $3.9b in additional funding.

The question here is what caused the increase in this per student costs?

14k more staff were hired than needed to service the extra 243k new students.

As more students entered the system more teachers and other staff are needed to service them. Here are details about staffing levels in government schools

Notes: The PC report provides a breakdown primary and secondary staff numbers for FY17 but only totals for FY08. FY08 primary and secondary staff numbers were assumed to be in the same proportion as FY17. Student-staff ratios were calculated by dividing the number of FTE students by the number of FTE staff.

Almost 90% (12k) of these extra staff were hired in non-teaching roles versus 2k teachers.

As a voting public we tend to like government announcements for increased frontline staff such as teachers and nurses. In contrast, back-office roles are seen as part of a ‘bloated’ bureaucracy that is to be minimised.

Notes: Teacher numbers were calculated by dividing the number of FTE students (Table 4A.3) by student-teacher ratios (Table 4A.17). Non-teacher staff numbers were calculated by subtracting teacher numbers from total staff numbers. Ratios were then calculated by dividing FTE student numbers by the number of teachers or non-teachers respectively.

The remaining $1.2b in funding increase went to other operations, increased depreciation and capital charges

While staff make up the majority of operating expenses (64%) they are not the only ones.

These non-salary expenses include

It’s time for the sector to become more efficient

I believe that there should be strong public funding for education. However, those government funds are not infinite. We should also endeavour to get better value for this spending, i.e. more productivity. If you can buy a textbook for $30 rather than $100 then we should.

School education has been one area particularly resistant to productivity gains. There is a wide consensus (parents, teachers and communities) in favour of small class sizes. Moreover, many jurisdictions mandate maximum class sizes: QLD 28 in Y3–6, NSW 30 Y3–6. It is unlikely that there will be movement to increase class-sizes and/or student-teacher ratios anytime soon.

However there is no similar love for so-called back-office activities such as staff in finance and administrative functions.

Increasing non-teaching staff efficiency by 10% from FY08 levels would have saved $1.4b

The Productivity Commission report defines non-teaching staff as staff who “generally perform their duties in one or more schools/Australian educational establishments as specialist support staff; administrative and clerical staff (including teacher aides and assistants) mainly performing general administrative and clerical duties; and building operations, general maintenance and other staff (including staff providing associated technical services and janitorial staff).”

These are generally considered back-office functions that should experience economies of scale. As the size of State Government school systems increased therefore it is reasonable to expect that the back-office would get more efficient not loss. In other words you would expect that student to non-teaching staff ratio to increase. Instead:

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