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
- more staff;
- staff pay rises;
- Other operations and depreciation
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:
- Nominal funding to government schools increased by 52 per cent, from $28.8b in FY08 to $43.7b in FY17.
- State governments increased their funding by 41% while the Commonwealth increased their contribution significantly by 165% to $6.6b
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:
- The $29b spent on Government schools in FY08 was equivalent to $36b in FY17 dollars.
- Real spending increased by $7b over this period from $36b to $43.7b.
- State government real funding increased by only 13% over the 10 years period compared to an 112% increase in Commonwealth real funding.
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.
- Between FY08 and FY17 student numbers increased by 11% from 2.27m to 2.52.
- This 11% accounts for about half of the 22% increase in real funding for government schools
- In FY08 government spending per child in FY17 dollars was $15.8k. Paying $15.8k for each of those extra 243k students cost an extra $3.8b to $39.8b.
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
- In FY08, 1 full-time equivalent staff member was needed to support every 10.4 students
- At this ratio 242k teachers were needed to support 2.5 million students.
- However in FY17 256k FTE teachers were employed in government schools, 14k more than required.
- This pushed the student-staff ratio down to 9.8
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.
- Of the extra 14,000 staff, approximately 12,000 were in non-teaching roles with only 2k new teachers hired.
- This dramatically reduced student-non-teacher ratios (39.4 to 33.5) especially in secondary schools (39.5 to 31.3).
- Of the surplus teachers, all of these were hired in primary schools pushing the primary school student-teacher ratio down from 15.6 to 15. If fact, the student-teacher ratio in secondary schools increased very slightly from 12.3 to 12.4.
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
- Other operations include school materials, maintenance, IT, cleaning and transport
- Depreciation on the assets owned by the states and territories including buildings and land
- User Capital Charge (UCC) which is “a notional user cost of capital based on 8 per cent of total written down value of capital assets as at 30 June.”
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:
- Non teacher efficiency decreased by 18%; In FY08 each non-teacher supported 39.4 students yet in FY17 they only supported 33.5 students in government schools.
- A 10% improvement in non-teaching staff efficiency would have increased the ratio from 39.4 to 43.4.
- At that ratio 58k non-teaching staff would be required to service 2.5 million students rather than the 74k employed today.
- This would translate to a $1.4b assuming an average salary of $85k (FY17 dollars).