Smart school funding a problem-solver

Glenn Fahey

21 May 2020 | IDEAS@THECENTRE

As is customary, new changes to school funding have carved up winners and losers. To finally put to bed, it’s time for a market-based makeover.

New Department of Education data shows how much schools’ funding will alter under the new means-testing ‘direct measure of income’ system. Reforms almost always increase the funding pie, but this shakeup doesn’t increase the pie so much as change the way it’s sliced up.

Parents who choose schools with higher median incomes are expected to chip in more, as they should generally. But the new ‘direct measure’ approach is no cure-all either.

First, the subsidy is based on the median parents’ income across the whole school, rather than what each parent actually earns. Second, parents’ income level isn’t always the perfect guide to how much parents can afford to pay in fees — for some, assets or help from family members would make a better proxy.

And, third, parents’ incomes don’t necessarily measure a child’s educational advantages — which is what school funding ultimately is supposed to address in the first place.

But it’s not necessarily fair to call these failures of the new approach though. There are simply so many flaws with school funding that tweaking around the edges just won’t cut it.

For a start, any subsidy should be paid to parents directly, not to schools — cutting out the middlemen in administration who re-calculate what goes to schools.

The amount of subsidy should be based on each students’ and families’ needs, not their schools’ needs. While the Gonski formula is notionally based on a child’s needs, there’s not necessarily any nexus to supporting individual students’ learning needs.

And the subsidy should be genuinely means-tested for each household, not the schools’ median.

We already provide welfare payments directly to households, adjusted to income and assets tests. Why not provide families with school-aged children a cheque each year equivalent to a basic, means-tested amount to spend directly on schooling?

Schools could then set their fees based on demand factors — like how popular they are and how much parents are willing to pay. Parental choice would keep fees in check, since schools with excessive fees will be less attractive. And public schools could offer market-based fees too; perhaps with some regulation to make sure they remain within reach of locals.

Parents could choose to pay more than the cheque’s amount — much like they do already — but the subsidy would be better targeted. And parents might use the cheque to pay for additional out-of-school support too to provide for their child’s needs. That’s far more transparent, competitive, and efficient than anything currently on the table.

School funding can be improved — not by spending more, but by spending it more wisely.

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