Last week I posted on trends in private school enrolments, and my colleague and friend Brad Rogers commented to me that the shift to private schooling is bringing significant savings to the State Government. While State Schools receive the bulk of their funding from the State Government, private schools receive large amounts of funding from parents and the Federal Government, and the State Government contributes much less. A simple comparison of some schools in my local area shows the thousands of dollars of savings that accrue to the State Government per student, if a student is shifted from a State High School such as Indooroopilly (Indro) SHS to a private school such as Brigidine or Brisbane Boys College (BBC) (see chart below based on My School data).
While the State Government saves a large amount of money when a student shifts from a State School to a private school, a fraction of this saving ends up being replaced by the Federal Government, which provides significant funding to private schools – although the level of this funding varies greatly across schools. I suspect the differences in Federal funding between Brigidine and BBC reflect the socio-economic mix of students. BBC’s ICSEA (Index of Community Socio-economic Advantage) score is 1,168 compared with Brigidine’s score of 1,103 (N.B. average is 1,000), which would mean BBC receives less Federal funding than Brigidine on equity grounds.
Overall, for every private school student, the State Government appears to be saving around $8,000 per student per annum. A back-of-the-envelope calculation tells me that, if private schools had remained at the 29% share of Queensland students they had in 2000 rather than increasing to a 33% share by 2013, the State Government would have to spend up to an additional $300 million per annum on the State’s education system.
N.B. for simplicity, in making the above calculation, I have ignored capital funding for schools and have ignored any average cost differences that may exist between primary and secondary students.
Update. See my more recent post Catholic schools still benefiting from very favourable funding deal from Howard Govt days, which corrects my misunderstanding of the reason for the difference in Commonwealth funding between BBC and Brigidine.
Queensland Economy Watch 
Excellent gene
Sent from my iPhone
Thanks Craig.
I have often wonder what the funding break-ups was for state and private schools.
The best rort the parents, is of course, to send their children to Indro SHS, and join the sports clubs at St Peter’s across the road. This minimises school fees, maximizes their access to State and Federal funding, and provides access to the wonderful privately funded facilities at the private schools.
..or of course attend Brisbane State High which is a GPS school, best of both funding schemes,
That is a good rort! Silly me, I forgot about St Peter’s. It would have been nice to put on the chart. Thanks for the info, Katrina.
Independent schools in Queensland save Governments (Federal and State) more than $800 million in recurrent funding in 2012 according to Independent Schools Queensland – see Media Release of 28/1/14 at http://www.isq.qld.edu.au
Thanks for that info, David.
Gene
Nice analysis. Like many parents, I see paying for a private education as an investment in our child’s future (sorry, can’t help being an economist). Private school fees are a top-up to fund education inputs beyond what the Government has decided is optimal for society. A better education provides both private benefits to the recipient, but also public benefits via economic productivity gains.
I love a bit of BOTE (back of the envelope) analysis myself, so I developed a little model based on the data you have shown (plus St Peters). A few observations…..
1) In rough terms, once a child has moved from the State system to the independent system, the State budget immediately saves about $7,500 (as you pointed out). This is partially offset by additional Commonwealth funding.
2) Based on the data I looked at, a rough proxy formula for Commonwealth funding per student in the independent school system looks something like: $7,500 per student; less 30 cents per student for every dollar of fees paid by parents.
Based on 1) and 2) above, I estimate the first $4-5,000 in private school fees actually goes into making up for the net reduction in State and Commonwealth funding (i.e. to get the funding available for a child back to the equivalent of that available if they went to a State school).
Then every additional dollar paid by parents is penalised by the Commonwealth by about 30% through their funding formula.
So if a parent invested $15,000 to send their child to St Peters, the actual increase in total recurrent education funding available for that child is actually about $7,000 (less than 50% of the out-of pocket investment made by the parents). I cannot think of any other investment that is effectively penalised 50% at the time of investment.
If we genuinely believe that investment in education beyond a minimal societal standard provides positive spillover benefits to the country, why are we deliberately penalising private investments so harshly via school funding formulas? The risk to Government is a reversal of the trend towards private education. That would really expose the structural deficit further.
Surely there is a better way to fund education that ensures:
1) minimum standards are reached over society
2) penalties for private investments are at least removed.
Great stuff. Thanks Jim. That’s an interesting way of looking at it. Unfortunately I think our concerns over equity are getting in the way of improving the education system.
Jim’s argument lends support for a system of education vouchers that vary by income, that could be redeemed at either a public or private school. There was a lot of discussion about this option years ago but I haven’t heard much lately – or maybe I am just not involved in these debates any more.
I would be interested in any rigorous evidence on the performance of public versus private schools after adjusting for socio-economic status. It is interesting that at the primary school level, public schools in relatively affluent areas such as Kenmore, Indooroopilly, Graceville, etc perform every bit as well in NAPLAN tests for instance as private schools in the same areas such as St Peter’s and St Aidan’s. However, at the secondary level the private schools appear to perform better, and large numbers of children who do their primary education at a public school move to a private school for their secondary education. It is hard to know what is the cause and effect.
Paul
I think vouchers are a good idea, but I don’t think there is a case for varying the value of the voucher based on income. Surely the tax system has already dealt with the equity issue and ensured that high income earners would be contributing more via the tax system anyway? Why create another distortion in the system where higher income earners may end up with a voucher that is less than the minimum required to pay for their child’s education? Doesn’t that effectively force them into a private education-like situation and remove their choice?
The key is to make sure the value of the vouchers are sufficient to provide a designated standard of education for every child. That would infer some level of regional differentiation as it is more expensive to educate a child in a bush school than a city school etc.
Paul, thanks for your comment. I think voucher schemes have been put in the too hard basket for the moment, unfortunately. Re. performance of public versus private schools, the evidence I remember seeing years ago is that private schools certainly boost tertiary entrance scores. So of two students of similar ability attending public and private schools, the one at the private school will achieve a higher tertiary entrance score. (Incidentally, this results in public school graduates doing better at university than private school graduates who achieved the same tertiary entrance score.) Given that a good tertiary entrance score can be a ticket to a good university course and a high paying career, a private school education certainly confers some advantages. Regarding the impact on NAPLAN, my understanding is that the literature on the value adding impact of education is still under-developed, and it’s difficult to draw conclusions.
If we work on the assumptions that the current funding for education is skewed to assist the disadvantaged, and that the community broadly accepts this approach (which one correspondent above does not accept, but most people seem to), then we might posit a model that continues this, but more fairly and allowing real choice…
On this basis, funding a needs-based voucher system, that allows families to choose the school for their children and to spend their vouchers, PLUS whatever else they want to apply, at the school of their choice, is quite simple.
In this situation, we can easily identify the socio-economic need and capacity of families – we already do so for the SES basis of the Gonski funding model. We can also identify any other dimension of disadvantage (disability, indigeneity, language not English, etc). If we ascribe an annual SES to a child’s family, then add other loading for other factors, that family can be given an EDUCATIONAL VOUCHER to spend at a school of their choice… government, Montessori, Catholic, Muslim or any other. The beauty of our modern data-gathering tools, along with annual reviews of social needs and disadvantage, make this solution quite easy.
(It is worth noting that Hayek’s model is now at a point in our technological advancement where it might work!)
In this case, every family can then enjoy the choices that are currently only available to a select few, to choose the religious/ social/ educational model they want for their children. And we can ensure that real support goes to those students with greatest needs. The old battles between public and private schools will be at an end. Families will choose, just like in the proposed NDIS model for disability care, and the new aged care funding models. Let the consumer choose!
Now wouldn’t the teacher unions and state bureaucrats (who want a very standardised and secular schooling system) just love that. Imagine putting real choice back into the hands of parents of all social standings???
Thanks for your comment, Mike. A voucher scheme along the lines you suggest would be a great idea. Considering the weird, inequitable school funding arrangements we currently have, I’m surprised there hasn’t been a greater push from the community for a fairer, more idealistic system.