NSW school funding cuts arrive … from a different source

The NSW government announced a cap on funding government and no-government schools along with significant cuts to bureaucratic staffing levels in the education department and other price increases to TAFE courses saving an estimated $1.7 billion over four years in an effort to address the state's fragile financial position.

Funds to the non-government sector will be capped around the current expenditure of $800 million annually saving the government $116 million to 2016. The state budget for public schools will be cut by $210 million over the next four years.

The funding freeze created the inevitable public outcry with calls for rallies, protests and teacher strikes although the cuts will be felt hardest in administrative education services as no front-line teacher positions in public schools will be axed.

Independent schools should have been on notice that government funding may not be so assured as a right rather than a privilege. That funding privilege is now subject to change although most school leaders believed any potential funding reduction would have originated from the commonwealth and not the states.

Some of the consequences from this funding freeze include the following.

i) For some time the NSW government has forecast significant fiscal restraint, one of which emanated from a $5.2 billion fall in GST revenue over the next four years because of declining receipts federally. Anecdotal information given to the writer indicates NSW remains in a parlous financial situation with numerous government departments being forced to implement severe cost cutting measures. Given the state's overall financial circumstances it appeared inevitable that schools would not escape necessary cost cutting measures. Many people are surprised the move was initiated by a liberal government which historically has viewed the non-government school sector favourably because parental tuition fee payments offset government expenditure that would otherwise be spent on schooling.

ii)Freezing state funding for four years amounts to a 3% support reduction annually which is below the current national cost increase affecting all Australian schools for primary and secondary students as measured by the Average Government School Recurrent Costs (AGSRC) index. This index increased by 6.9% in 2011 over 2010 for primary students and 4.8% for secondary students in the same period. Although national CPI costs have been held to less than 3% in the last twelve months for the last four years the AGSRC index has always risen higher than CPI measures. This means NSW non-government schools will need to budget for at least a 4-5% effective income reduction each year, compounded over the next four years, as a result of the government's funding freeze.

iii) In the face of this inevitable income reduction independent schools will be faced with three options:

a) Accept the income loss but attempt to operate under existing cost parameters without disproportionate tuition fee increases. This seems an unachievable option to implement.

b) Reduce or rationalise school services to minimise operating expenses. Some savings may be achieved but not at the expense of teacher reductions.

c) Raise tuition fees while attempting more stringent controls to gain marginal cost savings.

While many parents utilising independent schools are facing their own personal financial restraints because of tighter economic times it seems c) will become an inevitable outcome from the state's funding decision.

iv) In political terms the O'Farrell government is probably seeking to minimise its electoral damage for the March 2015 state election by announcing this funding reduction relatively early into its four year term. In financial terms freezing school funding may foreshadow addition government cuts to other government services or public service jobs.

Cutting $210 million to public schools offers limited manoeuvrability for the sector to offset the reduction. Catholic and independent schools may posses some flexibility to raise tuition fees but they could face a parental backlash from many families already stretched financially to pay for normal, anticipated fee increases. Adding another 4-5% to offset loss of state revenue support – which merely holds schools in the same position financially - may be a bridge too far to cross for some families. Equally worrying will be any negative impact on forward student enrolments if fee escalations move beyond acceptable levels for the clientele of a particular school.

v) Other political consequences arise from this state government decision. Only one week ago Prime Minister Julia Gillard exhorted states/territories to join her school 'crusade' by financially supporting proposed federal funding allocations to inject an additional $6.5 billion annually to improve schooling. Contrary to Ms Gillard's expectations the NSW government will merely cite its own state financial circumstances to refute Canberra's impositions. If NSW cannot underpin Ms Gillard's schooling crusade it seems improbably that the federal funding target can be achieved. Nor does it seem likely that states' agreement on a new schooling federalism can be consummated noting that the Queensland government budget also earmarked 14,000 public service jobs to be axed. Some of these job cuts will inevitably be sourced in school departmental bureaucracy. Under such circumstances it remains extremely problematic how any binding financial consensus with the states can be negotiated by schools minister Mr Peter Garrett to implement Ms Gillard's crusade.

vi) The federal government is keen to implement the ACARA national curriculum reforms into schools during 2013 or 2014. Funding reductions to the state's education bureaucracy could seriously impact on this curriculum timetable providing another unknown outcome from eastern state's depleting financial situation.

vii) Conveniently ignored by the state government is the reality that many low funded non-government schools already experience significant funding restraint from the state since the middle nineties. Low fee Christian and catholic schools will be most seriously affected by this state funding reduction.

Some conclusions

Each public school will be required to seriously review the NSW government's funding freeze and its implications for learning delivery. The consequences for non-government schools and its implications for future tuition fee decisions are considerable.

How such an income reduction can be accommodated by the non-government sector without jeopardising education delivery or alienating fee paying parents constitutes a major strategic decision for the next four years. Despite statements to the contrary from the state government is seems inevitable that the allocation freeze will not be rescinded in the future.

This government decision raises an inevitable outcome: state recurrent funding, at least to the non-government school sector, will permanently decline in real terms in future.

All schools –government and non-government - must now confront that funding reality.