The controversy over funding for government and non-government schools which began more than 100 years ago, has continued unabated into the 21st Century. Funding was largely a state and territory responsibility until second half of the 20th century.

Following the Second World War, adequate resourcing of schools became more and more of a pressing issue for the states and territories. By the 1960s it was seen to be in the national interest for the Commonwealth to step in and provide some funding.

The Whitlam Government first introduced recurrent Commonwealth funding for both government and non-government schools in 1972. The Commonwealth funding formula has gone through various permutations since then, depending on which ever government was in power.

The Whitlam Government established the Schools Commission in 1973 which was to oversee the distribution of funds. This government also drew up the School Recurrent Resources Index (SRRI) which based school subsidies on the recurrent resources available to the school. The SRRI was based on the principle of achieving a common target for all schools, later expressed as the Community Standard, and was designed to fund the least well-resourced schools to meet this standard.

In principle, the Community Standard remained the benchmark for funding through the 1980s, although under the Fraser Liberal Coalition, federal funds to private schools gradually increased while the states and territories were left to make up the widening gap to government schools. The Hawke Labor Government replaced the SRRI with the Educational Resources Index (ERI) which assessed the relative “need” of non-government schools by measuring their private income.

The Keating Labor Government introduced a new formula, the Average Government School Recurrent Costs Index (AGSRC) in 1993.The AGSRC is calculated by taking the total costs of running government schools and dividing them by the number of students giving an average cost per student on a national basis. Private school funding is calculated as a percentage of the AGSRC while the per student cost for government schools is calculated by analysing what the system costs to run. The new funding formula for private schools included a “betterment factor” for schools operating below the AGSRC. This provision incrementally increased their grants annually so that by 2000 they would be all be operating at the AGSRC level.

Socio-Economic System (SES) replaces ERI to assess funding for non-government schools.Systemic Catholic schools not funded under SES until 2004.Government school lobby says SES increases resource disparity between public and private.Australian Education Union (AEU) lists major problems with SES.AEU says AGSRC also fundamentally flawed as basis of determining funding.

When the Liberal Coalition was elected in 1996 it began a review of the ERI and eventually introduced the Socio-Economic System (SES) in 2001. Whereas the ERI measured the level of funding a school received against the revenue generated by the parents, under the SES, the level of funding depended on the capacity of a school’s parent community to support it, as measured by the community’s socio-economic status. Fee increases and other private income (e.g. bequests, endowments) did not jeopardise Commonwealth funding, only a change in the socio-economic status of its parent community.

Initially, Catholic systemic schools were not funded under the SES and continued to be funded under a policy developed for Catholic systemic schools in 1972. This policy allowed Catholic authorities to allocate government funds (block grants) based on the needs of a school according to the resources available to each school. The Church had raised concerns about a funding system based solely on the SES of school communities. Catholic systemic schools remained outside the SES until 2004.

While funding formulas have continued to be controversial over the years, the SES model has become increasingly contentious with the government school lobby which says its principle effect has been to increase the resource disparity between private and public schools.

The Australian Education Union, in its submission to the Independent Inquiry into the Provision of Public Education in New South Wales (2001), said that not only had the proportion of funding going to private schools increased with time, the proportion of Commonwealth recurrent funding (books, furniture etc) compared with targeted equity programs had also increased. It said problems with the SES included assessing the communities, rather than the families from which the students came, ignoring the resources available to the school and the number of schools not funded according to their SES but under an indexed ERI.

The AEU said the AGSRC was also fundamentally flawed as a basis for determining private school funding as the national average for school costs varied so widely with a wide variation within the funding of government schools and the differences in the costs of education between the states and territories.

The AEU said there was also every indication that the proportion of funding to private schools from state and territory governments had also increased considerable. It noted that NSW was a particularly high funder of private schools and was the only state where the amount of expenditure on government schools was legislated (25 per cent) rather than determined on a budget by budget basis. Apart from direct grants, private schools also benefited by other state and territory subsidies such as loan assistance, and free or subsidised transport. In some cases these were more beneficial to private schools.

For the full AEU submission see The Commonwealth’s Role in Public and Private School Funding at

An internal review of federal funding of Catholic and independent schools completed by the Federal Department of Education in 2007, was critical of what it said were entrenched “inequities” in the distribution of private school funding.

The secret report, revealed in the Sydney Morning Herald (10/2/08) said that under SES funding model, 60 per cent of systemic Catholic schools and 25 per cent of independent schools were funded above their entitlement. It blamed the inequities on the transitional “Funding Maintained” arrangements the government made prior to the introduction of the SES using 2000 funding levels.

The report revealed that some private schools would be overpaid by as much as $23 million each in the next funding cycle. If the funding system was allowed to continue, private schools would get up to $2.7 billion more than they were strictly entitled to under the new four-year funding agreement starting this year.

The department recommended gradually stripping back schools' extra funding to give them time to adjust. It also rejected the private school lobby's argument that the extra funding helps keep a lid on the fees parents pay. It pointed out that fees continued to rise significantly.

It found that while the SES model itself was "fair and transparent", it was not being applied fairly to all schools. "The consistency and equity of the SES funding arrangements is undermined by the fact that almost half the non-government school sector is funded outside the 'straight' SES model," the report said. On this basis the department did not support retaining the current funding arrangements as it was not being applied fairly to all schools.

Following the leaking of this report, the Rudd Government announced it would review the controversial funding model. The Federal Minister for Education, Julia Gillard, has stated that the Government would conduct a public review of the socio-economic status funding system. However, the Government would have to keep the system until 2012 before it introduced any changes.

"Attempting to change the existing funding model at this stage in the funding cycle would cause a delay in the funding determinations for schools in 2009," she said.

In March, the Government announced that it was considering using the SES as a basis for funding government schools as well as non-government schools. The government schools' lobby received this news with cautious optimism saying it would be fairer if it was applied across the board.