Saturday, September 05, 2015

Fiscally punishing non-government schools not a smart move

Using fiscal policies to target private schools threatens an educational system that is serving Australians well.

With government budgets around the country in such a parlous financial state, there is no end to suggestions about how to get our public finances back in shape.

But in recent months we have seen a rising chorus of voices asserting that non-government schools should be making more of a contribution to the fiscal consolidation task.

For example public education advocates are trying to dispel the notion, based on estimates provided by government bodies, that the average public cost of educating a child in a non-government school is less than in a government school.

Researchers Chris Bonnor and Bernie Shepherd released a study disputing the size of the implied savings to taxpayers which arise when parents enrol their children in Catholic and independent schools.

The implication of this line of thinking is that since non-government school education isn't so cheap after all governments can readily claw back public subsidies for Catholic and independent schools, without doing a great disservice.

But after sorting schools on the basis of the socioeconomic status of school community, Bonnor and Shepherd still conclude average per student public funding in non-government schools is less in both low and high SES areas.

State and federal governments provide students in low SES independent schools an average of $10,870, and Catholic schools $12,330, lower than the average subsidy of $13,125 afforded to a student in a low SES government school.

Even if we accept their analysis at face value, and that is contestable given other valid ways to statistically group schools, that taxpayers saved more than $2 billion in 2013 remains a significant implied amount of savings in the current fiscal environment.

Also notable is that after-tax parental contributions, donations and other incomes for non-government schools in low SES areas are, on average, quadruple that received by government schools.

Another curious feature of the Bonnor-Shepherd analysis is their criticism of figures used by the Productivity Commission for the cost of capital used by schools, which they decry adds at least 15 per cent to the apparent cost of government schooling.

The figures are certainly imputed estimates of cost, but it is unreasonable on accountability grounds to not establish at least some estimate of the costs of maintaining school buildings and facilities.

Indeed, it is often ignored in the schools funding debate that, unlike in government schools, capital investments at non-government schools are largely funded by parents directly through school fees.

And as education academic Brian Caldwell has highlighted over many years, the government school sector has long been afflicted by gross capital mismanagement with taxpayers wearing the long-term burdens of this.

Attempting to estimate the true costs of capital certainly does more good than harm, even if the estimates are open for discussion, because it encourages us to consider whether parents and taxpayers are receiving decent value for money on investments.

Alongside the calls to scale back public funds to non-government schools have been arguments that new taxes should be imposed upon the schooling sector, to end the so-called mollycoddling of schools from tax-free "protection".

In particular it has been suggested that the GST should extend to school education services, with a particular emphasis on non-government schooling in an apparent effort to minimise the pain of GST base broadening on poorer families.

Such an idea, though, is without warrant if we are concerned about investing more in our young people.

It is well established in the conventional "optimal taxation" literature that investment activities should be excluded from taxation treatment, because this would help optimise the production of final goods and services in the economy.

The GST is designed to tax the final consumption of goods and services and not investments cascading through the production process and, so, multi-year human capital investments in young people should remain out of the GST base.

Numerous studies published both here and abroad show that more and better schooling is associated with improved individual productivity, translating into an enhanced performance of a national economy as a whole.

Within this, researchers at the University of Melbourne have also quantified improvements in long-term wage rates for students at independent schools compared with their peers in government schools.

Even so, parents of students in non-government schools may be quite sensitive to increases in school fees, given the abundance of "free" government schools whose operations are primarily funded out of general taxation revenue.

It has been estimated on a national level that more than 113,200 students would be re-enrolled in government schools around Australia if the GST is broadened to include school education, at great cost to public education authorities.

A recent study conducted for Independent Schools Queensland demonstrates similar effects at a state level, with a broader GST likely to induce switching of about 22,700 students from non-government to government schools in Queensland alone.

As mentioned previously such an outcome would be self-defeating from a budgetary perspective since the public sector, and in the end taxpayers who pay for it, will struggle even more to accommodate enrolment demands for government schools.

To be certain, this shift in student enrolment is also likely to hurt the poor in the long run, given the empirically established wage premiums earned by non-government school graduates.

Investing in human capital, and the physical capital needed to support investing in young people, is too important to be negated by spending clawbacks and tax grabs grounded in erroneous analysis and false assumptions about the role and contribution of non-government schools.

Preparing young Australians for economic and social participation in a changing world through quality education is vital for our future prospects.

Non-government schools have long played a fundamental role in this educative task, with responsibility for providing schooling services for more than 1.28 million students in more than 2700 schools across the country.

Students in non-government schools are excelling in national literacy and numeracy testing and, despite claims to the contrary, enrolments in non-government schools are saving taxpayers money.

Far from protecting Catholic and independent schools from the rigours of parental choice and the need for innovation and flexibility, resisting demands to target non-government schools for special fiscal punishments is one of the better investments we can make in our future.

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