The bucks stop where? Crisis in school funding

By Simon Marginson,
Professor of Education at Monash University &
Director of the Monash Centre for Research in International Education.

TWENTY YEARS ago Australia was a world leader in education. Though participation in education was lower than it is today, total public spending on schools, universities and TAFE was 5.4 per cent of GDP, compared to the
present level of 4.3per cent, and was well above the OECD average. Funding per student was much higher, enabling excellent teaching and learning materials to be provided.

The Federal Government's disadvantaged schools and multicultural programs were highly regarded internationally. TAFE was being renovated by the
collaborative efforts of federal and state governments. Basic research in universities was flourishing. The only hole in the net was in pre-schools and early childhood education, where Australia was yet to create universal provision at pre-school level, along European lines.

Economically the country was not travelling well at that time - we had moved in and out of recession twice in five years - but politicians and the people saw that public investment in education would provide a better future for
all. There was no debate about that.

What went wrong? Somewhere in the low taxing, low spending and high privatising 1980s and 1990s, the country lost its way. We did not decide that governments should reduce investment in education on our behalf, but that is what happened.

After a generation of policies designed to reduce public spending on education by encouraging private spending on education - without much thought for long-term consequences - Australian public investment in education at 4.3 per cent of GDP is 21st out of 28 OECD countries. We have a high level of private investment (1.1 per cent of GDP, sixth in the OECD) but it takes the form of tuition fees, private investment in exclusive schools and postgraduate business courses, with little flow-on to the community.

The result is that we now have a serious resource crisis in public schools, universities and TAFE. We have also failed to develop pre-school education. The national participation rate at four years of age is one-third of the population, half the OECD average. The average OECD country spends 0.4per
cent of GDP on pre-school education. We spend 0.1 per cent.

There is nothing wrong with quality schools, TAFE and universities depending largely on public funding. It is the same the world over.

Certain social ``goods'' such as public education, research, public health, welfare, defence, law and order, and government itself generate common public benefits. We all gain from a community that is well-educated, healthy, safe and well governed. And such goods are also the foundations of future economic prosperity, especially investments in education and research. However, goods like this that are held in common, and whose benefits are open-ended and long-term in character, are not readily bought and sold in markets.

Such goods are subject to what economists call ``market failure''. This means that to be produced adequately, they need the right amount of public funding. Only goods that are reducible to private benefits - especially immediate private benefits - lend themselves readily to market transactions. This means that when education is provided on a market basis, only some aspects of it, e.g. exclusive schooling and high-wage vocational courses, become fully provided for.

Recognising this, in recent years many OECD countries have upgraded their public investment in education. There is a new emphasis on ``investment in knowledge'' because of the growing role of knowledge in high-technology
industries, and the new skills required in an IT-based economy and a globalised culture.

Unfortunately, Australia remains stuck in the cost-cutting and privatisation era of the early 1990s. We have stood aside from the international trend and are now in danger of running down education so severely that we will find it
almost impossible to recover.

In addition to this overriding problem of under-investment, education in Australia also faces serious federal and state difficulties. The two levels of government share responsibility in education. The states have the constitutional power and carry the main burden in public schools and TAFE. The Federal Government has the main financial power (it collects 78 per cent of all tax revenue) and has taken the main role in private schooling and higher education.

The present federal/state arrangements are riddled with anomalies, clumsy overlaps, unnecessary duplication, buck-passing and unhelpful politicking and point-scoring.

For example, in pre-school education, the states have the will to lift pre-school education, but not the fiscal clout. The Commonwealth has the fiscal clout, but it is remote from the point of delivery, screened off from public pressure, and wants to evade all spending responsibilities. Nothing
happens. We continue to flounder.

In relation to schooling, the Federal Government has the greater fiscal clout and, over time, this has tipped the balance of funding towards the private schools (largely federally supported) and against the public schools
(dependent on the states). Worse, policies on one school sector are made without reference to the other school sector - despite the unfulfilled potential for sharing, and despite the fact that the development of one sector, e.g. new publicly supported private schools, has implications for the other.

TAFE simply falls between the two stools. Again, the states do not have the means to upgrade funding to the level required, and the Federal Government continues to sit on its hands. No wonder a number of TAFE colleges are in
serious crisis.

Further, TAFE and universities both educate the post-school population, but one is largely a state matter and the other federal. These two sectors are subject to very different funding levels, funding systems, accountability
relations, industrial relations and educational cultures.

This handicaps policy coordination, for example in relation to regional development, and measures to increase participation. It makes every step towards better cross-sectoral articulation slow and difficult.

Federal elections enable us to take stock of the big national issues and few are bigger than education. People consistently rank it, and health, as the top national issues.

Education in Australia needs not just new policies but a new national policy consensus.

Such a consensus needs to include:

A substantial increase in total public investment in education, to be implemented over the next five years or so.

New financing mechanisms to provide a guaranteed ``floor'' of national funding, e.g. an education levy or life-long learning levy - akin to the Medicare levy on incomes, and accompanied by a reduction in general income tax.

A reforged federal/state settlement, based on collaboration rather than the perpetual argument and buck-passing that is our present lot.

Simon Marginson is a professor of education at Monash University and the director of the Monash Centre for Research in International Education.

Published in THE AGE on 31st October 2001