Partnership School Funding

Save Our Schools NZ

Fact Checker

Partnership School Funding

The Ministry of Education has produced a brochure that attempts to explain “Partnership Schools” funding. Unfortunately, it does a good job of highlighting the problems, rather than answering the real questions.

In particular, their worked examples reverse out the most troublesome items and then proudly claim that this explains the “facts”.

Parents are not going to make comparisons with notional Ministry of Education worked examples. They are going to compare the effect of the actual funding Partnership Schools receive with the schools that already exist in their local areas.

For example, the primary school worked example seems to be the Rise Up Academy, based in Mangere. This is compared to a Decile 3 State school in an unknown location with a roll of only 44 students.

Furthermore, it appears that the secondary school chosen in the brochure worked example is Paraoa, with a projected maximum roll of 300 (although its roll this year did not exceed 53). This is the largest of the maximum rolls of the first five Partnership Schools, so this helps the illustration look better by spreading the fixed costs over the highest number of projected students.

In the short term, Sponsors seem to have used the excess funding they have received to provide more teachers and other perks, such as free uniforms and free stationery.

Creating smaller class sizes has been a feature of the initial batch of schools and even the Education Review Office has commented on this point.

But this cannot persist in the long term. If the Ministry assertion that costs will equalize over time proves correct, then staffing ratios should become more consistent between types of school. But if they persist, it could signify that the Partnership Schools are permanently overfunded.

Our full analysis of the brochure is detailed below. The brochure itself is available here:

http://www.minedu.govt.nz/theMinistry/EducationInitiatives/PartnershipSchools/~/media/MinEdu/Files/TheMinistry/PartnershipSchools/StatePartnershipSchoolsFunding.pdf

Save Our Schools NZ

9 December 2014

Background Discussion

Issue 1: “Partnership Schools are fully-funded schools outside the state system…”

Why are Partnership Schools fully funded by the State, when they are schools of choice? Why is their funding model inconsistent with other types of school, such as Catholic schools?

If parents choose to enrol their children at a Catholic school, for example, then that school is funded for operational grants and the same teacher staffing entitlement as an equivalent State school. These are the two largest costs, by far, of providing education.

But when the Private Schools Conditional Integration Act 1975 went through, it was made clear that the State would pay for those students’ education but would not be responsible for the schools’ assets, which remain the property of the Proprietors. Why are Partnership School assets, which are owned by a private sector Sponsor, paid for by the State?

Issue 2: Is the funding model consistent with the original National / ACT Party Agreement?

The agreement, in December 2011, mentioned the issue of funding but vaguely stated that:

“Public funding would continue to be on a per-child basis. (Details are included in the attached Annex).

Annex: Public funding would continue to be by way of normal operational grant funding and may include funding targeted at disadvantaged groups. Schools may also be eligible for capital funding for school property, although overseas experience suggests use of private capital will be required. Schools may choose to rent, rather than own the school building and hence may instead receive equivalent funding to cover rental costs.” [Emphasis added]

This statement raises two questions: how much private capital is invested and at risk in the new schools? And how would be the “equivalent” funding to cover rental costs be determined?

Issue 3: “Partnership schools receive much the same funding as comparable state schools.”

What does “much the same” mean? As the brochure quite rightly points out, “Funding for all schools, even those of a similar size and decile, varies.” No two schools will ever be identical for all sorts of reasons. Fair enough. So, how was the “equivalence” funding model determined and what assumptions were used? What would be the implications if the actual outcomes were different from those assumed in the model?

Reading the detailed funding model background paper released by the Ministry gives us an insight into just how vague this equivalence approach really is and how many assumptions underpin it:

“The Crown believes funding Partnership Schools on the basis of “Cash for Buildings” provides equivalence with the property support for State schools where property is leased. The following table provides indicative amounts of property funding for Partnership Schools based on Cash for Buildings model. The amounts below are indicative only and subject to change.

Please note that the amounts above may alter if a school is not proposing to reach its maximum roll in the first few years. Composite school (Yrs 1 to 13) funding may also vary depending on the balance between the numbers of primary and secondary students enrolled.” [Emphasis added]

And therein lies the key problem: the equivalence approach is based on two key assumptions: the school moves within a few years towards its maximum roll and that the costs it will incur are similar to those of equivalent state schools being funded on this particular “Cash for Buildings” model.

But note the large difference between a 50 roll secondary ($209,724) and a 300 roll secondary ($745,112). The larger school is funded for this cost component at a rate that is 3.5 times the amount of the smaller school!

So if the new school simply projects that it will grow, then it will be funded at a much higher rate in the short term than may ultimately prove to be necessary to cover its actual costs.

Issue 4: Small schools are expensive.

The brochure makes two statements about how certain costs associated with a new school mean that average funding will appear higher than in established schools; but that eventually as any new school reaches capacity, its average funding per student will fall. The economists would call this “economies of scale”.

The allowance for fixed costs of this nature is called Base Funding. The Base Funding for the three Partnership secondary schools has been set at $997,044 per annum. The middle school receives $571,448 and the primary school receives $145,856 per annum.

But if the schools remain small, even at their projected maximum roll levels, they will remain expensive and not achieve the same reduced average funding per student that larger schools achieve.

Minister of Education, Hekia Parata, is on record in parliament acknowledging that small schools are expensive.

Issue 5: Then why create more small schools?

Why are we creating new schools at all, given that many of the new Partnership Schools are not in areas of roll growth? This is also inconsistent with Treasury’s advice to the incoming government in 2011, which advised the government to “rationalise the school network”!

New partnership schools in 2014 have been created in South Auckland (South Auckland Middle School and Rise Up Academy) Albany (Vanguard Military School) and in Whangarei (Paraoa). The four schools proposed for 2015 will be in South Auckland (Pacific Advance Senior School and Waatea), West Auckland(Middle School West Auckland)and Teina, a sister primary school in Whangarei for the Paraoa secondary school. That makes a total of 8 schools that are, in reality, in areas where schools already exist.

Why, therefore, is the State using a funding model which is seeking to fund these new schools on an equivalent basis to that used to create new State schools, when there is existing capacity in the school network?

Issue 6: “All new schools are also funded for a minimum roll even if the school, on opening, is below that roll number.”

What has been the actual experience so far with the schools’ rolls?

The roll return information is contained in the “Schools Directory” spreadsheet available on the Ministry’s Education Counts website at

http://www.educationcounts.govt.nz/directories/list-of-nz-schools

Based on actual roll experience, three schools were funded during the course of the 2014 year on a “Guaranteed Minimum Roll” number of students that was greater than their actual roll returns ever recorded.

What evidence is there that the Partnership schools’ rolls are consistent with the projections and assumptions underlying their funding model? In particular, the Ministry comment that “the amounts above may alter if a school is not proposing to reach its maximum roll in the first few years…” is certainly relevant here.

How were the “Guaranteed Minimum Rolls” determined for the 2014 year? What, if any, changes are to be implemented by the Ministry in the procedures used to determine the Guaranteed Minimum Roll for any new schools in the future?

At what stage of their development will the secondary schools be subject to the same funding reduction regime that now applies to the funding for State and State-Integrated secondary schools, where funding is reduced during the course of a year if the school’s actual roll falls?

ENDS

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