Expenditure: Expenditure on formal education

Over the decade to 1995-96, total expenditure on education increased substantially. Over that time there has been a shift in funding from schools to tertiary education and an increase in funding by private individuals and organisations for public and private sector education.

Government expenditure, at both the Commonwealth and State level, makes up a substantial part of total resource allocation to education. Underlining the importance which Australians place on education, many families and individuals also devote considerable proportions of their budgets to education expenses.

Access to educational opportunities, and the manner in which available resources are distributed to the different types and levels of education and training, generate considerable discussion. The level of resources available, the distribution of government funds to government and non-government schools, and the balance between private and government expenditure, has a direct bearing on the degree to which groups have access to the range of education and training available.

In Australia, substantial funding is provided by the Commonwealth to the States and Territories for education programs. This generates some tension over their respective roles, particularly in the schools and Vocational Educational and Training (VET) sectors, as these come under State/Territory control.

Education expenditure Total outlays comprise capital and current outlays by the Commonwealth, State/Territory and local governments, and the private sector. Capital outlays comprise: expenditure on assets such as school buildings and land, furniture and fittings, and other capital assets. Current outlays comprise net current expenditure on goods and services (e.g. expenditure which does not result in the creation of fixed or intangible assets such as buildings or equipment), plus current transfer payments (e.g. interest payments, subsidies, personal benefit payments and current grants). Own source outlays comprise expenditure on education by the level of government specified (or by the private sector) less grants received from other levels of government (most commonly the Commonwealth). Operating costs comprise expenditure on direct delivery of education services, administration and general services, and property, student, delivery support and other services. This review draws upon data from a variety of sources. Some of this data relates to the academic year, while some relates to the financial year.

	1985-86	1987-88	1989-90	1991-92	1993-94	1995-96
Outlays on education(a)	$m	$m	$m	$m	$m	$m
.Government outlays	15,797	16,118	17,238	18,589	19,690	20,551
Commonwealth	6,119	6,527	6,675	7,724	8,797	9,240
State/Territory(b)(c)	9,678	9,591	10,563	10,865	10,893	11,311
Private outlays(c)	1,141	1,550	1,853	2,240	2,416	2,532
Total outlays on education	16,938	17,668	19,091	20,829	22,106	23,082
Proportion of GDP	%	%	%	%	%	%
Government	5.4	4.8	4.7	5.2	5.1	4.9
Private(c)	0.4	0.5	0.5	0.6	0.6	0.6
Total outlays on education	5.7	5.3	5.2	5.9	5.8	5.5

(a) Expenditure expressed in 1989–90 dollar values.
(b) Total includes local government outlays.
(c) Outlays financed from own resources.
(d) Expenditure and GDP at current prices for each financial year.

Source: Expenditure on Education, Australia (cat. no. 5510.0); and unpublished data, Government Finance Statistics collection.


Source of funding by sector
The three sectors of education - schools, VET and higher education - each receive funding from a number of different sources.

Government schools are almost wholly funded by government, whereas non-government schools receive funding from various sources. State and Territory Governments provided 74% of government funding in 1995-96. The Commonwealth Government provided supplementary funding through a variety of programs to both government and non-government schools (26% of government funding). In addition, the Catholic and independent school systems generate private funds for their schools, mainly through fees and charges but also through church and parish grants and private donations.¹ In 1996, 45% of the income of these schools came from private sources.²

The VET sector receives most of its funds from the State and Territory Governments (56% of total income in 1996) although the Commonwealth Government provides the majority of funds for capital works as well as financial support for VET running costs (27% of total income in 1996).³ The private sector also provides funding through service fees (9%), individual student fees (4%) and the provision of ancillary trading services (4%).³

The higher education sector is largely funded by grants from the Commonwealth Government (57% of total income in 1996), contributions from students under the Higher Education Contribution Scheme (12%) and fees from fee-paying overseas and postgraduate students, and other charges (13%). This sector also receives some funds from consultancies, research contracts and other sources (13%), from investments (4%) and from the State and Territory Governments⁴ (1.4%).

Higher Education Contribution Scheme The Higher Education Contribution Scheme (HECS) was introduced in 1989. Students contribute to the Higher Education Trust Fund either first through up-front payments paid directly to the institutions at commencement of each year's study, or later through voluntary contributions and deferred payments, both of which are paid through the taxation system. Total payments by students have risen from $100 million in 1989-906 to $419 million in 19967 . Since the introduction of HECS, the amount charged and the rate of repayment through the tax system have varied. Since 1997, instead of a standard charge for all courses ($2,478 for continuing students in 1997), the fees charged to new students differ according to the cost of, and demand for, the course studied8. In 1997 fees were $3,300 for arts or humanities subjects (including nursing and education), $4,700 for computing or business subjects (including mathematics, engineering and most sciences), or $5,500 for law or medicine (including dentistry and veterinary science). Repayment rates and thresholds through the tax system were also increased from 1997-98, starting at 3% of incomes in the range of $20,701-$21,830 to 6% of incomes $37,263 and above.7 In its first full year of operation (1989-90) $435 million was paid to higher education institutions through the Higher Education Trust Fund6. By 1996, payments to the Trust Fund totalled $764 million7. The Commonwealth Government contributes part of its operating grants for higher education institutions to the Trust Fund. The amount paid represents the cost of students who elect to defer payments, and the discounts provided for up-front payments.8 The dollar value of the Commonwealth's contribution to higher education funding is expected to decline from 1998 with expected increases in HECS revenue from students and proposed reductions to operating grants.9

Government and private expenditure
Between 1985-86 and 1995-96 total outlays on education (after adjustment to 1989-90 values) rose 36%. However, prices in the education sector increased less than prices in the rest of the economy. This was a factor in the overall decline of education expenditure as a proportion of Gross Domestic Product (GDP)⁵ from 5.7% to 5.5% (as expressed in current prices each year). While most education expenditure is incurred by governments, over the last few years an increased proportion has been taken over by the private sector. Government share of total outlays on education during this period fell as a percentage of GDP from 5.4% to 4.9%, while private outlays increased from 0.4% to 0.6% of GDP.

Although the government sector contributed the vast majority (89%) of total outlays on education, between 1985-86 and 1995-96 contributions from private sources increased at a greater rate than public sector contributions. The increased private sector growth (122%) came mainly from private school fees, due to the drift of students to private schools; and from the growth in overseas university student numbers.⁴ Expenditure on schooling by private households varied according to the type of school attended, with higher costs incurred by pupils at non-government schools (see Australian Social Trends 1997, Government and non-government schools).

In contrast to private source contributions, total government outlays on education rose 30% between 1985-86 and 1995-96 (after adjustment to 1989-90 values). The main growth was in the Commonwealth sector (up 51%), reflecting increased grants to the States and Territories, mainly for tertiary education. Outlays from State/Territory Governments and local governments from their own resources rose by 17%.

The largest proportion of total government outlays on education went to primary and secondary school education. In 1995-96, this comprised 55%. During the same period, higher education attracted 24%, and vocational education and training provided through Technical and Further Education (TAFE) institutions 11% of government outlays on education. The balance was spent on pre-schools, other special education, and student transportation.

However, the distribution of government outlays has shifted over the 10 year period, with an increased proportion allocated to tertiary education and less to primary and secondary school education. Over this period, outlays on tertiary education rose 50% (58% for universities and 38% for TAFE) (after adjustment to 1989-90 values), while the corresponding rise for primary and secondary education was 19%. The substantial rise in funding for universities occurred because of the large increases in Commonwealth-funded university education student places between 1988 and 1995.

GOVERNMENT OUTLAYS ON EDUCATION AS A PROPORTION OF GDP
	(a) Comprises courses offered by Technical and Further Education (TAFE) institutions. Source: Expenditure on Education (cat. no. 5510.0); and unpublished data, Government Finance Statistics collection.

How is the money spent?
The majority of funds spent by the government and private sectors on education are used to pay teaching and non-teaching staff salaries in schools, TAFE and universities. In addition, funds are required for support services for students and staff, research activities in universities, cleaning and maintenance of buildings and general administrative costs. Money is also spent on providing new buildings and equipment or upgrading existing facilities.

	Teaching staff salaries	Non-teaching staff salaries	Total salary costs	Other costs(a)	Total
	%	%	%	%	$m
Primary/secondary
Government(b)	52.5	10.8	(c)70.5	29.5	12,084.0
Non-government	49.8	10.5	(d)67.2	32.8	5,221.4
VET	n.a.	n.a.	60.7	39.3	3,917.0
Higher education	34.4	29.1	63.5	36.5	7,590.3

(a) Includes provision of buildings and grounds and other operating expenditure.
(b) 1995-96 expenditure.
(c) Superannuation for both teaching and non-teaching staff included in total salary costs only.
(d) Superannuation and long service leave for both teaching and non-teaching staff included in total salary costs only.

Source: MCEETYA, 'Summary 1995-96 Finance Statistics' from government section of National Schools Statistics Collection, 1996; NCVER, Australian VET Statistics: financial data, 1996; DEETYA, Selected Higher Education Finance Statistics, 1996.


Government school expenditure
In 1995-96, government school expenditure totalled $12,084 million. In that year, 52% of expenditure by government schools was on teaching staff salaries, and a further 11% on non-teaching staff salaries. The remaining expenditure was on non-salary costs which included other operating expenditure (the costs of goods, services and cleaning) and the provision of buildings and grounds.

Per student school expenditure in 1995-96 was $5,063. It was higher in secondary schools ($6,110) than in primary schools ($4,410) reflecting the greater costs in secondary schools.

Non-government school expenditure
In 1996, non-government school expenditure totalled $5,221 million. As with government schools, the salaries of teachers and other staff was a major category of expenditure (50% and 10% respectively).

Expenditure per student by Catholic schools was 79% of that for independent schools at the primary level and 70% at the secondary level.

Per student expenditure was $7,353 in independent schools, and $4,785 in Catholic schools. The Commonwealth and State/Territory Governments funded some of this expenditure ($2,377 per student for independent schools and $3,344 per student for Catholic schools).

Government and non-government school expenditure Government expenditure data for primary and secondary schools do not represent total government expenditure on school level education. They exclude expenditure on: Commonwealth direct payments to parents and/or students; pre-schools and TAFE establishments; payroll tax, long service leave provisions, depreciation and sinking fund payments, interest on Commonwealth loans and teaching housing; student hostel provisions; and funds raised by schools, school councils or community organisations. Non-government expenditure data for primary and secondary schools do not represent total expenditure on school education. They exclude expenditure on: Commonwealth and State direct payments to parents and/or students; salaries of staff and operating expenses of the boarding house components of schools.

Vocational Education and Training
In 1996, VET expenditure totalled $3,917 million, excluding those services which were financed solely by private providers³. Salaries accounted for 61% of total costs.

There was a significant increase between 1995 (1.8%) and 1996 (3.1%) in total payments to non-TAFE providers for VET, such as commercial training providers. The proportions ranged from 6% in Northern Territory down to 1.3% in Tasmania. Provision of supplies and services absorbed a further 23% of VET expenditure.

The Commonwealth Government provides funding for apprenticeships and traineeships, both as part of its VET in Schools program and its Support for New Apprenticeships program¹⁰ (see Australian Social Trends 1998, Workplace training).

Higher education
In 1996, expenditure of general, recurrent and research funds by higher education institutions in Australia amounted to $7,590 million.⁴ Of that amount, 34% was accounted for by salary and salary-related expenses for academic staff, and a further 29% for non-academic staff. Depreciation and other expenditure accounted for the final 37%.

In terms of activities undertaken, more than half of total expenditure in 1996 was devoted to academic activities and research (60%). Libraries, student, public and other academic support services accounted for 16% of expenditure, with buildings and grounds accounting for 6%. Expenses relating to administration and other general institution services, plus superannuation costs, made up the balance (18%).

The Commonwealth Government funds a major proportion of research work undertaken by universities. Expenditure on research includes funds spent on large-scale projects involving several institutions, funds allocated to institutions for post-graduate research students, research projects by groups of staff or students, and research by individuals.

In 1997, the Commonwealth Government provided $623.5 million to universities for research activities. Just over one half (52%) was allocated to institutions, 27% went to specific projects and the remainder to individual researchers.⁹


Endnotes
1 Ministerial Council on Education, Employment, Training and Youth Affairs, 1997, National Report on Schooling in Australia 1995, Curriculum Corporation, Carlton, Victoria.

2 Department of Employment, Education, Training and Youth Affairs, 1998, Non-government Schools Financial Questionnaire Collection 1996, DEETYA, Canberra.

3 National Centre for Vocational Education Research, 1997, Australian Vocational Education and Training Statistics 1996, NCVER, Leabrook, S.A.

4 Department of Employment, Education, Training and Youth Affairs, 1997, Selected Higher Education Finance Statistics 1996, AGPS, Canberra.

5 National Board of Employment, Education and Training, 1992, Education, Training and Employment Programs, Australia, 1970-2001: funding and participation, Commissioned report no. 11, AGPS, Canberra.

6 Commonwealth Treasury, 1990, Budget Statements, 1990-91, Budget paper no. 1, AGPS, Canberra.

7 Higher Education Council, 1997, Eleventh Report to the National Board of Employment, Education and Training on the Operation of Section 14 of the Higher Education Funding Act 1988 and the Higher Education Contribution Scheme, AGPS, Canberra.

8 Commonwealth Treasury, 1997, Budget Strategy and Outlook 1997-98, Budget paper no. 1, AGPS, Canberra.

9 Department of Employment, Education, Training and Youth Affairs, 1996, Higher Education Funding Report for the 1997-99 Triennium, AGPS, Canberra.

10 Department of Employment, Education, Training and Youth Affairs, 1997, Portfolio Budget Statements 1997-98: Budget-related paper no. 1.4, AGPS, Canberra.

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