Non Government Schools in Australia are at an interesting juncture at this time – increasing enrolment demand, higher costs, government grants suppressed or falling plus unknown fee increase capacity. All of which become a potential recipe for disaster.
Enrolment demand for non government schools is up. According to the Australia Bureau of Statistics (ABS):
· In 2023, 36% of all Australian Students were enrolled in a Non Government School.
· Between 2019 and 2023 Independent School numbers increased by 14.1%, Catholic School enrolments grew by 4.8% and over the same period Public School enrolments grew by 0.7%
· Between 2022 and 2023, looking at the % growth of students, Government Schools reduced in NSW, Queensland, South Australia, Tasmania, ACT and the Northern Territory. The % growth in Government schools was only in Victoria and Western Australia, though at significantly lower rates than the growth in enrolments in non government schools in those same states.
From Resolve’s experience, there seems to be no slowing down in parents looking to enrol their children in non government schools – with a whole range of factors at play in making such decisions.
At the same time, schools are under a range of significant inflationary pressures, not the least of which is in respect of the single largest expense item for any school, being teacher salaries. A major increase for NSW Public School teachers in late 2023 of up to 12% with flow on pressures to the non government sector, means that apart from inflationary linked upward pressure on salaries for existing Enterprise Agreements when they come up for renewal, there is likely to be an additional push across the country to increase salaries in line with the NSW experience.
Looking next at income in the form of government grants. Increases in Commonwealth Recurrent Grants once upon a time were linked to increases in the Average Government Schools Recurrent Cost (AGSRC). Therefore, an increase in NSW Government School salaries would have flowed through to non government schools in terms of additional funding, which would in turn enable them to deal with increased salaries. This connection was broken a number of years ago and now indexation is linked to CPI and also overall WPI (Wage Price Index) which may not reflect as precisely movements in educational wages. The result being for instance, for 2024, the grants will only increase by 4%, well below the inflation schools are experiencing and a long way below salary increases in NSW!
In addition, many schools are seeing a real reduction in the funding through the action of the Direct Measure of Income (DMI) funding mechanism, whereby a significant number of schools are seeing their funding rates fall in the period to 2029 as they are adjusted to new levels in accordance with the formula.
During the COVID years many schools kept a lid on school fee increases, however, this is now catching up with them with overall high cost increases, however, schools are worried about their ability to increase fees given the broader cost of living pressures on their families and the potential loss of enrolments that may result. In reality, the funding gap that may need to be made up from an increase in fees can be very significant and the % increase of fees needed to generate the necessary $$ can be very high.
The problem is particularly exacerbated in schools with a high proportion of grants compared to fees for their income. The gap coming from higher salaries along with the suppressed increase in grant income cannot be made up for without a major increase in school fees.
At the same time to deal with the student growth, schools are looking at major building projects with higher capital costs and higher interest rates on borrowings than they have had in quite some time……getting the picture?
We are already starting to see school budgets for 2025, especially in NSW, show signs of strain and we are expecting this to also be the case nationally as we head into 2026 and 2027.
At Resolve we encourage Boards, Principals and Business Managers to begin to look closely at these issues now and how they impact on your school. Steps should include utilising or accessing/developing (if you do not already have one) a Long Range Financial Masterplan, better use of Financial KPIs, looking at cost reduction strategies as well as the overall management structures and processes. All of which are aimed to identify and bring about savings.
Resolve would be pleased to assist you as you look more closely at your finances including planning, cost reviews, organisational structure reviews and finance and admin reviews.
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