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Capital funding

Demand

The steady growth in enrolments in Independent schools has placed heavy demands on capital development such as buildings, grounds and equipment in the sector. Enrolments have grown by 26 per cent or nearly 110,000 students in the last ten years, and are projected to grow by another 18 per cent or more than 96,000 students by 2025.

Growth in the sector requires not just the building of new schools, but also the refurbishment or expansion of existing facilities, the replacement of out-of-date materials, and upgrades to equipment to meet changing curricula and expanded courses.

Expenditure

In 2014 capital expenditure in Independent schools was $1.48 billion, or an average of $2,574 per student in the sector. By far the largest component of capital expenditure in Independent schools is for buildings and works. Land, buildings and improvements accounted for 77 per cent of the total expenditure. Expenditure on other items such as furniture and equipment accounted for the remaining 23 per cent.

Main sources of capital income

Parents have traditionally paid for most capital development in Independent schools. On average, school community contributions provide about 86 per cent of capital funding in the sector. In 2014, over $855 million of parental contribution was spent on capital development.

Main sources of capital funding for Independent schools, 2014

Source: Australian Government Department of Education

Parents and school communities make their contribution through school fees, donations to school building funds and fundraising activities. Parents are encouraged to make voluntary payments to school building funds, which are recognised as ‘deductible gift recipients’ for income tax purposes.

The remaining 14 per cent of capital funding in the sector comes from governments, through capital grants programs, state or territory government interest subsidies or loan schemes.

Main sources of capital funding for Independent schools ($m), 2014*

PARENTS AND COMMUNITY
Fees and charges 647
Parental/community donations 208
Sub-total 855
GOVERNMENTS
Australian Government 77
State/Territory governments 59
Sub-total 136
TOTAL 991

Source: Australian Government Department of Education
*Note: Additional funds used for capital purposes are outlined below.

The sector also uses borrowings for capital as well as for some recurrent purposes. In 2014 the net total borrowings of the sector were $3.1 billion which equates to $5,680 per student.

This borrowing has increased steadily over the last decade. On average, debt servicing – which is built into school fees – accounts for about 2 per cent of recurrent expenditure in the Independent school sector. Depreciation and amortisation for buildings and other capital assets for the Independent school sector totalled $760 million in 2014.Typically, such amounts are made available for capital purposes.

Australian Government capital funding

The main component of Australian Government capital funding is the Capital Grants Program which provides capital funding to non-government schools with the aim of improving school facilities, particularly for the most disadvantaged students. Block Grant Authorities (BGA) administer Australian Government capital grants for Independent and Catholic schools on a state and territory basis. In 2014 grants for the Independent sector totalled approximately $134 million.

These grants are distributed in the sector on a needs basis, with priority given to disadvantaged school communities with the least capacity to raise funds. Many long-established Independent schools receive no capital grants from governments. The extent and quality of their facilities reflect instead generations of contributions from families, former students and other donors.

With the introduction of the new Schooling Resource Standard (SRS) funding model for recurrent grants in 2014, the Capital Grants Program will continue under the Australian Education Act 2013.

Between 2009 and 2011, the Australian Government made a substantial investment in capital infrastructure across all schooling sectors through the Building the Education Revolution (BER) program, in particular through the Primary Schools for the 21st Century element (P21) of the program. BER funding had a significant and welcome short-term impact on capital grants provision for Independent schools. The P21 element of the BER funded 1,098 projects in 917 Independent schools for a total of $1.6 billion. The benefits of the BER were increased in the Independent sector as additional funding was contributed to BER projects by Independent school communities. In the Independent sector, the BER initiative leveraged an additional $370 million in private contributions from Independent school communities towards BER projects.

State and territory support

In Queensland some capital grants for Independent schools are provided by the state government. Several state and territory governments also provide interest subsidy arrangements. State and territory grants to Independent schools totalled $59 million in 2014 and interest subsidies to Independent schools totalled $14 million.

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