As Australian students begin the final term of 2024, governments are in the middle of a bitter standoff over public school funding for next year.

The federal government has offered states and territories a 2.5% funding increase for schools to the tune of A$16 billion, but some are demanding 5%.

The deadline for states and territories to sign the proposed new school funding agreement ended on September 30, leaving the future of Australian school funding beyond 2025 in limbo.

On top of ongoing funding uncertainty, there are also significant issues with how the proposed new agreement is designed. How can we fix this?

How does school funding work?

Federal, state and territory governments each contribute to public school funding.

The federal government currently contributes 20% of the schooling resource standard. This is the estimate of how much public funding a school needs to meet students’ educational needs.

The Commonwealth ties this funding to reforms and targets aimed at improving equity and learning outcomes for students. The remaining 80% is up to states and territories to fund.

The current agreement expires at the end of this year and the Albanese government is proposing to replace it with the ten-year Better and Fairer Schools Agreement from the start of 2025.

The new agreement provides some important opportunities to improve schools and student outcomes, including measures to enhance student wellbeing, increase attendance, strengthen the teacher workforce, and increase the proportion of students who leave school with a Year 12 certificate.

Painfully slow progress

The current round of funding negotiations has been plagued by sour politics and persistent roadblocks.

The new national agreement was originally due to begin in 2024, but was delayed after a damning December 2022 Productivity Commission review. This found the current agreement had “done little” to lift student outcomes.

The federal government then commissioned an expert review panel (of which one of us, Pasi Sahlberg, was a member) to inform a new agreement. This year, we have seen negotiations with states and territories over funding and details of the Better and Fairer Schools Agreement were released in July.

But progress has been painfully slow. While Tasmania, Western Australia and the Northern Territory have signed on, other states and territories are holding out.

In August, federal Education Minister Jason Clare issued an ultimatum: sign the agreement by September 30 or forgo the 2.5% funding increase. The federal government has since downplayed the missed deadline while critics suggest it was always an “arbitrary” ultimatum.

Ambiguous equity targets

The political theatre and inability to find consensus raises major concerns about how effective the national reform agenda can be.

A closer look at the targets also raises questions about how they might work in practice.

For example, the new agreement is supposed to have equity at its core (it claims to be “better and fairer”) but it lacks a clear definition of equity. It also lacks specific equity targets to narrow achievement gaps between students from low and high socioeconomic backgrounds.

The new agreement has “learning equity targets”. This includes measures to reduce the proportion of students in the “needs additional support” NAPLAN category for reading and numeracy by 10% and increase those in the “strong” and “exceeding” categories by 10% by 2030.

The only specific target for disadvantaged students is there is a “trend upwards” of the proportion in higher NAPLAN proficiency levels.

Past experience suggests schools will likely “triage” students to reach these targets. This means they will focus more on students who are just below or above the target levels, and less on those unlikely to make the mark. This is what happened when similar targets were set in Ontario in the 2000s.

So, even if overall average NAPLAN scores improve, achievement gaps (between advantaged and disadvantaged students) could grow. This will not improve equity – it will do the opposite.

Toothless targets

There are also no mechanisms to hold states and territories accountable for meeting targets until schools are “fully funded” under the agreement.

Fully funded means states and territories are receiving 100% of the schooling resource standard. To make matters worse, even when jurisdictions are fully funded, there are no penalties or sanctions for failing to cooperate with the agreement.

Timelines to reach full funding in the bilateral agreements already signed are years away. For example, it is 2026 for Western Australia and 2029 for the Northern Territory.

This means states and territories can choose whether they meet the targets or not.

3 ways to fix school funding

Failure to fully and fairly fund schools, mixed with an inability to set meaningful targets, creates deep uncertainty for schooling systems as a new year approaches.

For example, last week the Australian Education Union placed a nationwide ban on the implementation of the new agreement, including “unfunded” reforms that would increase teachers’ workloads.

This is not a sustainable situation. So, how can we fix it?

1. Set meaningful targets: it is not enough to have ambiguous goals for improvement that might improve test scores for some but also worsen inequities. At a minimum, we need to rethink targets to ensure they narrow achievement gaps between equity groups. Without this, education systems will continue to fail those who need the most support.

2. Ensure accountability for the targets: we need to make sure states and territories cannot escape or delay their obligations to improve equity and learning outcomes. To do this, schools should be fully funded from 2025, so current (not future) education ministers are compelled to act.

3. Distance the politics from school funding: schools need stability and consistency to plan effectively. The Better and Fairer Schools Agreement has a helpful ten-year term but reforms are needed to ensure funding decisions remain fair and consistent across the nation. Instead of messy and protracted political negotiations between governments, we could instead set up a national agency to oversee the distribution of school funding.

These measures would help avoid political interference and ensure funding is allocated in line with student needs, national reform priorities and agreed targets.

It’s time to address the deeper issues

The ongoing failure to fairly resource and set meaningful reforms for our schools is a symptom of a broken national funding system.

Unless we address its foundational issues, Australian teachers and students — particularly those in disadvantaged schools — will continue to be short-changed.

Glenn C. Savage receives funding from the Australian Research Council.

Pasi Sahlberg was a member of the Australian Government's Expert Panel to inform a better and fairer education system in 2023.

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