'This is the smoking gun': How the Catholic system is shifting millions in school funding from the poor to the rich

Retail worker Kate McMahon was a single mother when Ashton, now eight, was born. It hasn’t been easy finding the money to send him to the local Catholic school, but she says it’s worth the struggle.

“I grew up in a divorced family, public housing, public school, so I made sure that I worked really hard … to be able to afford to send him somewhere better,” Ms McMahon, 33, said.

Ashton is in Year 2 at St Mary’s Catholic Primary School in Toukley, on the Central Coast. This year, the family will pay roughly $3,400 in school fees — an amount Ms McMahon has never thought to question.

Skip ahead to see what the data reveals about your Catholic primary school

Leaked documents seen by the ABC suggest hundreds of NSW Catholic schools are missing out under a scheme that will have diverted more than $300 million in public funding from the system’s poorer to richer primary schools by 2023.

Administered by Catholic school authorities and approved by the state’s bishops, the scheme aims to keep fees low for families in wealthy parts of Sydney, according to the documents.

It comes at a hefty cost for low- and middle-income families in the system, who are asked to pay much higher fees to make up the shortfall.

Ms McMahon is paying triple the amount parents at St Mary’s are expected to be able to afford, according to the Australian Education Act. The AEA assesses “capacity to contribute” (CtC) based on tax information about the median income of parents at a school.

“I … feel a bit ripped off now,” she said. “That money could have gone elsewhere.”

State and federal government funding for Catholic system schools in NSW — amounting to $2.8 billion in 2020 — is calculated based on individual schools but delivered as a lump sum payment to Catholic Schools NSW (CSNSW), the sector’s administrative body for school funding.

CSNSW uses its own “needs-based” model to distribute the funding to each of the state’s 11 dioceses, which, in turn, use their own “needs-based” models to allocate the funds to individual schools.

The details of these distributions have long been kept secret, despite the Education Act requiring system distribution models to be “transparent and publicly available”.

‘The smoking gun’

The documents uncover for the first time the calculations used by CSNSW and its predecessor, the Catholic Education Commission of NSW (CECNSW), to distribute government funding among the state’s 420 or so Catholic primary schools.

Containing data stretching back to 2015, they include internal analyses and proposals, presentations, emails and working papers prepared by CSNSW or CECNSW for the 11 bishops of NSW and senior staff at diocesan education offices.

Some documents have been labelled “Confidential”, “Commercial-in-confidence” or “Confidential draft” and include comments from Catholic schools office staff.

Adrian Piccoli, director of the University of NSW’s Gonski Institute for Education, described the documents as “explosive”.

“This is the smoking gun [showing] how the Catholic system has hoodwinked governments for years,” said Professor Piccoli, who was also the NSW education minister from 2011 to 2017.

“You just think: ‘Why do they even write this down?’ … I’m gobsmacked.”

CSNSW CEO Dallas McInerney defended the model, saying the the amount redistributed was “a tiny fraction” of the total pool.

“The aim is to make the low fee offering as ubiquitous as we possibly can right across NSW,” he said.

However, the documents suggest the transfer of government funds from lower-SES to higher-SES schools has been the basis of the Catholic system’s distribution model for primary schools since at least 2015.

From 2020, the socio-economic status (SES) of a school is based on the median income of parents and determines their capacity to contribute.

According to a draft proposal, CSNSW’s 2020-23 distribution model gives three times more government funding to the system’s highest-SES primary schools than they are entitled to under the Australian Education Act (AEA).

Mr McInerney confirmed that this accurately describes the current model.

The extra money comes from the government funding intended for low- and middle-SES schools, which are mostly in outer Sydney or regional and rural NSW.

This allows schools in some of the state’s wealthiest areas to collect roughly one-third to half of the fees parents at the school are estimated to be able to afford, the documents suggest.

Meanwhile, school fees in much poorer areas are set up to two or three times above those parents’ “capacity to contribute” under the Australian Education Act.

A regional-metro divide

The dioceses benefiting most from this model are Sydney and Broken Bay. (Broken Bay diocese encompasses Sydney’s Northern Beaches and North Shore, as well as the Central Coast.)

They gain at the expense of regional and rural dioceses, including Armidale, Wagga Wagga, Wilcannia-Forbes and Bathurst.

Piecing together data from the documents, the ABC estimates that between 2015 and 2023, Catholic school authorities will have diverted some $309 million in government funding from poor and middle-income dioceses to the state’s wealthiest dioceses.

“The people who should be really angry about this are the parents who send their kids to low-SES Catholic schools, particularly in regional New South Wales,” Professor Piccoli said.

“The money their kids are attracting to the system is actually being siphoned off to go to wealthier schools, to keep the fees down for people who live in [the wealthier suburbs of] Gordon and Killara.”

Mr McInerney initially told the ABC the redistribution was “inside Sydney metropolitan schools, so it’s not … a rural to metro redistribution at all.”

However, he later said that $21 million would be transferred to the Sydney and Broken Bay dioceses in 2020: $15 million from the “non-rural” dioceses of Parramatta, Wollongong, Maitland-Newcastle and Lismore, and $6 million from the remaining five “rural” dioceses.

“What we’re talking about is about half of 1 per cent redistribution from a pool of almost $3 billion,” Mr McInerney said, adding that the most government funding any one diocese would lose in 2020 was 1.2 per cent.

The ABC supplied CSNSW with a detailed spreadsheet of figures compiled from the documents.

Mr McInerney said CSNSW estimated the redistribution over the nine years to 2023 was “closer to $200 million” and confirmed the annual amounts redistributed from 2018-23.

However, he declined to share further figures with the ABC.

CSNSW is not contravening any laws. Both CSNSW and the dioceses are permitted to redistribute government funding, providing the distribution is needs-based, has loadings for disadvantage, and is “publicly available and transparent”. (More on this later.)

However, experts say the documents reveal CSNSW’s intention to subvert the aim of public policy.

“[These documents] provide clear evidence that NSW Catholic funding distribution is designed to avoid the goal of public policy: that parents who choose non-government schools should pay in line with their income,” education policy consultant Peter Goss said.

And the problem may go well beyond NSW, data shows.

Separate figures compiled by the ABC from the My School website reveal parent contributions at high-SES schools in other states and territories are even lower, on average, than in NSW.

“State-level patterns show CSNSW is not the only system subsidising high-SES primary schools,” Dr Goss said.

“Queensland and NSW have the most obvious cross-subsidy but fees in the ACT and Victoria are also higher than you would expect for low-SES schools, and lower than you would expect for high-SES schools.”

This desire to keep primary school fees low in metropolitan areas betrays “the deep fear … parents will walk” if Catholic schools raise fees in line with incomes, Dr Goss said.

It’s a high stakes pursuit for the Catholic Church. Historically, schools have played an important role in extending and consolidating its reach.

‘This reflects the Bishops’ clear preference’

Dozens of less advantaged primary schools in the Catholic system charge either the same or higher fees than more advantaged schools, My School data shows.

For example, based on its CtC score of 119, St Columba’s in Leichhardt North, in Sydney’s inner west, should be collecting about $6,870 in fees and other parent contributions, according to the Education Act.

In 2020, it will collect an estimated $3,210 per student, analysis based on My School data suggests.

An invoice seen by the ABC shows this year Ms McMahon paid $3,411 to send Ashton to St Mary’s in Toukley, which has a CtC score more than 30 points lower than St Columba’s.

St Mary’s should be collecting roughly $1,175 in fees and other parent contributions, according to the AEA.

The highest parent contribution collected by any Catholic primary school in NSW is St Thomas in Willoughby, according to analysis of My School data. It collects an estimated $5,740 per student — some $3,650 below the amount set out in the AEA.

Both the bishops and Catholic school authorities are well aware of this outcome, the documents suggest.

CSNSW’s distribution models are endorsed by the 11-member Catholic bishops who own CSNSW Ltd. Each bishop presides over a diocese and endorses the model that the diocese uses to distribute government funding to its schools.

According to the 2020-23 paper, the proposed model fulfils the bishops’ intentions:

Mr McInerney confirmed these details were “broadly” an accurate description of the current model.

Another document analysing the Catholic system’s 2015 and 2017 distribution models, labelled “Confidential”, describes how high-SES schools benefit at the expense of low-SES schools:

A comment on the same document suggests that the CECNSW’s own data contradicts the arguments it is making to the public:

This slide from a presentation about the proposed 2019 distribution model illustrates how much funding regional and rural dioceses would surrender to Sydney and Broken Bay under that model:

A 2017 CECNSW analysis explains the risk involved in raising primary school fees in the Sydney and Broken Bay dioceses. It then points out how the lack of resources in rural and regional dioceses has impacted students:

“They’re cross-subsidising wealthier schools from money that’s meant to go to poorer schools … and what they’re saying here is: ‘This is what the bishops wanted,'” Professor Piccoli said.

“To me, this is the internal memo from [cigarette company] Philip Morris saying: ‘Hey, look, we know smoking causes cancer, but we just won’t tell anybody.'”

Brian Croke, who served as executive director of Catholic Education Commission NSW for 24 years, said the inconsistencies between the government needs-based allocations and the Catholic system’s distribution formula became “more obvious” as time wore on.

Dr Croke retired at the end of 2017, when CSNSW replaced CECNSW.

“Everybody was aware of it but … the final buck stopped with the bishops and the bishops were reluctant to change the basis [of the funding formula],” he said.

The “crunch point” came in 2014, when the Education Act made it “not just a pity, but unlawful not to allocate your grants strictly according to a needs-based formula”, he said.

“[But] nobody likes giving up money, do they?”

Millions diverted from poor to rich

CSNSW figures confirm the amount of funding being transferred each year from 2020-23 will rise with inflation, arresting the downward trend of the previous four years.

This was “one of the most disappointing” revelations in the documents, Dr Goss said.

“Cross-subsidies … are now effectively frozen in time, with the scales tilted permanently towards the more advantaged schools.”

Mr McInerney said the government model implied fees of up to $9,500 in some Catholic primary schools.

“That’s clearly out of the reach of many families,” he said.

However, an ABC analysis based on Commonwealth data shows this applies only to eight of the roughly 420 Catholic system primary schools in NSW.

The median incomes of parents at these schools are among the highest in NSW.

Data compiled from the documents suggest that in the nine years from 2015 to 2023, the poorer dioceses will have lost between $2,360 per student (Wollongong) and $7,840 per student (Wilcannia-Forbes), on average.

Compared to the other dioceses, Wilcannia Forbes has the highest share of students who are Indigenous, low SES or have a disability.

Meanwhile, the richer dioceses will have gained between $2,120 per student (Sydney) and $9,030 per student (Broken Bay) more than they are entitled to under the AEA.

These amounts are “comparable to the increases that NSW government schools got over an entire decade”, Dr Goss said.

After initially saying that loadings for disadvantage — such as disability, Indigenous background and low proficiency in English — were “passed on in full” to the dioceses, Mr McInerney later clarified the 2020-23 redistribution affected both base funding and loadings, as outlined in the draft proposal.

Dr Goss described the scheme as “outrageous”.

“It’s bad enough to cross-subsidise schools where parents can afford to pay more. But now it seems that Catholic Schools NSW wants to skim off part of the loadings,” he said.

“This makes a mockery of the freedom that the law gives them to redistribute the government funding they get.”

The ‘trickle up’ effect

The ABC has analysed My School data to assess the impact of the proposed 2020-23 model on nearly every primary school in the Catholic system.

This is how the model appears to work.

Here is the primary school “capacity to contribute” (CtC) curve set out in the Australian Education Act.

This is what the Government uses to determine the base amount of public funding each non-government primary school should receive.

The Government contributes the percentage above the line; parents are expected to contribute the percentage below the line.

The higher the income of parents at the school, the more they are expected to contribute and the less public funds allocated.

This is how Catholic Schools NSW has re-drawn the curve, according to the draft proposal.

The key difference is the funding allocated to high-SES schools, with schools at an SES of 125 or higher reaping the biggest benefit.

At the most advantaged schools, public funds are meant to cover only 20 per cent of the standard cost of education.

But the CSNSW model allocates public funds to these schools at 60 to 62.5 per cent — three times as much as intended.

Here’s how it plays out for individual schools.

This chart compares the two CtC curves against the estimated fees and other contributions parents paid in 2020.

It is based on charts in the leaked documents. The ABC has used My School data to estimate 2020 figures, so fee amounts are approximate.

It suggests that in 2020, roughly 90 schools are collecting fees and other contributions far below the intended capacity to contribute.

The vast majority are high-SES schools where families have the highest capacity to contribute.

At the opposite end of the scale, about 280 schools — the vast majority low-SES — are collecting amounts far above parents’ capacity to contribute.

Dozens of low- and middle-SES schools are charging parents the same amount or more than their high-SES counterparts.

For example, Fr John Therry, in Sydney’s inner west, is one of the most advantaged schools in the state.

But the data suggests it collects just one third of the amount families are expected to contribute.

This would make Fr John Therry roughly the same or cheaper than at least 30 much less advantaged schools, including St Martha’s in Strathfield, St Kevin’s in Dee Why and St Therese’s in Denistone.

All three have SES scores at least 25 points lower.

Similarly, St Bernadette’s in Castle Hill collects just over half of the intended capacity to contribute, the data suggests …

… which makes it the same price or cheaper than at least 100 much less advantaged schools.

These include St John the Baptist in Woy Woy, St Felix in Bankstown and St Mary’s in Bellingen, which all have SES scores at least 17 points lower.

The schools reaping the biggest benefit are the state’s most advantaged schools.

They belong exclusively to two dioceses: Sydney and Broken Bay.

But My School data suggests the gains aren’t being shared with the poorer schools in these dioceses.

Most of these schools are charging parents well above what they’re estimated to be able to afford.

The situation is worse in regional dioceses such as Lismore, Bathurst and Canberra-Goulburn.

In these dioceses, nearly every school is charging families far above their estimated capacity to contribute, the data suggests.

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The battle for enrolments

Taxpayer dollars cover about 80 per cent of the cost of educating a child in the Catholic school system.

The ability to channel those funds to its more advantaged primary schools is key to the system’s long-running strategy of promoting itself as the “low-fee alternative”, experts say.

Education expert Lyndsay Connors, who has held senior education positions at Commonwealth and state levels, said the focus on fees “may well reflect concern that the recent decline in student numbers and enrolment share in their primary schools — especially in more affluent areas — will jeopardise the future of the sector.”

The Catholic sector’s share of full-time equivalent primary school enrolments fell to 17.9 per cent in 2019, from a peak of 19.4 per cent in 2012.

That decline would be far greater were it not for the sector’s growing number of non-Catholic students. In 2018, non-Catholics made up nearly 30 per cent of students in Catholic system schools, compared with 20 per cent in 2008, according to the latest CSNSW annual report.

Fear that parents would abandon Catholic schools if fees were raised is more acute in well-off metropolitan areas because those parents have the greatest choice of high-achieving and well-funded government schools, education policy expert Peter Goss said.

But there is potentially more at stake than the future of the sector.

Historically, Catholic schools have played an important role in boosting congregation numbers and reinforcing the Church’s place in the community.

Primary school enrolments often feed into secondary school enrolments, Dr Goss points out. If some Catholic primary schools are forced to double or even triple their fees and lose enrolments, this may start to put pressure on Catholic secondary schools.

“Does all of this compound and lead to an overall decrease in enrolments in Catholic schools?” he said.

“And if so, what are the longer-term implications for the Catholic Church in Australia?”

Mounting calls for change

The revelations come amid escalating disquiet over lack of transparency in the way Catholic school authorities distribute public funding.

In July, a National School Resourcing Board report became the fifth in five years to call for greater transparency of school funding arrangements. The Federal Government has backed all 10 of the recommendations.

Mr McInerney said the Catholic sector supported transparency as one of the principles of needs-based funding.

“The [CSNSW] model is compliant with the requirements of the Act. Our model is up on our website as per the requirements.”

However, the document available on the CSNSW website, titled “The needs-based funding arrangement for the NSW Catholic schools system” says only that the model “limits” the CtC amounts for higher-SES primary schools but does not specify by how much.

“I would argue that [the document] is not transparent,” Dr Goss said.

“It says [their model] uses different values but doesn’t give you their values or their formula or any way of gauging how much they are subsidising parents in advantaged schools compared to the national formula.”

About 80 per cent of government funding to non-government schools comes from the Federal Government.

A Department of Education, Skills and Employment spokesperson said: “The … [Education Act] recognises that schools and school systems are best placed to understand the individual needs of students and budget accordingly.”

Credits

Notes about this story

• Estimated parent contributions are based on My School figures for school income earned from fees, charges and other parent contributions. Actual amounts may differ. Fees make up the bulk of parent contributions.
• Breakdowns of the amounts diverted to or from each diocese are compiled from the documents and are based on illustrative figures and forecasts at the time.
• The total amounts redistributed in 2018-23 are based on CSNSW forecasts. Amounts for 2015-17 are compiled from the documents.
• My School data was compiled from the My School website by the ABC. It was not supplied by the Australian Curriculum, Assessment and Reporting Authority, which runs the My School website.
• My School finance data provides comparable income and expenditure data across individual schools. Detailed information about the methodology and limitations can be found on the My School website, under “Technical and statistical information”.