Education Amendment (Financial Assistance to Non-Government Schools) Bill 2006
Reverend the Hon. Dr GORDON MOYES: I speak on behalf of the Christian Democratic Party on the Education Amendment (Financial Assistance to Non-Government Schools) Bill. The object of this bill is to amend the Education Act 1990 to prohibit non-government schools that operate for profit from receiving financial assistance from the State Government. Companies are generally fuelled by one motive—to make a profit for shareholders. In fulfilling this mandate, it is inevitable that those in charge will seek to maximise income and minimise costs. If the bottom line becomes the guiding philosophy of an entity, sacrifices will be made to ensure that shareholders are happy and the business remains not only afloat but also productive.
However, an element of risk is attached to applying this philosophy to the provision of educational services. Although companies and their directors may pledge to serve the best interests of students, it may be said that a company will not set aside its profit motive to uphold the interests of students at all costs. An apparent conflict of interest exists. Due to this conflict of interest it is clear that the Government, in assessing the allocation of taxpayers’ funds to government and non-government schools, should restrict these funds to not-for-profit entities. It is only right that profit-driven entities should not be entitled to government funding to assist their operations. Economic stewardship of taxpayers’ funds demands that any risk of funds being distributed to private individuals for inappropriate purposes is eliminated. This bill eliminates that risk. However, importantly, it does not prevent the accreditation and operation of for-profit schools in New South Wales. Not-for-profit non-government schools will not be affected by this proposed legislation.
The prospect of profit-making schools in Australia is not novel, neither is it a new. In my work entitled The Makers of Australia, in chapter 8, which is headed “The Educators”, I trace how many of the first schools in Australia were private, for-profit, institutes, colleges and grammar schools. The Age reported that the founder of ABC Learning Centres has considered establishing a for-profit primary school in Victoria. He had also applied for accreditation for such a school in Queensland. Such moves have met with opposition to varying degrees in these States. In Victoria, Education Minister Lynne Kosky indicated that the Victorian law would be changed to prevent for-profit schools from registering. In Queensland, legislation was introduced last year preventing private companies receiving taxpayer funding if they intended to make a profit from running schools. Federal laws already prevent Commonwealth funds being used to support for-profit schools.
There are some salient distinguishing factors between the enacted legislation in Queensland, the proposed legislation in Victoria and the legislation we are considering today. First, the Victorian Government is looking to prohibit the registration of for-profit schools in that State. Under legislation in Queensland and this legislation for-profit schools will still be able to exist and be run. Secondly, in Queensland, the Education (Accreditation of Non-State Schools) and Other Legislation Amendment Bill 2005 appears to be more restrictive in nature, disallowing any arrangement deemed prohibitive under its terms. Under the legislation, a “prohibitive arrangement” is an arrangement or contract entered into between parties not dealing with each other at arm’s length. The definition of “prohibitive arrangement” is further qualified to ensure that the mere fact that a non-profit entity, such as a religious institute, has the power to appoint and remove directors of a governing body does not of itself mean that an arrangement between the school and the non-profit entity is a prohibited arrangement.
This bill does not legislate to that extent. In essence, it provides that financial assistance under the Education Act may not be paid to or for the benefit of a non-government school that operates for profit. The Association of Independent Schools Queensland remained opposed to the proposed legislation in that State. However, one clear and unifying factor in the intention of the legislation introduced in Queensland, Victoria and New South Wales is that government funding should not go to the governing body of a non-state school if the school is being used as a vehicle for making and distributing profits to shareholders. In this we are all agreed.
In considering the merits of this bill it should be noted that the Association of Independent Schools in New South Wales supports this legislation. My office contacted the association, which is the peak representative organisation for non-government schools in this State, to adduce its position on the bill. In its initial dialogue with the Minister for Education and Training, the association expressed some concerns about the bill. One concern is that any school with an appropriate business-financial relationship with a for-profit company must be allowed to continue to conduct that business without undue interference. In the association’s view, where a relationship involves purchasing goods or services at market rates, whether it be from an exclusive or non-exclusive supplier, the relationship should be allowed to continue unhindered. This stance is merit worthy, given that appropriate commercial transactions between schools and other entities are without harm.
The Catholic Education Commission was also consulted in the process of the drafting of the bill. In one of its reports the commission indicated that “it does not see problems for Catholic schools but school owners will need to ensure that they are compliant with the provisions of the legislation when it is passed and comes into force”. The bill inserts new section 21A, which provides that State financial assistance may not be paid to schools that operate for profit, defining what is meant by “for profit”. A school will not be eligible for government funding if a proprietor’s assets or income, as they relate to the school, are paid to any other person.
However, some necessary exceptions are made to this definition. The payment of honoraria is not to be regarded as the payment of income to a person; a school can still treat commercially with other entities, but only as long as its transactions are at no more than reasonable market value; and schools can continue to deal commercially with organisations that are related but are not for profit. All these exceptions are well grounded. An example of the latter exception would be Catholic schools, which obtain services such as professional development from the Catholic Education Commission. Importantly, under proposed section 21 (4), the Minister is endowed with the power to call in information if he or she is of the opinion that a school may be operating for profit. It is relevant to turn to the Minister’s second reading speech in this regard. She said:
I want to put on the record that the intention of this subsection is to delineate the discretion of the Minister to investigate when specific concerns come to light about a school. It is not intended to provide a licence for general fishing expeditions.
This proposal is important because it will allow the Minister, if he or she thinks it necessary, to monitor whether a school is operating for profit and thus becomes exempt from government funding. It is a discretion requiring wisdom in its use and application. For schools currently registered under the legislation the bill will take effect from 1 January 2007, and for new schools it will take effect at the time of registration. The Christian Democratic Party, being committed to the education of students in the State, in both private and State schools, commends the bill to the House.