DRAFT – Confidential not government policy - 2 November 2015

Review of Funding – November 2015 – March 2016

Date Proposed actions Materials

Week 2 November Clinic (4 November) - Agree materials to support sector engagement on the problem (strengths and weaknesses) - Discuss draft back ground reports (Murray Jack and David Moore) and next steps - Discuss timelines and agree next steps

- Draft collateral - ‘Problem definition A3s’ - Draft background reports (Murray Jack and David Moore) - Draft 3 year timeline and short term timeline

Week of 9 Nov Meeting – the Minister and Finance Ministers (date TBC) - Share draft problem definition materials to be used for sector engagement (National Cross Sector Forum and

elsewhere) - Share background work stream findings (Murray Jack & David Moore) - Discuss next steps on Review

- Draft collateral - ‘Problem definition A3s’

- Background work stream findings - Next steps

Week of 16 Nov

National Cross Sector Forum (20 September) - Discuss the problem definition

Share and engage with sector (ongoing)

- ‘Problem definition A3s’

Week of 23 Nov Clinic (TBC) - Discuss feedback from engagement to date

- Discuss key change proposals

- Summary feedback and advice A3

Week of 30 Nov Update Finance Ministers (TBC)

- Summary feedback and advice A3

Week 18 Jan Provide draft Cabinet paper and discussion document

- Draft cabinet paper and discussion document

Week 25 Jan Feedback on draft Cabinet paper and discussion document Update Finance Ministers (TBC)

- Draft cabinet paper and discussion document

Week 1 Feb Feedback on draft Cabinet paper and discussion document - Draft cabinet paper and discussion document

Week 8 Feb Sign-out and lodge Cabinet paper and discussion document - Cabinet paper and discussion document

Week 15 Feb Cabinet Committee - Cabinet paper and discussion document - Cabinet paper and discussion document

Week 22 Feb Cabinet consideration - Cabinet paper and discussion document - Cabinet paper and discussion document

Week 1 March – 8 April

Sector consultation – major change propositions - Discussion document

Deputy Secretary: Andrea Schollmann METIS: 964503 2 November Annex 2

DRAFT REVIEW OF FUNDING SYSTEMS – THE PROBLEM

CONFIDENTIAL – NOT GOVERNMENT POLICY

KEY PROPOSITION: A FUNDING MODEL ALIGNED TO LEARNING AND DEVELOPMENT PROGRESS

The objective is that each child or young person is supported to achieve a year’s worth of learning each year, in line with Te Whāriki, the NZ Curriculum, and Te Marautanga o Aotearoa. A funding model strongly aligning delivery of resources to the different stages of learning and the different needs of children and young people. We need funding models that support innovation and collaboration along learning pathways and between providers, and support improvements in the quality of teaching and learning.

PARTICIPATION AND ACHIEVEMENT LEVELS REMAIN A CHALLENGE

The achievement challenge remains significant. New Zealand has consistently had a big gap between our top performing students and those who are not doing so well. We perform poorly relative to other countries in mitigating the effect of socio-economic disadvantage on educational achievement. Studies also show we have a worrying decline in some key areas when New Zealand students are compared with their overseas counterparts. Some children and young people have risk factors which may impact their educational achievement. Where children and young people have multiple risk factors, these tend to compound the impact on achievement

CURRENT ECE AND SCHOOLING FUNDING SYSTEMS REFLECT CHANGES MADE OVER THE LAST 30 YEARS

Key elements of the ECE funding system:

• Move from a care to an education and care model

• Support for women’s labour market participation

Changes to lift quality and accessibility of ECE through:

• Equity Funding introduced

• Incentives for more qualified and registered staff

• 20 Hours ECE introduced

• Updated regulations

Contributing to equitable outcomes:

• BPS participation target

• Increasing Equity Funding

• Funding for relief teaching included in operational grant

• Progressive implementation of TFEA (decile mechanism)

• Māori Language Programme Funding replaces Māori Factor Funding

• Careers Information Grant

• STAR

• Māori immersion curriculum staffing ratios

• Targeted Funding for Isolation introduced

• Reduction in Maximum Average Class size (small primary/intermediate)

• Base Professional Leadership (primary) and Base Management staffing (secondary)

• Base Curriculum Staffing (secondary)

• Additional Guidance Staffing (secondary)

Additional staffing resource at Year 1

Schools operational grant introduced

• Implementation of unified staffing model (primary and secondary), including curriculum staffing ratios

2010s 1990s

School

ECE

2000s

Deputy Secretary: Andrea Schöllmann METIS: 964503 2 November 2015 Page 1 of 4

Annex 1

DRAFT

Teacher salaries

$3.6 billion

Operational funding

$1.2 billion

Operational Resourcing: State and State Integrated Schools (GST excl., 2014)

INTERNATIONAL COMPARISON

...but is above OECD average across the board once adjusted

for GDP per capita

In equivalent USD converted using PPPs for GDP, based on full-time equivalents. ‘Table B1.1a. Annual expenditure per student by educational institutions for all services (2011)’ in OECD (2014), Education at a Glance 2014: OECD Indicators, OECD Publishing. http://dx.doi.org/10.1787/eag-2014-en. More information on the coverage of statistics can be found in the Reader’s Guide.

$8,084 $8,670

$10,023

$8,296 $9,377

$9,506

$-

$4,000

$8,000

$12,000

Primary Lower Secondary Upper Secondary

Expenditure per student in USD, by PPPs for GDP (2011)

New Zealand

OECD average

Based on full-time equivalents. ‘Table B1.4. Annual expenditure per student by educational institutions for all services, relative to GDP per capita (2011)’ in OECD (2014), Education at a Glance 2014: OECD Indicators, OECD Publishing. http://dx.doi.org/10.1787/eag-2014-en. More information on the coverage of statistics can be found in the Reader’s Guide.

26 28

32

23 26 27

0

10

20

30

40

Primary Lower Secondary Upper Secondary

Relative to GDP per capita

New Zealand

OECD average

KEY FUNDING FACTS

FUNDING

SCHOOL PROPERTY CAPITAL FUNDING (GST excl.)

FUNDING FOR UPGRADES AND MODERNISATION

Five Year Agreement (state sector) $150-200m per annum

Funding for substantial upgrades due to property-related issues (eg. weather tightness, state sector)

Policy 1 funding (state integrated sector)

$200-300m per annum

c. $50m per annum

FUNDING FOR EXPANDED FACILITIES/NEW SCHOOLS

State sector* *Demand driven, subject to tests and annual Budget process

$100-250m per annum

Policy 2 funding* (state integrated sector) *Demand driven, subject to tests and annual Budget process

$0-30m per annum

Unless otherwise stated, all data derived from Education Counts, the Ministry of Education’s data portal: http://www.educationcounts.govt.nz

NZ’s expenditure per student is

roughly equivalent to the OECD average...

...dipping below in primary and lower

secondary...

$6.549 $7.124

$7.532 $7.639 $7.756 $7.989 $8.079

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

Total Vote Education Spend on Schools ($billion, GST excl.)

$0.871 $1.042

$1.193 $1.350 $1.363

$1.446 $1.566

$0.0

$0.4

$0.8

$1.2

$1.6

$2.0

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

Total Vote Education Spend on ECE ($billion, GST excl.)

$7,973

$5,756 $5,743 $4,870 $4,875 $4,858

$5,972 $6,120 $6,867 $6,838

$7,244

$8,514 $8,988

$-

$2,000

$4,000

$6,000

$8,000

$10,000

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13+

Per Student Funding (incl. operational and salaries), by Year Level (GST excl.)

Figures derived from historic spend rates over the last five years, accessed from a range of sources (eg. capital intentions master spreadsheet for state schools).

Placeholder graph – data being finalised by EDK

Deputy Secretary: Andrea Schöllmann METIS: 964503 2 November 2015 Page 2 of 4

CONFIDENTIAL – NOT GOVERNMENT POLICY

DRAFT

But the funding system ...

Could do more to incentivise behaviours from services which encourage early and sustained participation of children at risk of educational disadvantage

• The system does not incentivise services to enrol and retain children from low socio-economic and/or isolated areas, to lift the quality of learner outcomes, or to work with schools to lift system performance.

• Equity Funding is a blunt mechanism. While recent analysis shows that Equity Funding tends to flow to services in highly deprived areas, there is potential for highly deprived children to attend services not receiving Equity Funding. It is estimated that one quarter of at-risk 0-5 year olds are enrolled in services that do not receive Equity Funding.

Has weak accountability associated with it, which may reduce the effectiveness of some funding

• There is poor transparency about the use of some resources (eg. a 2013 ERO report found that the use of Equity Funding was of limited effectiveness in 27% of services and was not effective in a further 12%).

Includes special education resources and expertise that are compartmentalised, fragmented and inflexible

Has rules to support ‘quality of provision’ but these hamper change and collaboration

• The ‘staff hour count’ requirement to qualify for funding for a higher percentage of ECE qualified and registered teaching staff, can impede the provision of non-teaching time for professional development and to explore opportunities for collaboration.

Can be viewed as administratively burdensome

• The current administrative model is heavy on transactional compliance, complex and costly for both providers and government.

The funding system...

Is responsive

• The ECE funding system enables providers to respond to parental demand in terms of the availability and nature of provision.

o Parents, families, and whānau have a variety of choices of ECE service type. This includes teacher-led services (ECE centres and kindergartens), parent- and whānau-led services (kōhanga reo and play centres), and home-based services.

o The system, through parent- and whānau-led services, recognises the importance of parent and whānau training and involvement.

o The ECE sector is dynamic, with over 1,500 licensed services opening and nearly 400 closing since 2007.

o Supports services providing ECE in a range of languages and cultures with varying levels of intensity (including sign language). There are nearly 500 Māori bicultural/immersion services and nearly 100 more in a language and culture other than English and Māori (spanning seven different languages).

Supports labour market participation

• Children’s participation in ECE also supports parents to work, study, and contribute to their community. The 2014 Growing Up in New Zealand report Now We are Two showed that around 75% of parents of two-year-olds accessed ECE so they could participate in study or the workforce.

Enables world-leading quality inputs

• New Zealand ranks among the top three countries in the OECD on key quality measures such as the proportion of qualified teachers and the number of staff to children. Around 95% of teacher-led, centre-based ECE services have at least 80% registered teachers.

• By international standards, New Zealand has high rates of participation, including by at-risk children. The prior ECE participation rate for children starting school in the year to 30 June 2015 was 96.2%. The rates for Māori and Pasifika children were 94.0% and 91.2% respectively, while the prior ECE participation rate for low decile (1-3) schools was 92.5%.

EARLY CHILDHOOD EDUCATION FUNDING SYSTEM The ECE funding system seeks to cover a reasonable share of the cost of education and care for children (a subsidy), allowing resources to move in response to parental demand.

WEAKNESSES STRENGTHS

REVIEW OF FUNDING SYSTEMS – THE PROBLEM

► What do you think of the strengths and weaknesses?

► Do these resonate with you?

► Do you have anything to add or change?

Deputy Secretary: Andrea Schöllmann METIS: 964503 2 November 2015 Page 3 of 4

CONFIDENTIAL – NOT GOVERNMENT POLICY

DRAFT

But the funding system...

Can do more to support students at risk of educational disparity • Resourcing to reduce educational disparity represents less than 3% of schools’ total operational resourcing.

• The decile mechanism does not accurately target resources to students most at risk of educational disadvantage.

• There is limited transparency about the way in which resources are used, and their impact on the achievement of this group.

• The decile approach has created an unhelpful perception of low decile schools.

Can be better at delivering fairness • The overall value of resources provided can be different between schools and students in similar situations, because a proportion of resources is delivered through staffing entitlement.

Can be even more efficient • The distribution of resources across year levels may not be well-aligned with the teaching and learning challenge at each stage of the curriculum; the pastoral needs of students; and the scale, scope and complexity of educational leadership and management at each point of the schooling journey.

• Special education resources and expertise are compartmentalised, fragmented and inflexible.

• The funding model has not accommodated changes in the structure of schooling.

• The way in which some elements of funding are calculated may be inefficient (eg. utilities based on historical data, STAR operating within a funding pool).

Should deliver its resources in a simpler and more predictable way • A range of system features create uncertainty, complexity and compliance costs for schools and administrative costs for the Crown.

Has weak accountability associated with it, which may reduce the effectiveness of some funding

• There is limited transparency about the use of resources and impact on educational outcomes.

• Schools could be better supported to strengthen financial management capability, and to make informed resourcing decisions that deliver good education outcomes for students.

• The requirement for schools to manage property may not be an effective use of the expertise of school leaders and may expose the Crown to unnecessary risk.

Could be more flexible • Delivering resources in the form of staffing entitlement may create unhelpful restrictions to meeting student needs, by limiting the ability of schools to access specialist expertise and by making collaboration and the sharing of resources administratively more complex.

The funding system...

Supports the educational viability of a ‘comprehensive’ network of state schools, as well as supporting choice and diversity

• The funding model recognises the cost disadvantage caused by small size and isolation and therefore supports the educational viability of :

o Schools in low population density areas.

o Schools that provide diversity of provision (eg. Māori medium schools).

Is broadly fair • Schools and students in the same situation are generally resourced in a similar way.

Is largely efficient • The level of resources is generally responsive to changes in the number and level of students in a school, so that resources can shift to schools that need them.

Is transparent • The funding formula and information on the actual value of resourcing provided to individual schools is publicly available.

Supports effective decision-making • The formula approach generally enables schools to be more strategic and plan into the future, although schools need to actively manage uncertainty associated with changing rolls.

• Decisions on how the majority of resources are used are made closest to the needs of children and young people.

Is flexible • Schools have considerable flexibility to use their operational grant funding and staffing entitlement to support educational achievement given the particular needs of their students.

SCHOOL FUNDING SYSTEM The funding systems for state and state integrated schools seeks to provide each school with sufficient resources to meet education expectations for its students and maintain property given the circumstances of the school community, while allowing resources to shift between schools as circumstances change.

WEAKNESSES STRENGTHS

REVIEW OF FUNDING SYSTEMS – THE PROBLEM

► What do you think of the strengths and weaknesses?

► Do these resonate with you?

► Do you have anything to add or change?

Deputy Secretary: Andrea Schöllmann METIS: 964503 2 November 2015 Page 4 of 4

CONFIDENTIAL – NOT GOVERNMENT POLICY