The Regulatory Framework for the New Zealand School Sector A Description.DOC

This is true in terms ofboth the provision and funding of school-level education:  the vast majority of schools are State-owned;  State-owned schools make up the lion’s share of school

The Regulatory Framework for the New Zealand School Sector:

A Description

Norman LaRocqueConsultantThe World Bank

1818 H Street, NWRoom G8-038Washington, DC20433Email:

nlarocque@worldbank.orgCanadaFirst@xtra.co.nz

November 1999

1 This report provides a brief description of the schools sector in New Zealand The report isstructured as follows:

 Section 1 presents an overview of the New Zealand schools sector, with particular emphasis

on the private school sector; and

 Section 2 then describes the key elements of the regulatory framework for New Zealand

schools as at November 1999 In doing so, it highlights some of the key developments

in the schools sector since the initial Tomorrow’s Schools reforms were introduced in

October 1989

2 The discussion in Section 2 looks at a number of aspects of the regulatory framework forschools This includes the rules that govern the establishment, governance and funding ofschools, industrial relations policies, the rules that guide the day to day operation of schools andthe powers that the Minister and Ministry of Education have to intervene in failing schools

Section 1: School Sector Overview

3 The New Zealand schools sector is predominantly “public” in nature This is true in terms ofboth the provision and funding of school-level education:

 the vast majority of schools are State-owned;

 State-owned schools make up the lion’s share

of school enrolments; and

 the State funds virtually all of the operating

costs of State and State Integrated schools

and a smaller, but still significant, share of

the operating costs of private schools

4 Public schooling is free until age 19 Children

must attend school from the time they turn six until

the time they turn sixteen Exemptions are

available for students up to age seven, for students

who are home schooled and for some students who

have reached the age of fifteen In practice, most

children start school on their fifth birthday

5 As at 1 July 1998, there were nearly 725,000

students enrolled at schools in New Zealand This

was some 60,000 more than at the same point in

1992 Growing rolls in aggregate has been a key feature of the New Zealand education scenesince the early 1990s However, this increase has not been felt evenly across schools or acrossregions of the country Areas such as Auckland have seen significant roll growth, while areassuch as Southland and the West Coast of the South Island have seen roll declines

Tomorrow’s Schools reforms.

 Government policy during the1990s favoured devolution ofresponsibility and increasedtargeting of spending

 The regulatory framework differsdepending on whether the school

is private, state or integrated

6 The increase in the number of school-age students reflects an increased number of birthsand higher inward migration The number of school-age students is expected to continuegrowing over the medium-term – with primary and secondary student numbers peaking in 2002and 2007 respectively

7 As shown in Figure 1, 87 percent of students attended State schools, while 10 percentattended State integrated schools and only 3 percent attended private schools The share ofenrolments in private schools is low by international standards (e.g., Australia, the United State

of America, the Netherlands)

9 Since Tomorrow’s Schools, there has been some increase in the diversity of the state

school sector in New Zealand This has been due principally to an increase in the number ofdenominational and non-denominational integrated schools and the establishment ofKura Kaupapa Maori (state schools in which the Maori language, culture and valuespredominate)

10 Europeans make up nearly 2/3 of the student population, with Maori, Pacific Peoplesand Asians making up 20 percent, 7 percent and 6 percent respectively The Maori share hasremained constant in recent years, but the Pacific Peoples and Asian shares have beenincreasing at significantly more than the overall growth in the sector

Section 2: The Regulatory Framework for Schools

11 The regulatory framework that governs schools is a function of whether it is a state school,

an integrated school or a private school This section outlines the structure of education in NewZealand, discusses the various elements of the regulatory framework and highlights how thesediffer across different types of school The attached Annex summarises the key differences.There are three major types of schools in New Zealand These are:

Share of Enrolments in 1998: State, Integrated and Private Schools

87%

10% 3%

State State Integrated Private

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 State schools These are owned state-owned schools that receive “full” state subsidies and

are extensively regulated by the state;

 Integrated schools These are privately-owned schools that have “integrated” into the state

system They receive state operating subsidies at about the same level as State

schools and are subject to many of the same regulations that apply to State schools; and

 Private or ‘independent’ schools These privately-owned schools They receive lower

government funding and are subject to fewer regulations

Table 1 The Structure of Education in New Zealand

Parliament Makes the law, provides the money and expects accountability Minister of Education

 Sets the policy direction

Minister Responsible for the Education Review

New Zealand Qualifications Authority

 Administers qualificationsand providesassurances about qualificationsquality, overseas theexamination system, and develops theNational Qualification

s Framework

Teachers Registration Board

 Registers teachers

Education Review Office

 Evaluates schools and reports publicly

Schools and their Boards of Trustees Parents and School Communities

Source: Ministry of Education

Regulatory Infrastructure

12 The schools sector is governed by a myriad of:

 sector specific and general Acts of Parliament (e.g., the Education Act 1964 and 1989, the

Private Schools Conditional Integration Act (PCSIA) 1975, the State Sector Act 1988,the Public Finance Act 1989);

 Orders-in-Council or regulations (e.g., the Education Staffing Orders, Education Bursaries

Regulations);

 contracts (e.g., the Primary and Secondary Teacher Collective Contracts); and

 government policies promulgated by the various state education agencies (e.g., school

funding levels, suspension guidelines)

13 These rules operate as an attempt to influence behaviour on both sides of the educationmarket – the supply side (i.e., schools) and demand side (i.e., parents and students)

14 The bulk of the legislative rules are included in the Education Act 1989 However, theother pieces of legislation outlined above also play a significant role in some key areas Forexample:

 the PCSIA governs the rules around integration of private schools into the state system; and

 the State Sector Act has a key role in governing the important area of industrial relations

15 A number of regulations and policy rules govern significant parts of the education sector.For example, the financing of schools is set by Government policy, while much of the industrialrelations environment is set out in the centrally negotiated Collective Employment Contract forteachers

16 The use of specific legislation to govern the sector contrasts with the situation in manyother sectors of the economy, which are governed by general legislation that applies across anumber of sectors (e.g., the Companies Act, the Commerce Act, etc) In that sense, thelegislation is vertical rather than horizontal – that is, it operates within an industry, rather thanacross a number of industries

17 Another characteristic of the legislation is that it sets out in significant detail the rulesgoverning the sector This is true in a number of areas including hours of operation and schoolgovernance For example, the make-up of a school governing body is set out in much detail inthe Education Act 1989 In contrast, the Companies Act provides only general guidance onwhat the make-up of a corporate governing body should be

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18 The key education agencies and their responsibilities are set out in Table 1 anddescribed briefly below:

 Ministry of Education Government department with oversight of the education system in

New Zealand Its key roles are to provide policy advice to the Minister of Education,implement policies agreed by the Government, develop curriculum statements, allocateresources to students and providers and monitor effectiveness

 Education Review Office (ERO) Government department which reviews and reports

publicly on the quality of education in all schools and early childhood centres

 New Zealand Qualifications Authority (NZQA) Crown entity which administers qualifications

and provides assurances about qualifications, oversees the examinations system anddevelops the National Qualifications Framework

 Skill New Zealand (formerly the Education and Training Support Agency) Crown entity that

oversees a range of initiatives designed to build a highly skilled and adaptableworkforce

 Specialist Education Services (SES) Provides specialist services to students who have

complex learning, communication and behaviour needs, and to their families, earlychildhood services and schools

 Early Childhood Development (ECD) Crown entity responsible for promotion and

development of quality, accessible and culturally appropriate early childhood education

in New Zealand

 Career Services rapuara Crown entity that provides career planning and information The

Service works with schools to help them meet their obligation to provide career planningprogrammes for students It also delivers career information and planning services

Entry of Schools

19 The rules surrounding the entry of schools into the education market differ across state,integrated and private schools The rules regarding state and private schools are set out in theEducation Act 1989, while those applying to integrated schools are set out in the PrivateSchools Conditional Integration Act (PSCIA)

State Schools

20 State schools can be established through one of three avenues:

 Standard State schools These are schools established by the Minister of Education under

s 146 of the Education Act 1989 Schools established under this section of theEducation Act 1989 must be either a primary, a secondary, an intermediate or acomposite school Schools are generally established by the Minister under s 146 toaccommodate roll growth Over 90 percent of the 2,774 schools in New Zealand would

be classified as ordinary state schools During 1998, six new ones were opened;

 Kura Kaupapa Maori These are state schools, established under s 155 of the Education

Act 1989, in which the Maori language, culture and values predominate They must havethe support of the parents of at least 21 children to be established Kura must adhere tothe Te Aho Matua philosophy (since early 1999) The Minister of Education hasabsolute discretion to refuse to establish a Kura At the beginning of 1998, there were

59 Kura; and

 Designated character schools These are schools established under s 156 of the Education

Act 1989 Again, each proposed school must have the support of the parents of 21children to be established The Minister of Education has absolute discretion to refuse

to establish a school under s 156 In the ten years since 1989, no s 156 schools havebeen established There are currently a number of groups considering applications for s

156 schools

21 Guidelines are currently being prepared to govern the establishment of s 155 and s 156schools The Secretary for Education can limit the roll size of any school – either explicitly or bylimiting the amount of property provided to a school

State School Reorganisations and Closures

22 Under the Education Act 1989, a Board of Trustees has the ability to reorganise itsschool so as to meet the needs of its community Reorganisations can include recapitulation(under s 150), change of class (s 153) and merger (s 156A)

23 Before doing so, a Board of Trustees must get the approval of the Minister of Education

S 157 of the Education Act 1989 requires that, in considering reorganisations, the Minister ofEducation must consult both with the school concerned and with schools whose roll might beaffected by the reorganisation There are not large numbers of reorganisations in any givenyear

24 The Educational Development Initiative (EDI) provides incentives to encouragecommunities to reorganise education in an area to meet the challenge of falling school rolls EDIhas been in place since 1992 Broadly speaking, it involves allowing some of the savingsobtained from a school closure to be retained by the remaining school(s) for a set period Thesavings can be used in a variety of ways to improve educational delivery Over 80 EDIs havebeen completed since 1992, with 18 of those in 1998 alone

25 The Minister of Education can close schools under s 154 of the Education Act 1989.Before doing so, the Minister of Education must consult with the Board of Trustees and with theBoard of Trustees of any school where the roll might be affected by the closure Table 2outlines the most recent trends in school reorganisations

Integrated Schools

26 The Private Schools Conditional Integration Act allows any existing or proposed privateschool to apply for integration into the state system As at 1 July 1998, there were 312integrated schools Schools sign an integration agreement with the Minister of Education Thisagreement may set enrolment limits, describe the special character education to be offered bythe school and prescribe religious instruction and observances (s 7) Both the school and theMinister of Education have the right to terminate the agreement if obligations are not being met(ss 11-13) A 1998 amendment to the Education Act 1989 made it easier to terminate anagreement where both sides agreed

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Table 2 School Reorganisations and Closures

To be registered, a private school must satisfy the Education Review Office that it is “efficient”

In this case, efficient means the school:

 has suitable premises, staffing, equipment and curriculum;

 provides tuition for 9 or more students between the ages of 5 and 15;

 provides suitably for the inculcation in the minds of students of sentiments of patriotism and

loyalty; and

 gives students tuition of a standard of tuition no lower than that provided to students enrolled

at a state school of the same class

28 Private schools can seek provisional registration and can operate for 12 months with thatstatus The Education Review Office (ERO) must then inspect the school within the first six totwelve months after it has begun operating A private school receives no funding while onlyprovisionally registered and it is up to the school to book an ERO inspection in order to gain fullregistration Once ERO is satisfied the school is efficient in relation to the standards set out inthe Act, full registration will be recommended to the Ministry of Education

29 Private schools are required to gain resource management consent for establishing andoperating the school This and other costs involved in setting up a new private school havebeen identified as a significant barrier to entering the market

Fee Setting

30 The ability to charge fees varies across the different types of schools:

 State schools cannot charge fees However, they can seek donations from parents.

Typically, donations would represent a small part of a school’s overall budget (less than

10 percent) These donations are tax deductible for parents;

 Integrated schools can charge attendance dues and can also seek donations from parents

Attendance dues are intended to cover the cost of the capital investment made by theproprietors in the school’s land and buildings or to cover leasing charges for schoolaccommodation; and

 Private schools are free to charge fees as they see fit, subject to market conditions Fees

are the main source of income for private schools Fees generally range from $2000 to

$9600 per year (GST inclusive) They can also seek donations from parents or raisemoney in other ways (e.g., sponsorships)

31 Some state and integrated schools are beginning to charge relatively high fees - onerecently integrated secondary school was proposing to charge $3,000 in fees, while a stateintermediate school is seeking a donation of $700 from parents

Funding

32 The state is the main funder of compulsory schooling in New Zealand, with spending ofaround $4 billion annually The funding systems differ across state, integrated and privateschools In general though, state and integrated schools are funded at a much higher level thanprivate schools The funding systems that apply to each type of school, and their keydifferences are summarised in Table 3 and are discussed below

Table 3 Summary of Key Income Sources for all Schools

External Sources Donations only Attendance dues and

donations Fees and donations

State Schools

33 State schools receive a range of cash and in-kind resourcing from the Crown Thisresourcing includes school staffing, school operating grants, school transport, special needssupport, curriculum materials and support and school land and buildings Governmentspending on the compulsory education sector has increased significantly in recent years This

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has been due to increases in the number of students and teachers in the system, as well asregular increases in school operating grants and negotiated pay increases for teachers

34 Some key facts on funding state schools areas follows:

 real per-student spending on teacher salaries and operating grants was 8 percent higher in

1998 than in 1990;

 real per-student spending on teacher salaries and operating grants rose by an average of

3.3 percent between 1994 and 1998, after falling somewhat during the first half of the1990s; and

 operating grants rose by an average of 4.7 percent between 1994 and 1998; and teacher

salaries grew by an average of 2.8 percent per year between 1994 and 1998

Box 1: Pilot for Self-Managed Property Funding

In October 1999, the Government announced a pilot programme that would allow

schools to fully self-manage their school property funding (SMPF) This initiative

builds on previous changes that have increased the schools’ self-management of

funding – school operating grants are currently bulk-funded for all schools and

teacher salaries are bulk-funded for around 30 percent of schools

Currently, schools are funded through a series of programmes for both maintaining

the quality of their property (called baseline funding) and increasing the quantity of

their property (called roll growth funding) Funding for property maintenance is

provided separately to schools through their operations grant

Under SMPF, the pilot schools will fully self-manage their share of baseline and roll

growth funding, rather than it being managed by the Ministry of Education through

the range of baseline and roll growth programmes Schools’ funding needs over a

five-year period will be negotiated with the Ministry of Education, based on school

development plans Funding agreements will be for five years Funds will be

advanced to schools based on the timetable set out in their school development

plan The level of funding will vary according to students’ year level and the

assessed age and condition of the school There will also be an allowance for roll

growth above current school capacity (on a per-pupil basis)

Approximately 40 schools will be involved in the pilot that will run for the year

1999/2000 The pilot will be evaluated at the end of April 2000 Subject to the

evaluation, further schools will be invited to take part in SMPF in 2000/01

35 The government’s policy towards resourcing has, over the past ten years, favoured both devolution and increased targeting of spending The key components are set out below and inTable 4 Average state funding to state and private schools is set out in Table 5 Key fundingcomponents are:

 Operational Funding This funding is paid directly to schools on the basis of both universal

and targeted entitlements Funding depends on a number of factors including student numbers, school type, year level and the school’s property profile In 1998, operational funding amounted to nearly $700 million Targeted funding includes Targeted Funding for Educational Achievement (see Box2), the Special Education Grant, the Careers Information Grant and Maori Language Resourcing

 Teacher Salary Funding State schools can be either centrally resourced or bulk-funded for

teacher salaries (see Box 6) Centrally resourced schools receive their staffing in-kind,and teachers are paid centrally by the Ministry of Education The extent of subsidydepends on the qualifications and experience of the teachers at the school Under bulk-funding, schools receive cash and pay their teachers directly Under bulk-funding, thesubsidy does not depend on the school’s staffing profile as all staffing entitlements arefunded at the same rate

Box 2: Targeted Funding for Educational Achievement

In 1995, the Government introduced Targeted Funding for Educational Achievement

(TFEA) as a component of schools’ operating grants TFEA is targeted to assist schools to

overcome barriers to students’ learning that are associated with socio-economic

disadvantage TFEA is not tied to any particular school activity In 1998, approximately

$50 million was provided to schools through TFEA - just over 7 percent of the $676 million

in operating grants provided to schools in that year

The per-student amount that schools receive under TFEA varies with students’ SES level

All schools are ranked by decile (i.e., 10 percent of all schools) and funding steps

Per-student funding is graduated – it increases as the school’s decile declines TFEA

funding is available to decile 1-9 schools For 1999, per-student funding ranged from

$NZ328.44 for a decile 1A school to $10.92 for a decile 9 school

The TFEA socio-economic indicator is calculated using Census “mesh-block” (a small

geographic area) data and schools’ 1 July ethnicity data It takes into account household

income, parents’ occupation and educational qualifications, household crowding, parents’

income support payments and Maori and Pacific People ethnicity The rating is reviewed

automatically every five years and can also be reviewed once per year if schools believe

their SES make-up has changed significantly (e.g., because of a plant shutdown) TFEA

has helped equalise funding across low and high decile schools In 1997:

 Decile 1-3 primary schools had total revenues per-student of $NZ3,323 versus

$NZ2,978 for decile 7-10 primary schools Low-decile primary schools also had a

surplus per-student of $NZ97 versus $NZ69 per-student for high decile primary

schools; and

 decile 1-3 secondary schools had total revenues per-student of $NZ5,405 versus

$NZ4,804 for decile 7-10 secondary schools However, low-decile secondary schools

had a smaller surplus per-student than high decile students ($NZ23 versus $NZ30)

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Integrated Schools

36 Integrated schools are eligible for similar funding levels as State schools The onlyexceptions to this are funding for vandalism and minor capital works Integrated schools mustmeet their own capital costs, providing facilities and equipment to a standard set by the Minister

of Education Until recently, integrated schools were required to own their land and buildings.This was changed recently to allow them to lease both land and buildings

Table 4 State and Integrated School Resourcing Components of Operations Grant Key Driver(s)

Base funding Roll and school type Larger schools do not

receive this funding

Per pupil funding Per pupil, weighted for year level

Relief teacher funding Full time equivalent teacher entitlement

(Which school roll and type determine)

Targeted rural funding Distance from population centres of more

than two thousand or roll and distance from schools of the same type

Vandalism Roll weighted for risk rating, (this is not paid

to integrated schools)

Maori language Per pupil weighted for level of language

immersion

Targeted funding for educational

achievement Per pupil weighted for decile ranking.

Special education grant Per pupil weighted for decile ranking

Careers information Number of students form three plus, weighted

for decile ranking

Normal and Model Schools Roll Being phased out

Risk management Roll weighted for decile ranking

Secondary tertiary alignment resourcing Number of senior students by application

Maintenance, minor capital works, heat,

light and water Property, individual to each school.

Private Schools

37 Before 1970 the state provided very low levels of funding to Private Schools by a variety

of means In 1970 the state decided to subsidise teacher salaries in the private sector at 20%

In 1975 this was increased to 50%, bringing it into line with the salary subsidy granted to

integrated schools In 1985 the Labour government removed the state subsidies of salaries, reducing it incrementally to nil by 1990 In 1991 the National government restored the state subsidy for teacher salaries at 20%