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Profit no longer a dirty word in education

By Mikayla Novak - posted Tuesday, 29 March 2005

Private sector participation in non government schools: Developments and reactions

In recent times, there has been a greater expression of interest and willingness on the part of the educational community to explore partnerships with the private sector in the provision of services to benefit students. In February 2004, it was announced that a newly established not-for-profit company, Independent Colleges Australia Ltd , would engage the services of major private sector organisations to help establish a new school in the outer south-west Brisbane region of Springfield.

Under this proposal, the developer Springfield Land Corporation Pty Ltd would lease the relevant land and buildings to Independent Colleges Australia, while ABC Learning Centres Ltd - Australia’s largest private sector childcare provider which operates over 800 childcare centres nationally - would provide financial support for the school. The new school is expected to commence operations in January 2006 with enrolments anticipated for up to 750 students, and is part of a broader Education City precinct in Springfield which will include an ABC childcare centre and a University of Southern Queensland campus. It has also been reported that Independent Colleges Australia is considering establishing a primary school in Victoria.

While parents in Springfield and surrounding areas would naturally welcome these developments to bring education services to the local area, the Independent Colleges Australia announcement has unleashed a torrent of shrill criticisms by a range of vested interest groups, particularly teacher unions.


In essence, it appears that these groups hold concerns over the role of companies in schooling, including the potential for schools that engage the services of private sector companies to receive public sector funding in similar fashion to other non-government, as well as government, schools. For example, the Queensland Teachers Union has suggested “no taxpayer funding should be available to schools when their developers start talking about making profits for shareholders”.

The Queensland Independent Education Union claimed “schools … should be run for the singular purpose of enhancing the students’ education - not with an eye on the profit margin and certainly not with profits coming out of the pockets of taxpayers”. Even former Victorian Premier, Joan Kirner, has weighed into the broader debate by reportedly suggesting that such developments would occur “over my dead body … schools … should be run in the interests of children”.

While it appears that the non-profit status of the Independent Colleges Australia school ought not to preclude it from receiving public funds under current government guidelines, the overreactions levelled against this particular proposal appears to have encouraged the Queensland State Labor Government to shift the goalposts by announcing that it would “clarify legislation to ensure taxpayer funds to non-state schools benefit students not shareholders”.

It is proposed that the Queensland Education (Accreditation of Non-State Schools Act) 2001 (pdf file 343KB) will be amended to ensure that non-government schools receiving government funding are operated on a not-for-profit basis, and clarify the criteria the Accreditation Board can take into account when considering whether a non-government school governing body is suitable. According to the Queensland Education Minister, the amendments are being made to “maintain the integrity of our schooling system by ensuring all schools, including non-state schools, continue to operate in the best interest of students”.

Delivering for students: The international experience of private sector participation in schooling

If we consider that the Independent Colleges Australia Springfield school model is consistent with current State Government accreditation and education funding guidelines, then what would explain the unions’ overreactions? Indeed, what underlying factors may have led to a state government announcing that it will amend its accreditation legislation in order to interfere with the operation and composition of non-government school governing bodies?

It would appear, to some extent at least, these reactions reflect an underlying belief that educational services delivery is somehow tainted when there is private sector involvement. However, the international experience has sufficiently demonstrated that private sector participation in the school sector can deliver real benefits for students.


Consider the experience of other countries, such as the United States, where for-profit firms actually provide direct school education services for students from the kindergarten to Year 12 (K-12) school years. In many American states companies can legally operate schools. For instance, charter school legislation allows private organisations to operate schools, and these schools can receive public funding for as long as they satisfy the educational accountabilities and other requirements of the charter agreement. A number of “educational management organisations” also exist where companies manage either single or multiple charter or government schools under contract to school districts. There are also a number of stand-alone for-profit schools that directly charge tuition fees.

The following provides an account of the organisational structure, financial and educational performance of some US for-profit school chains:

  • Edison Schools Inc: This New York based firm is America’s leading private sector manager of government and charter schools, serving around 235,000 students in 20 States and the District of Columbia (with 30 per cent of Edison students directly enrolled in educational management organisations). In 2003 Edison earned approximately US$425.6 million in revenue, and employed 6,348 people. According to its latest school performance annual report, Edison students recorded an average gain of 6.7 percentage points between 2002 and 2003 on State test scores - a gain of over two times the respective school district and State test gain rates. Similar results are achieved for Edison schools when compared against other schools with similar levels of socio-economic disadvantage and ethnicity. In addition, on average, 85 per cent of parents gave Edison schools an “A” or “B” rating.
  • Mosaica Education Inc: Mosaica Education Inc operates around 45 tuition-free charter schools, serving around 11,000 students in seven states and the District of Columbia. In 2003 the company earned revenues in the order of $83.5 million, and employed around 1,200 people. The company was one of America’s fastest-growing urban businesses in 2004, and had been recognised as an “Education Innovator” by the US Department of Education. School test performance data for 2003 indicated that Mosaica students recorded sustained growth in test scores, with an average 8.7 point gain between 1999 and 2002 - including a 9.8 point increase in Language and Arts and 7.2 point increase in Mathematics. There had also been consistent reductions in the proportion of students scoring in the lowest test score quartiles.
  • Ombudsman Education Services Ltd: Ombudsman operates over 60 accredited schools in 100 school districts throughout the US, with the specific objective of providing education for children with learning difficulties at risk of dropping out of school or being expelled. The company has assisted more than 100,000 students since its inception, and has helped over 85 per cent of students to remain in school attendance, or return to their original school, at the appropriate grade level.
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About the Author

Mikayla Novak is a Research Fellow with the Institute of Public Affairs. She has previously worked for Commonwealth and State public sector agencies, including the Commonwealth Treasury and Productivity Commission. Mikayla was also previously advisor to the Queensland Chamber of Commerce and Industry. Her opinion pieces have been published in The Australian, Australian Financial Review, The Age, and The Courier-Mail, on issues ranging from state public finances to social services reform.

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