Can schools rely on public-private partnerships?

The Victorian Labor government, crying poor, wants to use the controversial private-public partnerships (PPP) model to remedy the decaying state of its public schools. This is a system in which a government service, or private business venture, is funded and operated through a partnership of government and one or more private companies.

The Victorian branch of the Australian Education Union (AEU) decided at its July 29 state council meeting to support the PPP-funding model, with safeguards, a position that AEU state president MARY BLUETT presents below. Other teacher members, such as AEU state councillor MARY MERKENICH, disagree with this strategy, arguing that a PPP system to finance state schools is the beginning of their privatisation.

Mary Bluett

In Victoria, many schools were constructed to meet the rapid expansion of the school population in the late 1960s and 1970s. They were constructed cheaply, in a hurry, and to last no longer than 20 years. Forty years on, these light timber construction (LTC) buildings are hot in summer and cold in winter, transmit noise readily, are functionally inflexible and wastefully expensive to maintain.

In a March AEU State of Our Schools survey, 75% of school principals indicated that their school needed a major upgrade in facilities.

The AEU has been pressing the government to develop a bold plan to ensure total replacement of our old infrastructure, beginning immediately. This plan must be implemented over the next 10 years so that government school students are educated in 21st century facilities.

Our aim is to provide an opportunity to regenerate and transform our public school system. We have a chance to develop contemporary facilities for science and technology, for the arts and the performing arts, for middle schooling, for the use of information and community technologies — everything, in fact, that a contemporary school needs to provide for contemporary learning needs for our students.

The cost of simply replacing LTC schools is $1.9 billion. This does not take account of schools that are even older and also need replacement, which would bring the cost to around $4 billion. At the current rate of spending, it will take 30 years to replace just the LTC schools. The magnitude of the task is beyond the government’s budget surplus, even if that entire surplus was devoted to education infrastructure alone.

The AEU’s Education for Everyone’s Needs campaign has raised the need to rebuild our schools. We have argued that the disrepair of schools is so great that it is a waste of money to patch up what should be replaced. Why should government school students be consigned to such appalling learning environments?

Arguments that PPP is privatisation of government schools are misleading and miss the point.

The AEU preference is for governments to fund capital works through conventional borrowing. However, due to decades of neglect, the need for a major investment in school facilities is overwhelming and something extraordinary. In this context the AEU wants to make sure that if the government decides to adopt PPP as a funding option for some school building projects, we get the best examples and avoid the problems that have been identified overseas.

NSW already has 18 PPP schools and, on a recent visit to them with senior officials of the NSW Teachers Federation, principals and teachers spoke highly of the quality and the upkeep of the facilities by the contractor. The schools were, for all intents and purposes, public schools with the school having complete control of the facility. The PPP had been used to build the school and maintain it, but apart from that took no part in the day-to-day running of the school or the curriculum.

PPP may be more costly to the taxpayer; however, one of the benefits of PPP that our federal AEU delegation saw both overseas and in NSW was that the quality of the building was far superior to that of Victorian schools. This was attributed to the fact that the school has to be handed back to the state in 25 years’ time in as good as a condition as when it was built.

One of the problems we face is that the schools built 50 years ago have not been maintained. Successive governments have found it easy to cut back on maintenance without any short-term political costs. The PPP contracts build in a maintenance schedule that means that government cannot avoid its obligations to maintain the school.

An AEU principal member in a north-eastern suburban primary school added up the money spent on his school building over the last 10 years and it came to $1 million. For this, he still has a deteriorating substandard LTC that should be bulldozed and rebuilt. This is a typical example. In the current funding model, we are wasting tens of millions of taxpayer dollars and this should be factored into any “cost” model.

If the government goes down the road of PPP, we need to be clear about what is acceptable and what is not. The motion passed by the AEU Council spelt out preconditions for any PPP. These were strong, definite and well thought-out conditions, and included the rejection of any influence and control by any private company on the daily running, organisation or educational program of the school. Basically, the PPP is about financing the building and maintenance of the school, nothing else.

The AEU will not support any government decision to go with PPP unless it is a model that is good for students, staff, school communities and the future of state education.

Mary Merkenich

The argument that PPPs are the only financial solution to fixing up our schools is dishonest. Everywhere they exist, PPPs have been shown to rip off the taxpayer.

The reason is simple. Instead of a government financing, building and operating a school, the PPP model entails business consortiums or merchant banks building, owning and operating schools. They are in it to make profits, and not just small ones.

It is also a fact that private companies pay a higher rate of interest for their funding than the least credit-worthy government. According to British academic Richard Hatcher from the University of Central England, Birmingham, education faculty: “Despite what privatisation’s proponents say, education-for-profit companies are less efficient because it is more expensive for them to borrow from the banks than for the government ... When these entities do cut costs, they achieve it by cutting the number of employees and employing new workers at lower rates of pay.”

In a UK study of the PPP model in the public hospital sector, Professor Allyson Pollock showed that they financially crippled the system, resulting in the loss of 20% of staff and 30% of beds.

The cost of nine PPP schools in NSW will be $300 million — more than the cost to build and maintain them along traditional lines. The NSW Teachers Federation (NSWTF) remains strongly opposed to PPP schools. It said that a March 8 NSW audit report showed that savings and other benefits from the PPP contracts “are not guaranteed”. According to the federation, “on the basis of overseas evidence from contracts further into their life the savings are either illusory or the contracts end up costing the public more than if financed through traditional methods”.

NSWTF researcher Sally Edsall, who toured England, Scotland and Canada, where school infrastructure has been financed privately for several years, warned against the PPP model. She said that a common feature of schools financed, built, managed and maintained by property developers or construction companies is the drive to maximise profits. This means minimising costs by narrowing the width of corridors, minimising classroom sizes and decreasing storage facilities.

Depending on the contract, school-use access ranges from the school retaining full control and usage rights to set hours which are for school-only use. In one school, the sporting teams couldn’t afford the after-school rents in school facilities, forcing them to hire cheaper facilities elsewhere.

During almost seven years in power, the Bracks Labor government has not re-invested in government schools, but neither has the Victorian AEU fought for it to do this. The Education for Everyone’s Needs campaign only began a couple of years ago.

The Bracks government has concealed budget surpluses many hundreds of millions of dollars greater than announced in the state budget. Attorney-General Professor David Hayward and Ken Davidson from the Age say this has been the case since 1999.

A massive capital works program could easily be funded from the budget surplus of around $1.5 billion. Given that the costs of refurbishing and building schools would be spread over several years, it is a furphy to argue that this year’s surplus would not be able to fund such a program.

The AEU leadership talks about “safeguards” for any PPP — an implicit acknowledgment that PPPs are flawed. Enforcing safeguards would require a strong union-led campaign, but the fact that the AEU leadership is ready to give up the campaign to force the government to adequately fund schools using government money suggests it would not be capable of enforcing any safeguards.

School facilities have to be paid for, whether they are financed as PPPs or along traditional lines. The PPP schools will be a drain on the state education budget because they are more expensive. This increases the pressure to cut back on other areas, such as school budgets, resources and salaries. There will certainly be less money for improvements to teachers’ working conditions or pay. This would exacerbate the problems that disadvantaged schools already face and increase inequality between schools.

Victorian students and teachers need an education union that will campaign for adequate government funding of state schools. The union must be prepared to organise a sustained industrial campaign, controlled by the AEU membership and with community support, to achieve this. It is hard to imagine that any government would be able to resist such pressure.

[Mary Merkenich is also a member of Teachers Alliance, which includes AEU councillors and classroom teachers who oppose PPP.]

From Green Left Weekly, September 27, 2006.