Nerd Sunday: Robbing Peter to pay Paul
If you liked the dark intrigue of The Davinci Code, I promise you'll love this.
I sighed out loud as I read the quote.
RNZ ran an article the other day on school donations. How many schools have opted into the government’s ‘donation scheme’, which gives extra funding to schools that agree not to seek donations from parents?1
Myles Hogarty is the principal at De La Salle College - a low-socioeconomic school with 95% Pasifika students.2 Hogarty explained to RNZ why the school rejected the donation scheme, continuing to seek donations instead. As he put it in the article:
"Parents are asked to contribute and have ownership in their son's education through a minor financial contribution. We did not join the Government donation scheme as we are opposed to the creation of a hand-out mentality. Removing a parent's obligation to fund their son's education builds a culture of dependency on the state to provide more and more."
A hand-out mentality? A culture of dependency on the state?
My quick visit to De La Salle’s website didn’t exactly paint a picture of freeloading. Compulsory attendance dues are $1016 for years 9 to 13. On top of that, there’s $316 for ‘school and subject contributions’, presented like part of an invoice so it’s not clear it’s a donation. After that, there’s a voluntary ‘Catholic Special Character contribution’ of $60. And unless Jesus drops stationery and uniforms down chimneys in South Auckland, families are paying for those too.
There’s a whole lot to unravel here, involving a complicated plot, flexible morality, and the church’s remarkable comfort with ‘dependency on the state’ when it suits. Imagine me brooding under poor lighting like a 2006 Tom Hanks.
Before we kick off, I want to be clear: Catholics don’t all think the same. I went to Catholic school, and for better or worse, I sent my kids too. Some of these schools go above and beyond for their students, embodying the best of the church’s social justice tradition. Others, not so much. But we need to take a step back.
I believe there is unfairness at the heart of the Catholic schooling system - to the taxpayer, and to poorer students and their families. And it’s exactly because I was raised in the church’s social justice tradition that this grinds my gears. Get comfortable, and I’ll tell you a tale.
OK: to make sense of this story we need to talk about funding. Maybe that sounds boring - or simply too hard. After all, we’re trying to understand an organisation with two thousand years’ experience being tricky with money. But I hope you’ll stick with it. After all, you’re paying for much of this.
Let’s start with a simple question: who owns schools? For state schools, that’s easy - they’re owned by the state. The clue is in the name, to be fair. But Catholic schools are owned by ‘proprietors’. A proprietor is some part of the church, like the local Bishop or Archdiocese.3 They may have different owners, but the government funds Catholic schools the same as state schools, mostly.4
On one hand, this is kind of fair. It’s the state’s job to make sure kids are educated, and if the church is helping the state do its job, the state should help the church with the costs. Besides, if Catholic schools weren’t there, the 8% of kids they serve would have go to state schools, with the state paying the bill.5
But if we accept the state should help pick up the tab for Catholic schools, the question becomes, what parts of the tab exactly? What’s fair? To figure that out, we need to touch on the different types of funding schools can get. I’ll make this as quick and easy as I can, I promise.
We’re not going to focus on school operational funding. For our purposes, we can think about operational funding as money for running stuff and buying or fixing small things: paying staff, meeting bills, purchasing whiteboard markers, calling the plumber to fix a leaky tap. State and Catholic schools get the same operational funding. That seems OK, more or less.
Where the wackadoodle stuff happens is the capital funding. Hold on to your hat.
Before we get into the details of capital funding, we need to understand how we got here - and to do that, we need to travel back in time. What follows is mostly from the church’s own account, but the flourishes of bitterness are my own.6
Back in the day, Catholic schools were private schools, completely separate from the state and receiving no government funding. For a time, this seemed to work well enough; but then society began to change. For a start, someone must have realised sex is fun and spread the word, because throughout the twentieth century, fewer people became priests, brothers and nuns - the cheap workforce that Catholic schools had relied on. Instead, lay teachers had to be employed, and they had to be paid a proper salary. Costs went up. At the same time, in the church’s account, revenue stayed low: schools tried to keep their fees affordable for big families with low incomes.
By the mid-twentieth century, the church says the Catholic schooling system was on the bones of its arse (this is a difficult claim to weigh, one way or the other, but we’ll come back to the church’s finances). Whatever the case, school property was a particular problem - everyone agrees it was a dilapidated shit show requiring urgent attention.
And so by the early seventies, the possibility of state funding for Catholic schools was on the table. This wasn’t without controversy. In the neutral and measured words of a 2022 church article:
The anti-lobby was strengthened (some would say poisoned) by an anti-Catholic cabal. The political issue of “State Aid for Private Schools” became fiery, stoking fervent debate in national media. The country was divided …
A scan of newspaper headlines through the early-1970s shows momentum was building against “state aid”. Much of the opponents’ rhetoric was virulent and bigoted. Proponents seemed more rational and profound.
Nor were the so-called ‘anti-lobby’ the only ones with reservations. Some Catholics feared that accepting state funding would ‘water down’ Catholic schooling. Even the De La Salle brother who championed state funding called it ‘Hobson’s choice’.
The turning point came in 1975, with landmark legislation that allowed Catholic and other ‘special character’ schools to ‘integrate’ into the state system. Integration would provide Catholic schools with state funding. It set down expectations in return, including that Catholic schools bring their shit show properties up to scratch. This was a big task with a massive price tag, funded again by the government through suspensory loans (loans with payment suspended to sometime in the future).
Integration would provide Catholic schools with funding for salaries and some maintenance, but school property would remain the responsibility of proprietors, as the property owners. Problem is that over the years - and with a whole lot of lobbying - that responsibility for property has got murkier.
Back to capital funding. Stay with this a bit longer, and try to think of it like eating your vegetables to get pudding.
You’ll remember we talked about operational funding: money for running stuff and buying or fixing small things. Both state and Catholic schools get this funding, and it can be used for minor maintenance of property.
Capital funding is different. For our purposes, we can think about it as funding to buy, build or fix big things - things that have a value for their owner, including land and buildings. State schools can get various kinds of capital funding if they meet the rules. The way this funding is paid out is controversial, and it’s been in the news, but you get the logic: the state is paying for big things that the state then owns.
When it comes to capital funding for Catholic schools, the state is paying for big things the church owns.
Capital funding to Catholic schools comes in two types. ‘Policy One’ funding is also known as ‘major maintenance or capital replacement funding’, based on the depreciation funding state schools get. It covers stuff like replacing parts of buildings, or even whole buildings, that are buggered.7 ‘Policy Two’ funding isn’t automatic - but a proprietor can apply for it to build a new classroom, or a new Catholic school altogether. It’s expansion funding. A new Catholic school funded through Policy Two can be owned by the proprietor - or owned by the government and leased to the proprietor at a peppercorn rental, basically nothing.8 Either way, it’s a hell of a deal for the church.
You could legitimately look at this stuff different ways, but I don’t love it. I have to pay for my own big things, like you do. If I re-roof my house and the property value goes up, I reap the reward. If I let my roof fall apart and it lowers the property value, I wear the consequences. If the roof falls apart because I can’t afford to maintain it, that’s unfortunate, but it’s still very much my responsibility. Above all, if I decide I want to build a second house - to expand, even if for a charitable purpose - I have to pay for it. Most people would see this as fair enough.
OK, capital funding is a little more complex than that. And it’s possible that, without Policy One funding, Catholic school property would descend into a shit show again, coming back to the government for another bail-out.
But this much is clear. In this financial year alone, the government spent $132 million on ‘funding to proprietors of integrated schools for capital upgrade, including modernisation, of their existing school property and facilities as well as expansion of the network of integrated schools’.9 And the law says that if an integration agreement’s cancelled or an integrated school is closed, ‘any land, buildings, chattels, and other interests relating to the school that are vested in the proprietor remain vested in the proprietor’.
You guessed it. Your taxes are going towards the value of church assets - and that value is kept by the church.
The thing is, we haven’t even got to the interesting bit yet. You might think it’s fair that Catholic schools get capital funding from the government because it levels the playing field with state schools: that’s certainly what the church argues. Maybe. But Catholic schools have access to a whole other stream of funding.
Remember compulsory attendance dues? The ones that cost $1016 a year for most kids at De La Salle College? They’re a fundamental difference between state and Catholic schools. State schools can’t legally charge attendance dues, but proprietors charge them for every Catholic student in the country - and parents are warned they can face debt collection if they don’t pay.10
So, what are attendance dues? Well, they’ve got bugger all to do with attendance. Simply put, they’re a per-student fee that goes towards Catholic school property. I couldn’t find church information on how much it gets from attendance dues, but my estimate is about $40 million this year, in addition to capital funding from the government - the $132 million.11
This is the point we really need to start digging. To be clear, there’s nothing wrong with the church asking its members to fund Catholic schools’ major capital spending - to my mind, it’s fairer than asking the taxpayer. But that’s where my sympathy ends. Everything else about attendance dues seems so messed up, I hardly know where to begin.
Attendance dues are pretty consistent everywhere - no matter where you are across the motu, if you’re rich or poor, if your school is rich or poor, or if you’ve got a big family with five or six kids in education. They’re typically about $500 for a primary kid, and $1000 for a secondary school kid.12
OK, you’ve spotted the first problem. This flat fee approach cuts no slack to struggling or large families - and, in some cases, lands them with eye-watering bills every year. But at least if poor families are paying all those attendance dues, their kids are getting great school property? Right?
This is where the plot thickens. Attendance dues in an area go into a regional pot. Taking De La Salle College again, those students’ attendance dues get paid into a pot for the Auckland Diocese - something called the Auckland Common Fund Limited, a company exempt from tax, whose shareholders are the Bishop and a small number of schools.13
But you’re thinking, pooling the attendance dues might be a good thing? Maybe every kid puts in the same, but the poor schools take more out? Well, that’s an unknown. The most recent annual report for the Auckland Common Fund Limited mentions a couple of big capital projects (neither of which are at De La Salle College), but other than that, it says nothing about what attendance dues actually pay for.
That seems weird: how can it be? Well, now the devil is really in the detail.
As the Auckland Common Fund Limited’s 2022 annual report says, ‘Attendance Dues collected are directed in majority towards servicing and repaying loans raised to develop new footprint projects in proprietors’ schools’ [emphasis mine].14 The De La Salle kids’ attendance dues are being spent on new property across Auckland, an expansion plan for Catholic schools - not funding the property that De La Salle or other kids are actually learning in right now.
OK, that’s even weirder - but surely the De La Salle kids and their families know which property projects they’re paying for?
This is where I begin to lose the plot. In a game of financial pinball, money gets pinged all around different church entities, from individual schools to the Auckland Common Fund Limited, between proprietors and something called the New Zealand Catholic Education Office. Each ping makes the money harder to follow. In the hours I spent - looking through documents with my most bamboozled Tom Hanks face - I couldn’t find a simple, adequate statement telling ordinary families where their money goes.
In the quote above, you’ll see attendance dues are mostly applied to ‘servicing and repaying loans’. What does this mean? It’s another pinball ping. Auckland Common Fund Limited borrows money to build new school property - then it charges attendance dues to repay the loan. The Auckland Common Fund Limited’s 2022 annual report gives the size of the debt families are on the hook for: $78.2 million. It doesn’t bother to say what the debt is funding.15
That’s it. That’s literally it, the extent of the report’s transparency on the loan: a single line with a giant number, leaving a mystery as to what it’s paying for. A void into which families are required to throw up to a grand per year per kid. If there’s a case to be made for this system - with its obvious inequities and opaqueness - then the church does not care to make it. Report readers are told they can request a full set of audited accounts from the Diocese. It’s almost as if they know ordinary people will have other things to do.
There’s a final possibility here: the church is simply too hard up to pay for school property. They’re just doing what they have to, to stay afloat. A deep dive into church finances is impossible, but let’s see what we can figure out.
Here’s the first point I want to make: spending attendance dues on new school property is a choice. The church could spend that money on maintaining existing property, and ask less from the taxpayer - but apparently this is a ‘dependency on the state’ the church can live with. Or it could stop building new property, make do with what it’s got, and radically reduce attendance dues. Again, no. With all that said, let’s return to Auckland. We’ve already had a look at Auckland Common Fund Limited - one branch of the Diocese’s activities. Let’s now look at the 2022 annual report from the Diocese itself.16
In 2022, one year, the Diocese’s revenue was just shy of $69 million. Now, we can’t assume all that money could be picked up and plonked into the Auckland Catholic school system. Just under $50 million came from ‘Grants - government, social housing and others’, money probably tagged for particular purposes, although the report doesn’t specify those purposes. And there are other legitimate expenses the church has to meet, outside education only.
Interestingly, we can see the Diocese received about $7 million in donations in 2022 - and some of these will have come from families also paying attendance dues.
But all in all, we see the Diocese ran a surplus of $13 million in one year. (They had a surplus of almost $3 million the year before, and almost $19 million the year before that.) I’m no accountant, but this sounds better than a poke in the eye with a sharp stick.
Let’s now step back from what happened in 2022, and look at what the Diocese owns. This is where it gets interesting. Again, we can’t see details - but we can see pretty big numbers. There’s $21 million in cash and cash equivalents, and another $51 million in current term deposits. A cool $137 million sits in investments. All up, including the value of its property and land, the Diocese has equity of almost half a billion.
I dunno. Maybe for the church, this is what it’s like to be on the bones of your arse - but I bet it feels better than going to school without any lunch.
If you’re anything like me, you’re probably wondering how this whole situation could come about - and why it’s allowed to persist. My short answer is ‘politics’. My longer answer has two strands.
Here’s the first strand. Remember earlier on, we said that if Catholic schools weren’t there, the 8% of kids they serve would have go to state schools, with the state paying the bill? This is more than just a theory. Once upon a time, the Catholic church in Australia put it to the test.17
By mid-century, Australia’s Catholic school system faced the same pressures as Aotearoa’s - and their properties were crumbling. The crunch came in a New South Wales town called Goulburn in 1962. The Southern Area Director of Education put the hard word on St Brigid’s Primary School: they were to urgently upgrade the school’s toilets to meet health and safety standards. The parish couldn’t afford it. After consulting with church authorities, they decided to take action. They went on strike.
All seven of the town’s Catholic schools announced they were shutting their doors for six weeks. Nuns walked the Catholic kids - two thousand of them - down to the local state schools. Overwhelmed, the state schools did their best; but they had room for just 650 of the Catholic kids. The strike lasted only a week, but it certainly made its point - and it was the catalyst for government providing funding to Australia’s Catholic schools.
Across the ditch, whatever the rights or wrongs, the church had learned to flex its muscles - and over the years, with one in five Aussie kids now in Catholic schools, those muscles have only grown stronger.18 Nowadays, the Australian Catholic education system is criticised for opposing education reforms that would address the relative over-funding of its own schools, and the poor cousin status of public schools.19 There’s no reason to think we couldn’t see something similar here.
The second strand of my answer? That’s more to do with the sheer power of embarrassment. By the time the Labour government announced a $396 million school property funding package in 2019, the tables had turned. Now it was state schools that were in shabby condition: 57% of buildings aged 40 years or older and showing problems, nearly half unable to support modern teaching methods, cold classrooms, bathrooms without hot water.20 The Minister of Education justified his decision to direct the funding package to state schools. As he explained, money was tight, and integrated schools (most of whom are Catholic) already had funding to modernise and upgrade - as well as access to attendance dues.
By now, the church was no longer making its historic case that the church couldn’t afford to maintain its buildings - or even arguing that Catholic schools had worse property conditions than state schools. It simply argued, with refreshing honesty about its motives, that “no matter where the funding is generated from, the Government has an obligation to fund our schools in the same way”.21
Muscles flexed, the church lawyered up - seeking a judicial review, and filing in the High Court.
Funny how money can always be found for the things that really matter.
I am asked sometimes why I sent my kids to Catholic school; and why I still sometimes skulk into Mass on Sunday morning, sitting alone and as close to the back as I can manage.
My older son’s first school was Sacred Heart in North East Valley, Ōtepoti. I’d flatted close by as a student, walking past it every day. It called to my own more profane heart, I guess, because I knew it was right. As my son neared school age, I dug out his baptism certificate, enrolled him. I met the principal, a man renowned for his decency. Someone or other had told me stories about him: his quiet care for the kids who needed it most, especially the CYFS kids; the time one of those kids climbed on the roof and the principal spent ages standing there, just talking gently to the little boy, coaxing him back down.
I stood in the school reception one day, waiting, and I looked at the kids’ art on the wall. There were pictures with children’s writing underneath about caring with love for the environment, bordered with the tino rangatiratanga red, black and white. Something just came over me: I can’t really explain without feeling foolish. I stood in this moment of clarity - knowing myself, my values, what I want to give my kids. It is stupid, I know, but I cried.
There are few of us, Catholic or not, who don’t wish to do what is right. For some, that means Catholic schooling, whatever it may cost. I don’t judge that, but it rankles to see an impulse to good turned against those who so deeply hold it. It rankles to see a Diocese announce it spends $142,310 in hardship support through its Financial Assistance Scheme, and $213,000 on debt collection. That’s not the tradition I was raised in.
My tradition of Catholicism? Well, I’m lapsed and half-arsed, no authority at all, a skulker at the back, but here we go.
It’s independent, even prickly if it wants to be - drawing on our heritage of inquirers, objectors, shit-stirrers. It views the comfort of the status quo with a certain suspicion, a pointed question here or there, even a side-eye at the better-dressed in Mass. It says, listen to your conscience. Take the greatest of care to figure out what’s right, and sit with it; but once you’ve got it, don’t delay. It’s what you do that matters.
It says, stand. Make yourself no excuses. Stand.
Catholic schools fall into a category called ‘integrated schools’, and since the very large majority of integrated schools are Catholic, we’ll keep it simple by talking about them as if they’re the same thing. Shit’s tricky enough already.
Sometimes the government will lease property for state schools to use, but for our purposes, that’s a level of detail we don’t need to worry about. There’s a good introduction to school property ownership here: Enrolments, school property and facilities – Education in New Zealand
I guesstimated this by taking the number of Catholic students from the New Zealand Catholic Education Office (NZCEO) 2022 annual report, looking at nation-wide attendance dues on the NZCEO website, multiplying the number of kids by the dollars, making a random allowance for bad debt, taking off the GST, and hoping for the best. This could be a shit methodology, but if it is, it probably gives the benefit of the doubt to the church by understating the revenue. For the more pedantic among us, note the periods over which the $132 million and the $40 million are collected are slightly different, but frankly I did the best with the crappy information I could find.
We’re looking at the 2022 report because it’s the latest available.
2022-ACFL-Annual-Report_Single.pdf (aucklandcatholic.org.nz)
The Auckland Common Fund Limited’s 2022 annual report talks about the intention to replace its old debt servicing scheme with a new one in 2023. The 2023 report isn’t out yet, to show how that worked - but I have zero faith that the new scheme is aimed to benefit struggling families.
We’re looking at the 2022 report it’s the latest available.
Catholic-Diocese-ReportWEB.pdf (aucklandcatholic.org.nz)
Thank you for this investigation. I understand the feelings are complex but the money part is surely simple. I a charity is benefiting from public funds and tax free status it should be completely transparent and it should be ethical. Just like for a PM - even if there’s an entitlement is it right to use it?
Hard to comprehend how such blatant dependacy on the state is allowed however I am not surprised at all. Thank you for the time you spend researching!