In Budget 2022, the Government announced that an Equity Index would replace the decile system for determining equity funding for schools. The Government also boosted the amount of equity funding allocated to schools, adding $75m per year to the $150m schools with higher levels of socio-economic needs already receive via the decile-based system. Funding was also allocated to support the shift to the new Equity Index.

For the 2023 year, no school or kura will receive less operational funding due to the Equity Index. From 2024 and onwards, any reduction in funding will be capped at 5% per annum of a school’s 2022 operational grant, to ensure any losses are phased out over time.

Equity in education is important because there is a significant economic and social cost associated with learners from disadvantaged circumstances not achieving because their schools and services are not adequately equipped to meet their needs. But will the new Equity Index help address disadvantage in our education system?

Like it’s predecessor, the decile system, the purpose of the Equity Index is to address the negative effects of socio-economic disadvantage on educational achievement. The Equity Index is a much better tool for doing this.

• It was developed in response to feedback from the education sector.
• It comprises a basket of measures of disadvantage for students that actually attend a school rather than the neighbourhoods that children live in
• The measures are based on research into the socio-economic determinants of poor educational outcomes.
• It incorporates a much broader range of measures than the decile system.
• The data can be updated more frequently than the data used for the decile system.
• It provides a much more nuanced understanding of the challenges faced by schools with high concentrations of students from low socio-economic background - which can be put to good use in educational research.

The decile system uses five indicators to determine a school’s socio-economic status:

• the percentage of households with income in the lowest 20% nationally,
• the percentage of employed parents in the lowest-skilled occupations,
• household crowding,
• the percentage of parents with no educational qualifications, and
• percentage of parents receiving income support benefits.

The decile system indicators are based on Census data and are therefore updated every 5 years, often with a considerable time lag. Also, the allocation of schools into decile groups does not take into account the number of students at each school. Add to this the stigmatising effect of a school receiving a low decile label which encourages parents to get their kids into higher decile schools, and this means students are not equally distributed across deciles. In 2021, 38% of school students attended a decile 8-10 school and 23% attended a decile 1-3 school (see chart 1).

And there’s no getting away from the fact that low decile schools are associated with poorer educational outcomes. As chart 2 shows, a much higher proportion of school leavers from lower decile schools only obtain NCEA level 2 or below. Although, the direction of causality between school decile and school leaver achievement is unclear because, as already noted, parents from less disadvantaged backgrounds get their offspring into higher decile schools. Less disadvantaged kids tend to do better in school regardless of the school for a variety of reasons, such as parents being generally more engaged in their learning.

Based on a 2019 report to Cabinet, the Equity Index uses 26 indicators that correlate with socio-economic disadvantage. Each indicator is weighted in the index based on its statistical relationship with educational achievement. The indicators include measures relating to parents’ interactions with the justice system, interactions with the benefit system, age, income, and education level, whether a child was born overseas, a child’s interactions with care and protection services and the youth justice system, and the number of times a child has changed homes and schools. More indicators may be added over time.

The Index is based on data from the Integrated Data Infrastructure (IDI) and can therefore be updated annually. Instead of sorting schools into decile bands, each school will be allocated a value on a numeric scale (a higher value indicating higher socio-economic disadvantage). This scaling offers greater accuracy and flexibility in resourcing allocation.

The 2019 Cabinet paper also included data showing that, while schools in lower deciles generally had higher Equity Index values, there was wide variation in Equity Index values for schools within the same decile. For example, decile 1 schools had equity values ranging between 20 and 80 and decile 10 schools had equity values between 0 and 40. Put another way, schools with equity values of 50, which could be considered to have similar socio-economic challenges, were distributed across deciles 1 to 7.

Using the Equity Index results, researchers will be able to compare students’ NCEA achievement across schools with similar levels of disadvantage and adjust for relative levels of disadvantage. This will enable researchers to understand which schools perform well for students from disadvantaged backgrounds over time and what those school are doing that makes them perform well.

Research using the Equity Index has already given us some important insights into the distribution and effects of socio-economic disadvantage, such as the following.

• Most students go to schools with low levels of socio-economic disadvantage. However, most disadvantaged students go to schools with very high levels of disadvantage.
• Over time, an increasing number of schools have either high or very low levels of socio-economic disadvantage. Fewer schools have moderate levels of socio-economic disadvantage.
• Once schools get beyond 30% of their students from disadvantaged circumstances they struggle to achieve in terms of NCEA success.
• A high concentration of disadvantage in a school affects all students in the school, not just those from disadvantaged circumstances.

The Equity Index is a means to an end. Equity funding for schools needs to be increased, and it needs to be spent on things that actually make a difference to educational outcomes for kids from low socio-economic backgrounds. It also needs to avoid the stigmatisation of schools that prevailed under the decile system.

The decile rating system was misunderstood as a measure of school quality, as opposed to its true purpose which was a measure to target funding to address socio-economic disadvantage. This affected how schools were viewed, their enrolment patterns, property costs in surrounding neighbourhoods, staffing of schools and how students viewed their educational opportunities. The Government has committed funds to ensure that the Equity Index avoids the same pitfall of stigmatisation. You can expect to see plenty of sector engagement and communication to try and achieve this. But it is hard to see how it can be avoided. Dress it up all you want, but a high Equity Index value will most likely be perceived the same as a low decile designation.

As regards funding, prior to the Budget 2022 announcement, the level of equity resourcing across the schooling system was 2.9%. The 2019 Cabinet paper noted that while it is difficult to compare school funding systems internationally, comparable countries and jurisdictions allocate approximately 6% of funding per annum to equity resourcing. In some places it is significantly more than this. If equity funding in New Zealand was 6% of total operational resourcing it would be $340 million per annum. As noted in the introduction, Budget 2022 raised the amount of equity funding by an additional $75m to $225m. Clearly the additional funds in Budget 2022 fall short of the 6% benchmark.

But would further equity funding make a difference? A recent OECD report outlined the importance of disadvantaged students being taught by experienced teachers who know how to make the most of teaching time, having access to internet connectivity and digital equipment in schools as well as teachers with good digital skills who are at ease with the technology and use it regularly.

In terms of policy, the OECD recommends giving schools the autonomy to hire and firing teachers and set salaries. Schools, they say, often do a better job than education systems of identifying teacher strengths. But this autonomy needs to be coupled with funding based on need so that schools with disadvantaged students can offer pay and conditions to reflect the challenging nature of the role. This suggests a much more fundamental shift in resourcing towards disadvantaged schools than the New Zealand equity funding model currently allows. The OECD also note that fast-tracked teacher career progression can be a better way to attract teachers to disadvantages schools rather than financial incentives.

Attracting teachers to disadvantaged schools is a lot harder when there is a teacher shortage. The onset of COVID saw a flood of teachers returning to New Zealand from abroad that made up the shortfall that had existed for some time. However, there are concerns that the opening up of borders will see a renewed exodus of young teachers.