SELECT COMMITTEE ON EDUCATION AND RECREATION POVERTY RANKING OF SCHOOLS (Quintiles) 29 November 2017

PRESENTATION OUTLINE Purpose Background Current school funding system Characteristics of system for the poverty ranking of schools The changing poverty profile of schools Addressing the shortcomings of the present system for allocating funds to schools Improving the adequacy of the school allocation Provincial compliance to the National Norms and Standards for School Funding Recommendation 2

PURPOSE To present to the Select Committee on Education and Recreation a report on the review of the poverty ranking of schools (quintile) for discussion. 3

BACKGROUND Section 35(1) of South African Schools Act (SASA) requires the Minister to determine national quintiles for public schools. The National Norms and Standards for School Funding (NNSSF) (Pars. 100 to 107) consequently provides criteria for a system in terms of which all public schools as well as all learners at these schools can be placed into quintiles, according to financial means. 4

BACKGROUND The National poverty ranking of schools (quintiles) for public schools and learners: One of five groups into which all public ordinary schools and their learners are placed. Quintile 1 is the most poor quintile, while Quintile 5 is the least poor. The national poverty distribution table ('poverty table') provides a guide to Provincial Education Departments (PEDs) on the distribution of learners across the different quintiles with the respective provinces.

National Poverty Distribution Table BACKGROUND National Poverty Distribution Table Quintiles % 1 poorest 2 3 4 5 Total EC 27.3 24.7 19.6 17 11.4 100% FS 20.5 20.9 22.4 20.8 15.4 GP 14.1 14.7 17.9 21.9 31.4 KZN 22.1 23.2 20.2 18.7 15.8 LP 28.2 24.6 24.2 14.9 8 MP 23.1 24.1 21.5 17.7 13.5 NC 19.3 20.7 21.4 17.1 NW 25.6 22.3 17.6 13.7 WC 8.6 13.3 18.4 28 31.7 SA 20

Current school funding system Funding receivable by a school is determined by: The national targets for the school allocation. This is determined by the DBE annually. The poverty ranking of the school. Poverty scores are assigned to school by PEDs and is based on the relative poverty of the community surrounding school. Challenges experienced regarding the current funding system include: Challenges with regards to the adequacy of the school allocation. Challenges regarding the ability of the current system to accurately rank some schools in terms of their relative poverty. 7

2017 PER-LEARNER ALLOCATIONS PED Q1-3 (No Fee schools) Q4 Q5 National threshold R1 243 R623 R215 EC R1 177 R590 R204 FS R240 GT KZN R955 R522 R179 LP R1 241 R621 R205 MP R1 059 R530 R183 NC R736 R346 NW WC R993 R369 EC, KZN, LP, MP are funding all schools below the national threshold amounts. NC is funding schools in Q1-3 below the no fee threshold. 8

2017 NO FEE SCHOOLS AND NO FEE LEARNERS PED No Fee Schools % No Fee Schools No Fee Learners % No Fee Learners EC 5 205 95.17% 1 578 131 83.12% FS 1 004 82.70% 575 582 85.69% GT 1 396 67.02% 1 463 721 71.45% KZN 4 964 84.21% 2 059 153 73.33% LP 3 726 96.35% 1 645 519 96.41% MP 1 592 92.29% 902 681 86.28% NC 407 74.68% 203 790 70.63% NW 1 318 89.60% 719 752 88.83% WC 866 59.72% 636 082 59.82% SA 20 478 86.34% 9 784 411 79.28% Approximately 86% of all public ordinary schools nationally are no fee schools. Approximately 79% of all learners are accommodated in no fee schools nationally. 9

ACTUAL EXPANSION OF NO FEE LEARNERS versus POLICY TARGETS PED % Learners in Q1, 2 and 3 Additional learners (%) Additional learners (Number) National Poverty Table Actual EC 71.6% 83.1% 11.52% 218 645 FS 63.7% 85.7% 21.99% 147 030 GT* 46.7% 71.5% 24.75% 507 044 KZN 65.5% 73.3% 7.83% 219 823 LP 77.0% 96.4% 19.41% 331 341 MP 68.7% 86.3% 17.58% 183 918 NC 61.5% 70.6% 9.13% 26 353 NW 88.8% 20.13% 163 103 WC* 40.3% 59.8% 19.52% 207 552 * GT and WC figures include voluntary learners in voluntary no fee schools in Q4 and 5 All PEDs have exceeded the policy targets for learners (no fee) in quintiles 1,2 and 3. 10

No Fee versus Fee Paying   NO FEE LEARNERS FEE PAYING PED Q1 learners Q2 learners Q3 learners Voluntary Q4 learners Voluntary Q5 learners Q4 learners Q5 learners EC 549 307 334 561 694 263 - 55 044 77 618 FS 211 440 165 963 198 179 36 046 70 023 GT 303 054 332 500 493 175 257 707 77 285 216 858 436 374 KZN 589 260 698 164 771 729 361 687 311 849 LP 600 271 680 421 364 827 20 115 48 165 MPU 459 463 360 468 82 750 51 564 39 967 NC 65 479 66 986 71 325 49 658 36 185 NW 229 610 162 088 328 054 87 947 9 536 WC 103 540 145 283 183 396 164 782 39 081 124 664 319 890 TOTAL 3 111 424 2 946 434 3 187 698 422 489 116 366 1 003 583 1 349 607 11

Review of the use of the poverty ranking of schools (quintiles) Characteristics of current system for determining the poverty ranking of schools: PEDs responsible to assign poverty scores to schools. The poverty score assigned to a school is based on relative poverty of community surrounding school. The following three indicators of poverty are used: Income levels of households in community around school; Unemployment rate in community; and Levels of education (literacy rate) of community. Schools in quintiles 1, 2 and 3 have been declared no fee schools. 12

Review of the use of the poverty ranking of schools (quintiles) The changing poverty profile of schools: A number of learners do not attend the closest public school. Schools in less-poor communities increasingly accommodates learners from a different (usually poorer) socio-economic background. Data on surrounding households becoming a less reliable indicator of the socio-economic status of learners in many schools. Unemployment rates dramatically increased recently and not taken into account when determining poverty scores for schools. Some fee paying schools in Q4 & 5 experience a level of funding that is below the no fee threshold. 13

Fee paying schools with income below no fee threshold 14

Review of the use of the poverty ranking of schools (quintiles) Recommendation to address shortcomings of the present system for allocating funds to schools: De-link a school’s allocation from its quintile ranking, distinguish between only two broad categories of schools i.e. no fee schools and fee paying schools Proposals for de-linking allocation from quintile ranking: Equalise the school allocation for all no fee schools (Q1-3). The voluntary reclassification of certain Quintile 4 and 5 schools as no fee schools. The introduction of a ‘fee-sensitive’ funding system for determining level of school allocation to fee paying schools. 15

Review of the use of the poverty ranking of schools (quintiles) Progress with proposals on de-linking school allocation from quintile ranking: Equalising of the school allocation for all no fee schools has already been achieved. All PEDs have, since 2014, equalised their allocations to all their no fee schools A funding bid (for R2.63b over the 2017 MTEF) was made in 2016 for the voluntary reclassification of selected quintile 4 and 5 schools as no-fee schools and & introducing the use of the ‘effective fee’ in determining the school allocation for fee paying schools Given the present budgetary constraints experienced by provinces currently, most PEDs will probably not be able to find the additional funding required within their existing budgets. 16

Improving adequacy of the school allocation Education CPI compared with headline CPI 17

Actual allocation v Projected allocation using Education CPI 18

PROPOSALS FOR IMPROVING ADEQUACY OF THE SCHOOL ALLOCATION Improving efficiency/utilisation of the school allocation: Procurement processes at national, provincial and school level; Efficient use of water and electricity; Effective retrieval of text books; and Accuracy of learner enrolment data. Addressing the ‘underfunding’ of the school allocation by certain PEDs: A strategy to be developed to ensure that all provinces will be able to meet the current allocation targets; and This will need the cooperation of the respective PEDs, their Provincial Treasuries, National Treasury and DBE. Increasing the national targets for the school allocation (and solicit funding for PEDs to be able to fund at these levels): A funding bid (for R8.7b over the 2018 MTEF) in this regard has been submitted to National Treasury. 19

Provincial Compliance to National Norms and Standards for School Funding (NNSSF) 20

2018 PER-LEARNER ALLOCATIONS PED Q1-3 (No Fee schools) Q4 Q5 National threshold R1 243 R623 R215 EC 1 316 660 228 FS 240 GT KZN 955 522 179 LP MP 1 285 650 226 NC 1 243 778* 366* NW WC 1055* 390* * Average allocation KZN and MP will fund all schools below the national threshold NC will fund schools in Q1-3 below the no fee threshold. 21

NORMS AND STANDARDS (N&S) TRANSFER TO PUBLIC ORDINARY SCHOOLS PED Date of transfer (due 15 May 2017): Challenges EC 12 May 2017 (only Q1,2 and3) and 15 June 2017 Technical problem with BAS caused delays in transfers. Learners without ID numbers not funded. FS 15 June 2017 Cash flow challenges. Matter is under constant discussion with Provincial Treasury to come up with a long-term solution. GT 15 May 2017 There were no challenges. KZN 31 May 2017 Serious cash-flow problems. LP 19 May 2017 Late submission of compliance documents by schools. MP Between 05 and 29 June 2017 Labour unrests during the 1st quarter of the financial year NC Between 18 April 2017 and 10 May 2017 No challenges NW Between 02 and 05 May 2017 Schools change their banking details without notifying the Department. WC Between 15 March 2017 and 12 May 2017 Four schools did not receive transfer payments due to non-compliance. EC (for Q1,2,3); GT; NC; NW and WC made transfers before the due date. EC (Q4 and 5); FS; KZN; LP and MP transferred funds after the due date. FS and KZN are experiencing cash flow problems affecting ability to transfer by due date. 22

TRANSFER: SUBSIDIES TO INDEPENDENT SCHOOLS PED 2016/17 4th Quarter transfer (due 1 April 2017) 2017/18 1st Quarter transfer (due 31 May 2017): Challenges EC Transfers May/June and October each year. 31 May and 14 June 2017. Late payment due to technical problem. FS 02 May 2017 15 June 2017 cash flow challenges. GT 23 June 2017. Budget constraints delayed the payments. KZN February 2017 31 May 3017 None indicated. LP 15 January 2017 19 and 30 May 2017 1% was outstanding due to non-compliance. MP 31 December 2016. 30 June 2017 to 21 July 2017 None indicated NC Subsidies are paid in line with public schools. 21 April 2017.   No challenges NW 10 March 2017 19 June 2017 WC 30 November 2016 10 May 2017 Late financial reports by schools delays payments KZN; LP; NC; and WC have made transfers for both quarters before the due date. FS and GT could not meet the due date for any of the above-mentioned quarters. 23

SUBSIDIES FOR SGB ASSOCIATION SUBSCRIPTION FEES PED 2017 Budget Date of transfer -due 15 May Challenges EC R0 No transfer made Evaluating applications for formal recognition; Budget will be made available for the next financial year. FS R254 000 Payment still awaiting disbursement. N/a GT n/a Subsidy is included in schools’ Norms and Standards allocations. KZN Unavailability of funds; will be considered if funds are available. LP No associations currently meet the qualifying criteria for subsidy. Planning to make provision during the 2017/18 budget adjustment. MP Due to budget constraints no allocation for SGB subscription, Will review possible allocation during the adjustment period. NC R200 000 12 May 2017 NW Yes Transfer not yet made None indicated WC R1 652 000 12 July 2017. None. EC; KZN; LP and MP: No budget made available. LP and MP will consider budget during the 2017/18 budget adjustment process. LP reports that none of the associations currently meet the qualifying criteria for subsidy. 24

COMPENSATION FOR FEE EXEMPTION PED 2016/17 Transfer (due 15 Nov 2016) Challenges 2017/18 Budget   EC 25 Mar 2017. Not all schools implementing R4m N/a FS 15 June 2017 Cash flow challenges; R6m GT 8 Nov 2016 No challenges R13.7m KZN 1st week of August. Processing delay experienced. Currently processing the 2015 payments as accruals for 2017. R20m LP No budget made available The Department has budget constraints. R0 Budget constraints. Addressing the matter during 2017/18 budget adjustment. MP 05 Oct2016 – 14 Feb 2017 Late submission of invoices by schools R2m NC Before 15 November 2016 R10m NW 28 December 2016 Late applications R 2m WC October 2016. R50.4m GT; NC and WC made their 2016/17 transfers made before the due date. LP has not made any budget available. May make budget available during budget adjustment 25

Recommendation   It is recommended that the Select Committee on Education and Recreation discusses the report on the review of the poverty ranking of schools (quintiles). 26