Scrapping the decile system and funding schools according to students' "risk of failure" could move stigma from schools in poor communities to students themselves, Labour has warned.
The Herald has learned the Ministry of Education has considered using Government-wide data on every preschooler and school student to peg extra funding to those at risk of educational underachievement.
Schools would be paid more for students who had one of four risk factors: a parent who had been to prison; if they or a sibling had suffered child abuse; if their family had relied on a benefit for a prolonged period; or if the child's mother had no formal qualifications.
Attaching funding to at-risk children would create privacy concerns, including whether the parents should be informed their child has a risk of failure, and whether it will stigmatise those children.
Those issues are still being worked through, the Herald understands. The approach has however worked in the Netherlands, and Australia has introduced a similar system.
LABOUR WARNS ON PRIVACY
Chris Hipkins, Labour's education spokesman, was critical of the current decile system, but said there were huge risks in identifying children and preschoolers as "at risk" based on indicators such as a parent's qualification history.
"Are mothers going to have to show up with evidence of what their qualifications are, and if that changes during the student's time at school, does the funding get cut?"
Such a system, if poorly designed, could create more inequality, Mr Hipkins said, and risked moving the stigma from low decile schools to individual children.
"Every kid has potential...and sticking a label on their head from as young as 3 or 4 years old saying they are at risk, could potentially be very, very unhelpful...if you look at how damaging the stigma with being at a low-decile school already is, imagine that then personalised to the children."
Even if information on what child was considered at risk was hidden from the public, Mr Hipkins said there could be attempts to identify the proportion of at risk children at schools, or even the children themselves.
Mr Hipkins said socio-economic factors must continue to be a factor in any new model. A more desirable option could be an enhanced version of the decile system, which uses information about deprivation in an area where a student lives.
THE GOVERNMENT'S VIEW
Today, Prime Minister John Key said he had been briefed by Education Minister Hekia Parata a couple of weeks ago on school funding, and discussions about what could replace the decile systems were at a very early stage.
"One of the things they said to me was they wouldn't really be progressing the issue unless they could get the other stakeholders on board - the unions and others."
Mr Key said education unions had argued for a change in the funding model. The possibility of more targeted funding fits with the "social investment" approach, which is being championed by Deputy Prime Minister Bill English.
"We have better information, so there is certainly an argument that says we would be in a better position to make sure the appropriate funding is more targeted...it's just a question of whether you could get that right, and how dramatic that would be.
"[Change] is sort of years away, not months away. But it is something they are looking at."
The Herald understands that, under the "at risk" proposal, children may only need to meet one risk indicator to qualify for funding.
If there is a "concentration" of at-risk students, the school could receive extra cash worked out by a formula.
It is thought the funding will cover about one-third of all children. It would not affect the number of teachers per school.
Asked today whether a targeted approach could stigmatise children, Ms Parata said those were the kinds of issues that would need to be worked through, but that outcome would not be allowed.
"We are at the very early stage, I talked to the main unions while we were away together in Berlin last week about their involvement, they will have concerns that they want to bring to the table.
"But we will not be interested in how we stigmatise children, rather what we are trying to do is get the right resource to the right kid at the right time in the right places, and that is quite complex."
It is not clear what other models are being investigated. Last year, Ms Parata commissioned three "think pieces" on alternative ways to fund schools. They have not been made public despite Official Information Act requests.
Pressed on whether an "at risk" model would be considered, Ms Parata said "no options were off the table", and officials were looking at what was being done overseas.
"We have a lot more data than we did when the decile system was introduced 15 years ago, and we need to take advantage of that. But we haven't yet decided on what model."
There was a cohort of kids who were persistently struggling at school, and they had characteristics such as a family reliant on a benefit, or a parent who has had a Corrections history, Ms Parata said.
MIXED REACTION FROM EDUCATION SECTOR
Allan Vester, head of the Secondary Principals' Council, said the proposal should be able to target individual need better than the "broad brush" of the decile system, and the concentration factor was an important inclusion.
However, he said any changes to funding that did not include extra staffing would limit effectiveness. "In countries such as the Netherlands, staffing is a very significant part of programmes to address the needs of the very groups which the Ministry is also trying to address," he said.
Secondary Principals' Association president Sandy Pasley said it would stop parents judging schools by their decile ratings. But she said children would need to be guarded against stigma from both schools and other students.
Head of the Early Childhood Council, Peter Reynolds, said the evaluation of a targeted funding model did not surprise him, as the Ministry had signalled interest in such a system for some time.
The school decile system had never been an option for ECE, because about half of all children enrolled according to the area a parent worked in, not where they lived.
Mr Reynolds said early childhood centres would have concerns that any extra funding to "at risk" children could mean less money for others.
There could also be problems if centre staff were required to collect information, like on a parent's qualification history. "What are we supposed to do, ask the parents coming through the door to bring their school certificates with them, so that we can tick the box and say, 'You are a special case'.
"The idea might sound good because it has been developed by some 25-year-old, pimply-faced official sitting in an ivory tower in Wellington, but actually in practicality it is going to have its challenges."
PPTA president Angela Robert said she was surprised the ministry was so advanced in its thinking about school funding models. The sector had achieved very little engagement with the ministry about the funding review, she said.
"Having said that, the model...seems to have some good points, and could well be better than the current decile system for targeting extra resourcing to the students and schools that need it most."
Ms Roberts said a broader review was needed, including looking at whether funding levels were enough, including the need for extra staffing support.
WIDER SOCIAL INVESTMENT APPROACH
The education funding overhaul would be the first in a raft of changes expected across the social sector, all closely linked to a substantial piece of work done by Treasury.
It last year analysed all children and young people up to age 25, as part of the Government's "investment approach" to social spending, which aims to identify where up-front spending can cut costs later.
Mr English is championing the work, and officials used Statistics NZ's Integrated Data Infrastructure (IDI), which links data from a long list of government agencies including corrections, health, education and the tax department.
Analysts assessed a variety of indicators which affect children's lives, including their ethnicity and where they live, and worked out which had the strongest correlation with poor outcomes.
Two of the indicators under consideration in education funding - whether the parents are on a benefit and the mother's qualifications - are already included in the decile formula, alongside income and overcrowding.
However, decile funding is based on the area from which a school draws its students, not from individual data. Decile-related funding accounts for about 9.5 per cent of total funding in decile 1 schools, falling to less than 1 per cent of funding at decile 10 schools.
Treasury officials also looked at what is likely to happen to at-risk children later in life. The 1 per cent of children who have all four indicators are four times more likely to leave school with no qualifications, nine times more likely to serve a prison sentence, and six times more likely to receive benefits for more than five years before they turn 35.
Mr English has said the next challenge is to deal with any privacy issues and target spending at those identified as vulnerable - which would save millions of dollars if poor outcomes like benefit dependency or jail time could be avoided through early intervention.
Such an "investment" approach promises to transform the approach of other Government agencies.
Justice Minister Amy Adams has signed off a funding commitment of up to $1.5 million to allow Ministry of Justice officials to develop modelling that builds on the powerful IDI database managed by Statistics NZ.
Initial analysis using the IDI database looked at what happened to offenders in comparison groups who were sentenced to community work or fined.
Offenders given community work were found to be 4 to 7 percentage points more likely to be reconvicted within two years, compared with offenders who were fined.
Ms Adams has told the Herald that such analysis could radically change the way policymakers, judges and the general public think about the balance between rehabilitation and punishment.