DET originally looked to the PFP process as a means of securing additional funds not otherwise available to it. It advised the Government that declining levels of capital funding had resulted in the deterioration of established schools and had inhibited the development of new schools.
DET's annual capital allocation for schools had fallen from $150 million in 1996-97 to $130 million in 1998-99. DET argued that this problem could be solved using the PFP approach, as the capital needed for new schools could be spread over a 30 year period.
The Treasury considered that private sector provision of government services simply meant that one form of liability in the State's balance sheet, debt, was replaced by another form of liability, the obligation to pay the private sector services provider. It argued that DET's funding should not be permitted to exceed its approved capital works program.
The Government decided that DET's capital allocations would be reduced over seven years by an amount equal to PFP construction costs, but not exceeding the cost of public sector delivery. This was to reflect the capital allocation no longer needed for these schools. DET would be able to retain any capital savings and accelerate some school construction over a 7 year period. As a result DET made some small savings arising from the PFP and new schools were advanced one or two years earlier than would otherwise have been expected.