The root of the problem is the Australian Education Amendment (Direct Measure of Income) Bill that was passed by the Federal Parliament on March 23 last year.

That legislation, which gives more money to schools where parents are on low incomes and less money to schools where parents are well-off, is now being implemented with adverse consequences for St Bede's, which is located in one of Canberra's most established leafy suburbs.

As a result we have the ironically perverse situation in which in the same year it is celebrating 200 years of Catholic education in the diocese, Catholic Education (Canberra and Goulburn) has to contemplate closing a much loved primary school.

This is because St Bede's, which has the equal highest DMI of any primary school in the diocese, is expected to lose 25 per cent of its income over the next eight years.

The problem is compounded by the fact St Bede's only has 130 students according to its website. Those students still require 17 teachers and a full range of educational facilities. Although the current fee income would only come to about $542,000 a year, the overheads are very substantial.

The difference between viability and crisis is entirely dependent on federal and territory government funding.

While some parents have already indicated they would be prepared to pay higher school fees to save St Bede's, that is not a realistic option. Catholic Education says that in order to cover the shortfall through fees alone they would have to go up by 17 per cent a year for the next eight years.

Because the increases would be year-on-year fees would have reached $12,075 in real terms (adjusted for inflation) by 2029. That represents a three-fold increase and would make St Bede's extremely uncompetitive with other Catholic primary schools in Canberra.

Even if the school was to increase its enrolments from 130 to 400, fees would still need to double to $8400 a year over the same period even before the necessary additional capital expenditure was taken into account.

The crux of the problem is that because of its location the school operates in a pocket of relative affluence. This has left it uniquely vulnerable to the latest funding changes. From Catholic Education's point of view the worst possible option financially would be to keep St Bede's operating. It can mitigate the impact of DMI by spreading the existing students across larger schools with lower DMIs in Narrabundah, Garran and Curtin where their parent's incomes would not have such a significant impact on funding outcomes.

The only other alternative, to use income that would normally be allocated to other schools with lower DMIs, would be at odds with Catholic Education's egalitarian ethos. The less well-off should not be called upon to subsidise the better off. That is, of course, the intent of the DMI reforms.

While this situation is unfortunate, and comes as a great shock to the St Bede's community, Catholic Education has done the right thing by addressing the issue of viability now rather than kicking the tin can down the road.

While it is impossible not to feel sorry for the tight-knit school community it is equally hard to see how St Bede's can continue operating given the new funding matrix.

The school is obviously a much loved and very special place but, due to both the funding changes and the low enrolment, it is no longer viable. Given the apparent lack of options the Archbishop is going to have to make a very tough call before the end of the year.

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