A former decile 1 high school is set to lose about $100,000 in annual funding - more than $100 a student - under the Government's new education scheme.

The Government was warned about this precise outcome and told by Treasury to increase overall funding to help soften the blow for low decile schools, but rejected the advice.

About 90 per cent of the country's 2500 schools last week found out their funding would increase under the new equity index, which distributes a pool of nearly $240 million and replaces the near 30-year-old decile system.

However, about 250 schools at the other end will have to make do with the same or slightly less funding.

One of those was De La Salle College, in Auckland's Māngere East. Principal Myles Hogarty said it was an "extremely disappointing surprise" when they found out last Thursday their index number meant their funding would drop by about $100,000.

Hogarty said that would likely mean the former decile 1 school would have to cut programmes.

"To lose that sort of funding will have an impact on learning."

NCEA results had been improving - above national and Auckland averages - and with the new framework weighing educational outcomes alongside socioeconomic factors, Hogarty said he believed that was likely a factor.

"It seems we are being penalised for the outstanding results of the students."

A Treasury paper written before the May Budget urged the Government to increase a funding boost to the equity pool, then $161m, from a proposed $75m to $100m by reallocating the education package.

• What does the Equity Index mean for school funding now?
• Dumping deciles: What's the Equity Index and how could it affect your school?

Minister of Education Chris Hipkins. Photo / Jed Bradley

"This change would strengthen the package by directing more funding to schools facing disadvantage, as opposed to funding a larger across-the-board inflationary increase that would also benefit schools facing lower disadvantage," officials wrote.

"This targeted approach would have stronger value for money, better impacts on wellbeing and educational outcomes, and better impacts for Māori and Pacific students."

The Treasury paper said the change from the decile system to the equity index would most greatly affect urban schools, and those facing the largest funding losses would be in South Auckland with a "high proportion of Pacific students".

"By increasing the investment into the equity index, the additional funding would be targeted at these schools, significantly reducing the funding losses they will experience."

Through Budget 2022 the Government ultimately decided to increase the fund by $75m, taking it to $236m.

How the equity funding will change in Auckland schools and kura. Photo / Ministry of Education

De La Salle College's roll is about 95 per cent Pacific students, Hogarty said.

"That description [by Treasury] very much matches our school.

"It is concerning if they were given that advice and did not take it."

Hogarty said their index score had shifted them to the equivalent of about "3 to 4" under the old decile system.

"I was surprised it could change in such a short time. I know some other schools are in similar situations," he said.

"I am not sure exactly how this was determined, but I can't say there has been any significant changes from day-to-day interactions with students and their families."

The decile system was introduced in 1995 to balance out inequalities and difficulties in schooling that different areas faced.

The up-to-date data and new criteria sees a redistribution of resources. Photo / Ministry of Education

It was based on five factors including income levels, the number of people on benefits, jobs and household crowding.

There were 10 deciles - 1 being the lowest and 10 highest, with lower-ranking schools receiving extra funding.

However, it was regarded as a blunt measure, wrongly seen as a marker of school quality, out-of-date and with too few bands. Deciles were also seen to increase the stigma and stereotyping of schools.

The new Equity Index uses 37 socioeconomic measures associated with poor education outcomes. These include factors such as a parent in prison or a youth justice notification, as well as parents' income and benefit history.

The results are anonymised and look at student profiles from the past 20 years and educational achievements, then compare them with current students over the past three years to produce an Equity Index score.

About 89 per cent of schools and kura will see a boost in funding, while the rest will receive slightly less. Photo / Ministry of Education

Numbers range from 344 to 569, giving 225 possible scores.

Based on that, schools receive their share of the equity funding pool - about 4 per cent of the total school budget nationwide.

Education Minister Chris Hipkins said the index uses better data to give a better picture of which students needed extra resources.

"Because of that we're able to invest more in the right places."

Under the new index the higher the score the higher the funding schools can receive. Photo / Ministry of Education

Schools and kura in Te Tai Tokerau/Northland will receive an extra $223 per pupil while those in Auckland will receive an average increase of $6.25 extra per pupil.

Schools in South Auckland will receive on average $525.47 per pupil after the changes, representing an average increase of $70.47.

This compares to schools in the north of Auckland which will receive on average $60.77 per pupil for an average increase of $16.60.

The exact scores schools received have not been released publicly, and nor has the funding that comes with it.

Hipkins said to adopt Treasury's recommendation would have meant other parts of the education package would have had to be cut. Treasury recommended this come from operations grants.

"This would be giving with one hand and taking with another and it's by no means clear whether any particular school would be better or worse off with more equity funding but a cut to their wider [operations grants]."

Hipkins said he thought they "got the balance about right".

Green Party education spokesman Te Anau Tuiono said the Government should have taken an approach that meant schools did not lose funding.

"Especially when it was made very clear that it would be Pasifika students in South Auckland who would miss out.

"What we're talking about here is small change in the context of a normal budget - but for some of these kids it can be the difference between schools being able to provide things like sports equipment, or going without."

Ministry of Education hautū (leader) of operations and integration Sean Teddy said schools that lose funding would be provided transition support.

The changes would not come into force next year, and from 2024 any reduction in funding will be capped at five per cent per annum of their 2022 operational grant, to make sure funding is phased out over time.