Schools will continue to be funded based on socio-economic deciles for at least the next two years.

Education Minister Chris Hipkins says the former National Government's plan to shift to a new funding system based on the risks of each student underachieving will not go ahead in 2019 or 2020, while he reviews possible wider use of the risk-based measures.

Instead, the current decile ratings of all schools will be adjusted from 2020 in line with socio-economic data from this year's Census.

The decision appears to have been driven by advice that the proposed risk-based system, combined with a National Government promise that no school would be worse off under the new system, would have required an extra $100 million a year under one scenario or $165m-$175m under an alternative scenario.

Last week's Budget showed that the Government's tight fiscal rules left no money yet to implement major Labour Party election promises such as higher subsidies for early childhood centres with 100 per cent registered teachers and a $150 grant per student per year to schools that stop asking parents for donations.

"National's decile plan could have cost around $100m per year to implement in the schooling sector alone. But as was the case with many of the previous Government's ideas, none of this funding was budgeted for," Hipkins said.

Former Education Minister Nikki Kaye announced just before last year's election that funding for schools and early childhood centres would shift to a risk-based system from 2019 or 2020.

The risk factors were not yet finalised, but 16 draft factors included ethnicity, mother's average income, how old the mother was when the child was born, and whether the male caregiver was not the biological father.

In a Cabinet paper released today, Hipkins said National proposed a new funding system based on a standard amount per child, plus extra funding for children at risk of under-achievement based on the risk factors, and for children with learning support needs.

Funding for private schools, which has been capped at $45.7m since 2010, would also have been moved on to a fixed proportion of the standard per-child funding rate.

Hipkins has scrapped any increase in the private schools funding cap and said he had asked the Ministry of Education to keep analysing a risk-based system for state and integrated schools and early childhood centres to understand issues such as "tipping points where concentration makes a difference to the likely achievement of students".

He said moving to a purely risk-based funding system would have led to a majority of the country's 2500 schools losing funding unless the Government spent extra money to compensate the losers.

"This approach would not really have been viable as it would have meant in effect running two parallel systems with over half of the schools and [early childhood] services effectively continuing to be funded on a decile basis," he said.

He said the risk-based analysis showed that while most students attended schools with low levels of disadvantage, most disadvantaged students attended schools with very high levels of disadvantage (above 45 per cent).

"An increasing number of schools have either very high or very low levels of disadvantage, with fewer schools having moderate levels (10 to 45 per cent)," he said.

"Once schools get beyond 30 per cent of their students from disadvantaged circumstances, they struggle to achieve (e.g. secondary schools are unable to achieve high NCEA Level 2 achievement rates at these levels of disadvantage).

"Importantly, high concentration of disadvantage in a school impacts on all students in that school, not just on those from disadvantaged circumstances."

Hipkins said that rushing to adopt the risk-based system quickly "is likely to distract from the wider insights into disadvantage that it gives and the system-wide application of these insights".

"Originally, the index was only going to be used for the 3 per cent of total school funding that supports them for disadvantage," Hipkins said.

"But we want to use the index to look at all education supports and resources, across schooling and early learning, to see if they can be better used to reduce disadvantage."

Kaye said National was very proud of its work on the new risk-based system and wanted to "grow the pool of money for disadvantage".

"National said last year it was continuing to finalise the system and at that point we would finalise the funding that needs to go with it."