Labor has been accused of "cynical bogeyman politics" after it attacked Education Minister Simon Birmingham's suggestion some private schools are being overfunded.
Treasurer Scott Morrison says there's more schools funding on offer from the commonwealth than ever before but it must be allocated based on need, not "sweetheart deals".
"Bill Shorten's agenda is to engage in cynical bogeyman politics," he told ABC radio on Wednesday.
"He goes out there, puts the sheet over his head as the big ghost scary thing he does every day and he tries to scare the Australian people every single day."
Labor has accused the government of having a secret hit list of schools earmarked for funding cuts.
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Senator Birmingham this week conceded there were some private schools that "fit the bill" of being overfunded by governments.
He is re-negotiating school funding arrangements with the states, with the existing agreement finishing at the end of 2017.
The funding arrangements were established 2013 with some of the deals with states signed under the then-Labor government and some signed after the coalition won power.
The Gonski panel tasked to develop a new funding model at the time was told no school could lose a dollar, meaning historical arrangements for federal funding of private schools were entrenched regardless of whether it matched need.
But funding to public schools would increase at a much faster rate to allow them to catch up.
Mr Morrison said taxpayer funding as a proportion of what private schools spent was "very, very small", but needed to stay.
"All Australians pay taxes and all Australians receive some sort of services for those taxes," he said.
Catholic schools are worried the renewed discussion around school funding creates uncertainty for parents.
"The priority must be to move all systems and all schools closer to being funded according to their need rather than moving funding between schools in aid of other policy objectives," National Catholic Education Commission director Ross Fox said.
NSW Association of Independent Schools chief Geoff Newcombe says comments about overfunding were disappointing and governments should look at how to get more money from wealthy parents who send their children to public schools.
He suggested imposing a Medicare-style levy for education.
Labor education spokeswoman Tanya Plibersek said Australians were seeing the "same, tired old fights".
"The government is out and about this week playing the blame game and picking fights with the states and territories to distract from its plan to effectively scrap needs-based funding," she wrote in The Guardian.
But Senator Birmingham said there were many common ambitions between the coalition and Labor on the issue.
"We both want to deliver funding that is distributed according to need and we both want to help boost student outcomes," he told AAP.
"I call on Labor to drop the schools scare campaign and work with the Turnbull government to iron out the problems with the current distribution of funding."
