The education union says linking school attendance to funding has been disastrous for the Northern Territory.

A new report from the NT the Department of Education shows school enrolments have fallen by 748.

It said the drop could be attributed in part to students moving from public to private schools.

NT president of the Australian Education Union (AEU), Jarvis Ryan, says that under the territory’s current funding model, the shift has left public schools underfunded.

“It's a vicious downward spiral,” Mr Ryan told reporters this week.

“We have an inverse needs-based model where more struggling schools will actually find it even more difficult to raise the resources they need to provide for their student cohort.

“Because we do things like fund schools based on attendance, more advantaged schools get better off over time.”

Mr Ryan conceded that population decline (especially in the town of Nhulunbuy) was partly to blame, but insisted that the former government’s practise of pumping money into private schools while stripping the public sector was at the heart of the issue.

Education Minister Eva Lawler agreed that parents were shifting children to the private sector.

“When you take $114 million out of the system, that's what happens,” Ms Lawler said, also referring to the actions of the previous Country Liberal government.

Ms Lawler says Labor is setting up a needs-based funding model.

“[Funding] needs to be attached to the students where the greatest need is,” Ms Lawler said.

“We know the greatest needs are around students in our remote [areas], low socio-economic, [with] English as a second language.”

The Government has committed $120 million, and another $20 million for the new school year.

Private schools have been guaranteed they will not lose funding under Labor.