Blame game over why hundreds of Victoria Uni jobs are now on the line

Saturday, 27 May 2023

Up to 110 academic staff and 150 other jobs face the chop as Te Herenga Waka–Victoria University of Wellington tries to overcome a $33 million deficit. How did it get to this? Gianina Schwanecke reports.

When Nic Smith started as Victoria University’s vice-chancellor four months ago, he knew finances had been declining for several years.

But it was this year’s enrolment figures, which showed the number of domestic students had dropped 12% (meaning 2600​ fewer students), that made addressing this “much more urgent”.

Current debt project shows the university breaching its debt ceiling and “running out of money” at the end of 2024.

It has halted all capital expenditure, aside from necessary maintenance and the living pā project already under way.

Further spending cuts to travel, IT services, catering, and office supplies have helped create savings of about $10m, Smith says.

However, it seems likely the other $23m needed to achieve the university’s goal of “being back in black” by next year will need to come from staff redundancies.

How did we get here?

Smith says the situation was worsened by an over-reliance on international students, particularly from China – something that has always worried him.

“Covid exposed that risk in quite a brutal way.”

Tertiary Education Union branch president at Victoria University of Wellington, Dougal McNeill,​ earlier said the situation could have been avoided.

He felt it was no accident the same thing was happening at Otago, where hundreds of jobs were also set to go, acknowledging the impact of underfunding from Government.

However, he said proposal was also the result of “catastrophic mismanagement” by previous senior leadership.

He felt for Smith, who had “inherited a mess that’s really not of his making”.

Chronic underfunding

Education Minister Jan Tinetti said more than $521m had been allocated in the Budget to raise tertiary subsidies 5% in response to “global inflationary pressures and the tough economic outlook” impacting the sector.

She described it as the biggest increase in at least 20 years. However, it was the responsibility of university councils to ensure institutions operated in a financially responsible manner that maintained long-term viability, she said.

Tinetti said Victoria University had publicly spoken about its reduced domestic enrolments and impact on finances.

“Universities have the autonomy to determine how they manage their financial performance, course offerings, and organisational structures. As minister, I do not get involved in any such decisions,” she said in a statement.

Smith says a lack of government funding to kept pace with inflation was the most signifiant contributing factor.

“If we had had our income indexed to inflation, we wouldn’t have a budget issue.”

Tinetti’s comments seemed disingenuous, he says.

“I think it’s only the biggest because inflation is large. It’s still below inflation which just means that we’re going backwards at a slightly slower rate than we were.”

There had been no indication the Government was “prepared to bail us out”, Smith told staff during the forums.

He worried by the time the Government took more action and made a more substantial funding contribution it would be “too late”.

“Universities are these unusual organisations where it takes generations to build up capability, and you can reduce that capability and the costs very quickly, but it will take years to bring it back.”

By underfunding universities, “we’re mortgaging our future”.

The university had effectively subsidised subject areas it thought were important – issues like climate change, identity politics, social cohesion – from areas it had made surpluses from.

However, an increasingly “market driven exercise” this was no longer possible meaning some value subjects were in the scope of the proposal.

“We’ve had to balance the financial viability of those programmes in the current funding regime and the research contributions they make.”

Previous leadership to blame?

Former vice-chancellor Grant Guilford, who stepped down from the role in March 2022, says when he announced his retirement from the university it was in a strong position. The annual report for 2021 notes a $31m surplus for the year.

“Those numbers say otherwise: growth in student numbers, growth in research, productivity and a very strong financial position at the end of 2021.”

However, Smith told staff the university had only once in the past seven years made the “minimum 3% surplus” required to pay down its “fairly significant debt”.

He also pointed to a steady decline in student numbers, with its share of domestic students dropping form a peak of 17% in 2017 to 13.9% in 2022.

Guildford says the “many and varied” challenges have been impacting the sector for some time.

A combination of long term trends, like government funding not keeping up with inflation and a failure of Wellington to realise the value of the university.

It was also short-term impacts, like the pandemic, border closure and sudden interruption of international student market that had been “filling void” of underfunding.

Guilford says it was something that had always needed to be “carefully managed”.

“It was clear should we have an epidemic or the borders be shut, there was always a risk that would be constrained, and we would have to downsize the university.”

His final three years at the university were focused on trying to reduce costs, he says.

The university had also been careful in selecting its building programmes, largely driven by seismic strengthening requirements and in part facilitated by the sale of Karori campus.

Work on the living pā was refurbishment of a 40-year-old facility and done to encourage more Māori student enrolments, he says, rejecting claims such work was a “vanity project”.

What comes next?

Universities have to be “business-like”, Guilford says, and it’s role of management to ensure they are earning enough money to support the costs of its “public mission”.

“You cannot afford to jeopardise these critical institutions by not being hard-nosed about balancing the books.”

Asked if he felt in part responsible, Guilford says if the university hadn’t been in a strong financial position by the end of 2021, “things would have been much worse”.

His thoughts went out to students, staff and management: “These are very difficult times.”

Smith says it was a “sad day” and he understood staff’s feelings of anger and grief.

A proposal document to be finalised for consultation in June, with decisions to be announced in August.