Falling student numbers to take another bite out of tertiary sector funding

Thursday, 31 August 2023

Falling student enrolments at four of Aotearoa’s universities and mega polytech Te Pūkenga are behind a forecast $107.7 million shortfall for the already cash-strapped tertiary education providers.

The Tertiary Education Commission (TEC) will cut its funding to them by $52m as a result of the fall in student numbers, despite Victoria and Otago universities asking the commission to hold off, a new report shows.

The TEC has also questioned whether Te Pūkenga’s cost cutting measures ‒ including cuts to 400 staff ‒ went far enough to address its own financial challenges and falling student numbers.

Universities are funded through the TEC, partly based on the number of students they have. However, a recent drop in student enrolments has exacerbated the financial challenges many have been facing.

A TEC briefing to Education Minister Jan Tinetti about the state of the tertiary sector noted a number of providers were forecast to “underdeliver” with enrolments forecast to be “significantly lower”.

Lower student enrolments at Te Pūkenga, Otago University, Massey University, Auckland University of Technology (AUT), and Te Herenga Waka ‒ Victoria University, meant they were expected to deliver $107.7m less than previously forecast.

In response to this, the TEC planned to reduce its allocations for the five organisations by close to $52m.

Victoria University of Wellington and Otago University asked the TEC to delay reducing their funding this year and instead recover it in 2024. This was seen to be especially important for the capital’s university which was reportedly “forecasting access to cash to be tight at the end of the year”.

Victoria University is grappling with a forecast deficit of $34m this year, and has seen enrolments decline 12.1%​ compared with last year.

The TEC considered alternative measures including reducing the funding at a lesser rate of 25% as opposed to 50%, and even not reducing the funding at all, instead using its balance sheet to support funding increases to other tertiary providers.

However, this was seen to be “inconsistent with historical processes” and could set an “unwelcome precedent”.

The TEC further noted while it may help their cash position in the short-term, it was “not conducive to the institutions effectively managing their organisation based on the true level of student enrolments”.

The reductions would have “limited financial risks” for Te Pūkenga, Otago, AUT and Massey, and TEC was working closely with the universities in financial difficulty, the briefing noted.

Te Pūkenga’s financial performance and enrolments “high risk”

Meanwhile a separate TEC briefing relating to Te Pūkenga’s March quarterly report described its financial performance and enrolments as “high risk”, with domestic enrolments falling “sharply” by 9% in 2022 ‒ that’s a drop of more 5200 students.

“As a result, Te Pūkenga is expecting to report a deficit significantly higher than its budgeted deficit of $27 million [for 2023].”

It noted Te Pūkenga, which was formed three years ago, after the merger of the country’s 16 Institutes of Technology and Polytechnics (ITP) and nine Industry Training Organisations (ITO), was implementing a range of cost saving measures. This included a new proposed structure with 400 jobs being cut.

However, the TEC felt “further large-scale savings and revenue growth still need to be achieved”.

“We remain concerned that not enough savings are being sought through the new organisation design.”

There were also continuing concerns about a “lack of clarity on how Te Pūkenga’s new operating model” would work.

The TEC said Te Pūkenga communicating its vision was “crucial to resolving some of the uncertainty that currently exists as well as improving staff morale”.

In June, the Government announced a one-off boost for the next two years of $128m of funding for tertiary education, however, this has not stopped many tertiary institutes from continuing with earlier cost savings proposals.

Tertiary Education Union members across the country’s universities, polytechnics and two wānanga are set to meet next month in September to discuss new funding solutions for the sector.