New Zealand universities’ financial woes ‘unprecedented’

New Zealand’s universities face “unprecedented” challenges, with sector-wide deficits expected to be reported in both 2023 and 2024 “for the first time on record”, the country’s Tertiary Education Commission (TEC) warns.

In a briefing to incoming tertiary education minister Penny Simmonds, the TEC lists financial pressures on universities and polytechnics as its “current top priorities”. The primary problem is that government funding increases have “fallen well behind inflation since 2020, after tracking relatively closely in the 10 years prior”, the briefing says.

This has been exacerbated by a Covid-induced slump in international education earnings, two years of unexpectedly high falls in domestic enrolments and increases in general operating costs.

The briefing, given to Ms Simmonds in November and released publicly in early February, says two universities are now considered “high-risk” along with the national vocational education college network Te Pūkenga.

“As minister, you hold several key levers that could influence the funding and financing of the sector,” it says. “However, the government needs to be clear on…the extent to which it wants to create an environment that drives economies of scale, specialisation and differentiation of provision.”

The potential levers include boosting the rates of teaching grants and research funding and giving universities more scope to cooperate in course delivery. The two most cash-strapped institutions, Victoria University of Wellington and the University of Otago, last year failed to win TEC backing for a collaborative language teaching arrangement but nevertheless pushed ahead with a pilot.

Tertiary education expert Roger Smyth said rate increases for universities were unlikely, with Treasury resources constrained and the government primarily focused on vocational education reforms.

Ms Simmonds, a former chief executive of the Southern Institute of Technology in Invercargill, confirmed the government’s intention to disestablish Te Pūkenga in a December letter of expectations to its chair, Murray Strong. He subsequently resigned, along with chief executive Peter Winder.

Mr Smyth, a former education bureaucrat, said policy analysts had been examining possible changes to university financing arrangements after the previous government promised a review of higher education funding last June. But the review’s future is uncertain after the now governing coalition parties made no mention of a higher education review in their pre-election platforms.

The TEC briefing urges particular consideration of government support for research. “The performance-based research fund (PBRF) has not had a funding increase since 2018,” it notes. “There is an opportunity to review it to ensure it reflects current strategic interests and that its administration costs represent value for money.”

The document also urges a focus on “equity-of-outcome issues”, particularly for the Māori and Pacific communities, which are expected to comprise around a third of New Zealand’s population within 20 years. The TEC says that, while the overall completion rate for degrees is 63 per cent, it is only 49 per cent among Māori students and 44 per cent for Pacific Islanders.

The briefing says that around 20 per cent of new university students drop out within a year, costing the sector NZ$169 million (£82 million) in forgone tuition subsidies and fees. “Improving completions is not just good for New Zealand’s economic prosperity; it makes financial sense for tertiary providers…given the financial issues currently facing [them]. There are compelling financial returns on investment in learner success initiatives.”

john.ross@timeshighereducation.com