New Zealand (Commonwealth Union)_ Recent findings from a Tertiary Education Commission (TEC) briefing paper have raised significant concerns about the financial health of New Zealand’s universities, suggesting that the sector’s fiscal situation is worse than it may appear. This analysis, reported by RNZ, reveals that Massey University and Victoria University of Wellington are identified as high-risk institutions, casting doubt on the sector’s financial stability in the coming years. The March briefing paper, obtained by RNZ under the Official Information Act, reveals that the combined deficit forecast for eight New Zealand universities stands at $42 million. This deficit is approximately 0.9% of their expected income. The paper highlights a troubling discrepancy between reported surpluses and the underlying financial challenges faced by these institutions.
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Universities New Zealand Executive Director Chris Whelan has pointed out that the government controls around 70% of university funding, leaving institutions with limited space in managing their finances. Whelan emphasized that while universities are making expenditure decisions, these choices are heavily influenced by government conversations and policies. The TEC report indicates that the $138 million surplus reported by the sector in 2023 was largely due to one-off gains and increased valuations of trust funds, masking an underlying deficit of $66 million. The report expresses concern over the sector’s reliance on these temporary financial boosts and the potential risks posed by declining capital spending, which could lead to substandard facilities and delayed maintenance issues.
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Additionally, the paper forecasts a collective deficit of $42 million for this year and raises doubts about the sector’s optimistic projections of a $44 million surplus in 2025, growing to $129 million by 2026. The report suggests that achieving these projections will be challenging due to anticipated increases in both domestic and international student enrolments, alongside constrained expenditure growth. Furthermore, Massey University and Victoria University of Wellington are identified as particularly high-risk. Massey is projected to face a $30 million deficit this year, with domestic enrollments declining significantly over the past decade. The report notes that Massey’s campus-based enrolments have dropped by 14%, with its Albany campus seeing a 40% decrease in domestic enrolments since 2018. The university is struggling with competition and changing student preferences, which have impacted its financial stability.
Despite these challenges, Massey Vice-Chancellor Jan Thomas remains optimistic. She notes that the university’s financial situation is improving and expects a smaller deficit than initially budgeted. Thomas attributes some enrollment declines to strategic changes, such as the discontinuation of certain courses, and highlights ongoing efforts to adapt and diversify revenue streams in response to anticipated government funding constraints. Additionally, Victoria University of Wellington is also facing significant financial pressures. The report indicates that Victoria’s domestic enrolments have decreased by 17% since 2021, and the university has budgeted for a break-even result this year. Vice-Chancellor Nic Smith disagrees with the high-risk classification, citing recent increases in student numbers and improvements in enrollment figures. However, he acknowledges the sector’s broader funding challenges and the need for strategic resource sharing and collaboration among institutions to address financial sustainability.
Furthermore, Smith emphasized that the university sector’s reliance on government funding and student fees, which have not kept pace with inflation, is unsustainable in the long term. He also suggested that universities must explore alternative revenue streams and share resources more effectively to navigate the financial difficulties ahead. The TEC’s report also categorizes Otago, Lincoln, and Waikato universities as medium-risk, highlighting the sector’s vulnerability to medium-term financial challenges. The report underscores the need for universities to address these risks promptly to prevent potential long-term consequences for their financial viability and their ability to deliver quality education.
As the government undertakes a review of the university sector and faces the costs associated with the dissolution of Te Pūkenga and other reforms, the financial stability of New Zealand’s universities remains a critical issue. The sector’s ability to adapt and find innovative solutions will be crucial in ensuring its sustainability and continued contribution to higher education in the country. Furthermore, the TEC report reveals a complex financial landscape for New Zealand’s universities, with significant risks and challenges ahead. Accordingly, institutions like Massey University and Victoria University of Wellington are at the forefront of these issues, grappling with declining enrollments and financial deficits. Hence, addressing these challenges will require careful management, strategic planning, and potentially new approaches to funding and resource allocation.
