Major university job cuts prompt warning over underfunding
They say a sharp drop in enrolments has exposed the long-standing inadequacy of government subsidies, and cuts to balance universities’ finance in the short term will do long-term harm to the country’s teaching and research capacity.
The warning follows announcements that the University of Otago and Victoria University of Wellington face multi-million-dollar deficits (NZ$60 million or US$37 million, and NZ$33 million respectively) and will need to axe hundreds of jobs each.
The deficits are driven by sharp drops in domestic enrolments that have come at a time when more-lucrative international enrolments are still recovering from the nearly three-year pandemic closure of New Zealand’s borders to new foreign students.
Though only Otago and Victoria are planning large-scale cuts, six of the eight universities have reported a downturn in enrolments since the academic year started in March.
In addition, university annual reports show the sector was already under strain last year, with five institutions reporting deficits for 2022 and a sixth expected to join them when its report is tabled in July.
This week the Victoria and Otago students’ associations and branches of the Tertiary Education Union launched a petition calling on the government to intervene.
“By taking immediate and decisive action, we can prevent these staff cuts and establish a sustainable funding model that avoids such risks to tertiary education in the future,” they wrote.
Declining government funding
They called on the government to allow Otago and Victoria to borrow more money for short-term relief, commit to more funding for the universities so they could avoid long-term job cuts, and sit down to review the way universities are funded.
The organisations noted that the government controlled 80% of universities’ funding via direct subsidies, research funding, and limits on annual increases to student fees.
They said direct government funding had declined 20% in real terms in the past decade, which was alarming.
They also said the government had saved about NZD350 million (US$218 million) due to lower-than-expected enrolments and that money could be reinvested to help the universities through a difficult period.
Victoria University Vice-Chancellor Nic Smith and Otago’s acting Vice-Chancellor Helen Nicholson supported the petition with an open letter of their own.
“The financial challenges facing New Zealand universities are significant and must be addressed urgently. The chronic underfunding of universities is increasingly threatening our stability,” they wrote.
“This issue is not about the budgetary responsibility or management of universities. Autonomy only exists when an institution has the resources to invest in the things it deems important – universities do not currently have that ability.”
Within less than a week the petition had several thousand signatories including former New Zealand prime minister Helen Clark.
An ‘extraordinary situation
Meanwhile, Tertiary Education Union president Julie Douglas said New Zealand’s universities are in trouble because of long-term government underfunding and in the short term they need a boost.
“We’re in an extraordinary situation at the moment and definitely there’s a problem in the university sector as evidenced by their annual reports,” she said.
“We’re in the problem now because of a long-term, systemic, chronic underfunding and if we don’t do something now it isn’t going to dig itself out of a hole. We need to have an active intervention.”
Douglas said a third university, Massey, is also cutting staff and she expects Auckland University of Technology will also announce cuts later this year.
Independent analyst Roger Smyth said last year’s deficits are highly unusual and indicate systemic problems.
“The difference between 2022 and all other years is that we've got the majority of universities recording a deficit. That's never happened in the last more than 20 years so it implies that the problems being faced by the system are system wide,” he said.
Universities New Zealand Chief Executive Chris Whelan said universities are constantly monitoring their enrolments and adjusting their budgets accordingly but it appears this year will be difficult for many institutions.
“Right now it’s going to be a challenge. That challenge is going to vary somewhat across the sector depending on where students are going, [and] how quickly individual universities’ international student numbers are recovering, but it’s going to be a challenge,” he said.
“The reality is we can do an awful lot around managing our expenses but actually it’s government that ultimately has to decide [whether] they want to maintain a high-quality, effective university sector.”
Whelan said the government recently announced a 5% increase in subsidy rates starting next year, but it is not enough.
“It is the biggest increase for a long time, but it’s a 5% increase in the face of about 6.8% forecast inflation. We’re continuing to slip backwards.”