New Zealand university funding shortfall set to widen

New Zealand universities face a bleak choice between rejecting eager students or shouldering much of the expense of educating them, after authorities warned that funding was unlikely to match demand.

The Tertiary Education Commission (TEC) said planning for 2027 was “taking place in a very challenging fiscal environment”, and universities and colleges should adjust their expectations accordingly.

“The investment environment is not expected to be materially different from 2026,” chief executive Tim Fowler said, in a foreword to an 83-page guidance document on funding applications for next year. “Enrolments will likely exceed the funding available.

“Trade-offs will be required, and most providers will see reduced investment. No provider should assume 2026 funding levels will continue.”

The advice echoes similar warnings last year, when enrolments significantly exceeded forecasts. Universities are thought to have admitted at least 4,000 unsubsidised students, although final figures are not yet available.

Universities New Zealand chief executive Chris Whelan said he expected the funding shortfall to be steeper this year. “The forecast increase in growth was 3 per cent and it looks like we are well above that.”

He said that while a cooling of New Zealand’s economy might have spurred more people to consider university, forecasting was generally becoming more difficult because of changing study habits. “Half of all students at university are now…coming back in their 20s and often later. They’re staying on to do postgraduate more than in the past. A lot of our models don’t pick up some of the subtleties.”

Whelan said some universities were accepting enrolments funded by student fees alone. “Some…are taking choices to not accept enrolments in areas where it’s likely to be too expensive.” He said the TEC might provide additional subsidies but “we still don’t know how some of those conversations are going to play out”.

The negotiations around 2027 enrolments could be tougher still. The guidance document, aimed at vocational training and private higher education institutions as well as universities, warns that some will receive no additional funding and some may receive no funding at all.

“In exceptional circumstances we may disinvest from all of your provision,” the document says.

“Our investment will focus on high-performing and priority provision that delivers good outcomes for learners, and the skills and qualifications needed for an educated, innovative and prosperous New Zealand. Providers should reprioritise their existing funding, where relevant, to respond to our priorities.”

Whelan said last year’s budget had delivered universities a “net overall increase” – albeit not enough to keep pace with their rising costs – while weighting more funding towards STEM subjects. Data was not yet available to indicate whether the policy change had produced more STEM enrolments.

“People…going down a STEM path pretty much need to have chosen to do that right out the gate at high school,” Whelan said. “It’s not something you can suddenly decide when you get to university – do I want to do English lit or physics?”

He said outcomes for STEM and humanities graduates were similar in terms of both earnings and employment rates. “It…comes down more to how transferable your skills are, and which part of the economy you’re going into.”

john.ross@timeshighereducation.com