New Zealand vice-chancellors have accused the Labour-Alliance government of reneging on a deal that tied extra state funding to a temporary freeze on tuition fees.
Last year, institutions agreed to freeze fees in return for the first funding increase in nearly a decade, but only if a more substantial increase followed in this year's budget.
But last month, a modest 2.6 per cent increase was again tied to a fee freeze. Vice-chancellors' committee chair James McWha called the deal "unacceptable".
If institutions reject the budget offer, they lose not only the increase for the 2002 academic year but also the 2.3 per cent increase paid out in 2001 and a new competitive "centres of research excellence" fund.
The University of Canterbury shut its doors for half a day in protest at the deal. Canterbury last year lost NZ$2.4 million (£690,400) in library purchasing power through currency fluctuations and also had to spend NZ$2 million in meeting unexpected new laboratory standards but had no means of raising extra revenue to cover these costs.
Vice-chancellors at New Zealand's seven other universities oppose the below-inflation offer, which they say would not redress nearly a decade of under-funding.
The government said it was committed to cutting costs to students by freezing student fees for the second year running.
Tuition fees, along with student loans, were introduced in the early 1990s. Steadily increasing fees have helped contribute to a spiralling NZ$4 billion student loan debt.
Professor McWha said if universities accepted the offer, they were faced with further cost-cutting measures that would place New Zealand universities in the second league of global institutions.