Most universities forecasting deficits again, blaming low domestic enrolments and higher costs

Most universities are expecting financial losses as they near the end of their academic year.

Five have told RNZ they are forecasting deficits for 2023, two expect surpluses and one, AUT, says it is too early to say which way its result will go.

Last year, six of the eight universities made deficits totalling about $99 million, one of the worst results on record.

Universities were blaming this year's deficits on factors including lower than expected domestic enrolments and higher costs.

The forecast of five deficits was an improvement on earlier this year, when a Cabinet paper warned seven universities were expecting deficits and the sector was forecasting an overall deficit of $62.6 million.

Tertiary education analyst Roger Smyth said the forecast deficits reflected the knock-on effects of last year's sudden drop in domestic enrolments and the cost of resulting staff lay-offs to reduce expenditure.

Education Ministry forecasts indicated domestic enrolments would be stable for the next few years, and Smyth said that would help universities return to surplus.

"To some extent, the 2023 results reflect the flow-through and responses to the 2022 situation. The system is likely to stabilise at a new, lower level and then build from there as more international students arrive," he said.

Universities New Zealand chief executive Chris Whelan said its members were dealing with major headwinds but the underlying problem was that government funding was not keeping up with rising costs.

A one-off funding boost earlier this year helped, but it did not remove the pressure on universities, Whelan said.

"We can get through this, but we just need government to basically recognise that it does control the majority of our funding, and if inflation goes rapidly up, governments needs to come in and assist with that," he said.

"Universities can keep on cutting but it is going to impact on quality, on the range of research and teaching that is available, so there's got to be a point that government, controlling most of our funding, also comes to the party."

Whelan said inflation increased about 30 percent in the past 10 years but universities' per-student funding from the government had increased about 20 percent in that period.

System is fundamentally flawed - union

Tertiary Education Union secretary Sandra Grey said the forecasts were disastrous and showed the higher education funding system needed an overhaul.

"We just can't keep having major public institutions facing year-on-year cuts because they can't make ends meet. There's something fundamentally flawed now in this system."

Grey did not expect universities would stabilise following the current round of cuts and restructuring at Otago, Massey and Victoria.

"Without a fundamental conversation about what we want out of our universities and a conversation about how we fund it, we're just going to see a continuation of more than a decade of just decline and decline in terms of staffing numbers and courses provided. We can't keep doing that. I don't see light at the end of the tunnel without that fundamental conversation."

Grey said relatively low international student enrolments were a factor in the deficits, but that only highlighted that the funding model made universities dependent on overseas income to prop up domestic enrolments.

"New Zealand can't be reliant on that international market, because who knows when we're going to have another pandemic or a financial crisis that will throw us into chaos again. We need a self-sustaining, well-funded public education system."

Universities needed more funding so they could provide high-quality education and research, Grey said.

How the universities compare

Auckland and Lincoln universities told RNZ they expected to make a surplus this year, AUT said it was too early to say though a recent council paper indicated a surplus was possible, and the remaining five institutions said they were expecting deficits.

The University of Waikato said it was forecasting a deficit of about $6m.

It said domestic student enrolments were within one percent of its budget, and it had enrolled more international students than expected.

However, operating costs had been higher than budgeted, particularly for staff remuneration and travel, and inflation was driving costs up.

The University of Canterbury said it would make a smaller deficit than it had budgeted for thanks to higher enrolments and more research income than expected.

It said its situation was not comparable to other universities.

"The University of Canterbury has only recently recovered from years of financial austerity and careful management following the earthquakes, and we are pleased to see our student numbers return to, and recently exceed, pre-quake enrolment levels," it said.

AUT said its enrolments were steady and it had made savings.

"However, it is too early to speculate on a return to surplus in 2023 and our focus remains centred on delivering for our students, staff and communities," it said.

Lincoln University said it was forecasting a small surplus after a big increase in enrolments.

"As of today's date, our total student head count stands at 4114, with 3054 domestic students and 1060 international students. This represents a 25 percent total student head count increase from 2022. The total student head count figure doesn't include enrolments for courses that haven't yet commenced, for example November Summer School," it said.