Photo: supplied
The government's preferred option for overhauling the nation's polytechnics could result in losses totalling $297m over the next four years - $39m more than the cheapest option.
The estimate comes from a team of advisers who said in May the government's preference - allowing some polytechs to stand alone and grouping the weakest together - would result in collective losses starting at $96.3m next year and falling to $50.3m by 2028.
The government is consulting on that option as it moves to dissolve Te Pūkenga, the national mega-institute that was created to combine polytechnic and workplace learning.
The advisers' report - obtained by RNZ under the Official Information Act - estimated that under the government's preferred option, the sector's annual deficits would be higher than in each of three other possible options and about $10m a year larger than the most cost-effective option (creating four regional polytechnics out of the existing 16 institutions, an option recommended by the Education Ministry).
It said the government's option delivered only moderate to low benefits on a range of measures, including better learner outcomes and would require "significant additional resource to return entities to viability".
Overhaul of polytechnics could result in bigger losses
The stand-alone entities would include Unitec and Manukau as a single polytechnic, Waikato, Eastern, Nelson-Marlborough, Otago and Southern.
The "non-viable" polytechnics would be Northtec, Toi Ohomai in Rotorua and Bay of Plenty, Western Institute of Technology at Taranaki, Tai Poutini on the South Island's west coast, and Whitireia and Weltec.
The advisers instead recommended the creation of eight organisations - merging Otago and SIT in the lower South Island; Ara, NMIT and Tai Poutini in the upper South Island; Whitireia, Weltec, Ucol and Western Institute of Technology in the lower North Island; and Unitec and Manukau in Auckland - leaving Northtec, Wintec, Toi Ohomai and Eastern Institute of Technology to stand alone.
The Open Polytechnic would provide online courses for the institutions.
Critically, the advisers also recommended keeping the provision of workplace training alongside the new polytechnics and creating a central services unit to provide cost savings and coordination.
The latter recommendations would retain some of the functions and purpose of Te Pūkenga.
"We consider that the two key parts of the system (ITPs and work-based learning) should not operate as separate systems. They must be integrated, which provides a sounder pedagogical approach.
"Public sector vocational education provision should be seamless, operating across an integrated network of provision with on-job, on-campus, and online modalities. We consider that this is one of the benefits of RoVE that Te Pūkenga has been working towards. We consider the system needs to avoid the unproductive competitive environment of the past between ITPs and previous ITOs," the report said.
The report said a central services unit (CSU) would cost about $7.5m a year to run.
"The CSU would take all the cost-saving benefits that currently exist within Te Pūkenga by consolidating certain services at a central level. This would enable the network and individual ITPs to continue achieving economies of scale and reduce costs.
"It would also centralise specific functions such as IT platform management (eg FMIS) and procurement (eg insurance), which can and have (under Te Pūkenga) led to cost savings through bulk purchasing and shared resources."
The report rated its recommended option as "moderate" in terms of financial viability and said it was "highly probable vulnerabilities remain in the network under this model".
It said large-scale mergers creating just four regional polytechnics would be most financially viable, but even then some regions were "inherently unviable".
The report said the vocational education system was in "a precarious state".
"It is clear from the financial modelling that the vocational system is in a precarious state and a number of conditions will need to be met to create a viable network of regional and industry-focused entities that also support New Zealand's social and economic goals," it said.
Funding rethink
The report said a fundamental rethink of funding vocational education and training was required, because funding institutions according to their enrolments did not provide enough money for key activities.
Regardless of their future structure, polytechnics needed significant capital investment for restructuring, property, and IT requirements.
The report said foreign students would be an important source of income and there was an opportunity to change the approach to international education.
It recommended ensuring polytechnics were not lowering their fees to compete against one another in the same markets, and a focus on Auckland where about 60 percent of foreign enrolments occurred.
The report said polytechnics had explicit commitments to Tiriti o Waitangi, including improving outcomes for Māori students.
Work-based learning is facing funding pressures, the report said. Photo: 123RF
Losses loom for industry training
The report indicated that organisations set up to arrange and provide apprenticeships and work-based learning could also run into financial problems.
The work-based learning divisions of Te Pūkenga had been profitable in recent years, thanks in part to significant increases in government subsidies.
But the report said that level of profitability would not continue.
"While there are a number of WBL divisions that could be successful if divested, a number are significantly challenged under the assumed funding conditions," the report said.
"If the WBL divisions were divested outside of the public vocational sector it could result in under-provision, or no vocational/industry training to certain industry sectors unless additional resources were made available.
"We would expect these sector surpluses would be larger if work-based learning divisions are incorporated into regional ITPs, as no standalone governance or ELT costs would be required."
The report also indicated that industry bodies should not be too quick to claim an interest in the millions of dollars Te Pūkenga's work-based learning sector earned in recent years.
"Over 90 percent of total revenue that went to the work-based learning divisions in 2023 came from government funding," the report said.