Massey University students celebrating their graduation from the country's most financially troubled university

The Tertiary Education Commission has named the two universities it says are at high risk financially.

They are Massey and Victoria.

The Commission appeared before Parliament’s Education Select Committee yesterday and offered a revealing and rare insight into the complex world of university economics.

Its Briefing to the Incoming Minister said two universities were facing a high financial risk.

The Commission’s CEO, Tim Fowler, quickly made it clear that one was Massey.

National Rangitikei MP Suze Redmayne had said the cuts Massey was already making didn’t quite measure up because its engineering courses had been closed, the Veterinary School was in trouble, and there had been significant cuts to other courses when the country relied on those industries.

Fowler told the Committee that Massey had ten consecutive years of declining enrolments.

“Now let me say that again: a decade of decreasing enrolments. That’s the first thing it is facing,” he said.

“The second thing is that you picked up the example of engineering.

“Massey delivered, until the end of last year, two per cent of the overall number of Equivalent Full Time Students (EFTS) in engineering across the entire country.

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“I would be asking why they hadn’t closed it a lot earlier.”

Massey is spread across two other cities, Auckland and Wellington, apart from its base in Palmerston North.

“They’ve got three large different campuses in three different cities with ten years of declining enrolments for on-campus,” he said.

“Now, that has been offset helpfully by an increase in off-campus; this is distance-related delivery.

“But distance delivery is not an easy game to be in.

“The number of people it takes to get one EFTS from distance has been declining every year for two decades.

“So you need 19, you know, 18 people enrolled just to get one even when they’re studying distance.

Fowler said the issues facing Massey were not an easy mix.

“It’s not just about how much we’re giving them for Veterinary Science or how much I’m investing in creative arts or whatever it might be that they’re delivering.

“There’s a whole variety of issues there that their Council and management team have to deal with.”

The prime role of the Tertiary Education Commission is to monitor the academic and financial performance of universities and polytechnics.

Fowler named Victoria University of Wellington as the other high-risk financially.

And ominously for both troubled universities, he suggested that although higher education enrolments had yet to start, he feared there was going to be “market share” changing hands, but any substantial increase or decrease in the number of students would be unlikely.

Fowler has a range of powers he can deploy to deal with the financial problems of the two universities, ending with sacking the University Council and appointing a commissioner to deal with any financially insolvent university.

“We haven’t done that at a university, but we have done it for several polytechnics before the Te Kupenga merger.”

Te Kupenga was Labour Education Minister Chris Hipkins’ answer to that string of financial issues within the Polytech sector.

But Fowler made it clear yesterday that it was not the TEC’s first option.

He said that the TEC had advised the incoming Labour-led government in 2017 that there needed to be a very comprehensive response to the state of the polytechnic sector in 2017; it was in a parlous state.

“We had already intervened at three of them and put commissioners in, and we’d put in $50 million just to keep UNITEC going,” he said.

“There needed to be a system solution.

“Our advice is, is out there in the public sphere. A single entity was not the preferred option that we had put forward.”

Fowler said the sector required larger extra funding sums from the TEC each year.

However, he questioned the model that the Polytechs had run under before Te Kupenga.

He said seven or eight had ended up with campuses in Auckland on Queens Street.

“The old polytechnic model was one of full-on competition, and that’s the reason why all those institutions were up in Auckland on Queen Street, trying to have their international students study there,” he said.

“And so, the question for us going forward is, okay, is there some value, in actually having collaboration between entities to be able to spread cost and spread load?”

To further complicate the TEC’s life is the National Government’s promise to build a third medical school at the University of Waikato.

Fowler said that the total number of medical school places was set not by the Universities or the TEC but by the Cabinet because the costs were so high.

It took $51,272 for the funded part of each year’s medical student tuition, plus the Ministry of Health then had to fund their training over their last two or three years once they were in hospitals.

However, this year, there would be an extra 50 medical students in the Auckland and Otago schools for a total of 598, which would cost $30 million.

National’s election campaign documentation says that the Waikato School will enrol 120 students in 2027, and its cost projection of $7.7 million a year aligns with Fowler’s figures.

The documents estimate the school will cost $280 million, with the University supplying the other $100 million.

Fowler was guarded on its chances of happening.

“It’s a bit of work that’s been led by the Ministry of Health that we feed into,” he said.

“It’s definitely still part of a policy process.

“There’s a cost-benefit analysis that needs to be done to support the feasibility of that particular medical school.”

To add even further to the TEC’s challenges, the 2023 Budget appropriated an additional $128 million to help tertiary institutions deliver their strategic plans.

In other words, an extra tuition subsidy.

But Fowler said that had only been appropriated for two years and had not become part of the baseline funding for universities.

“And at two years, it comes off. So that’s what’s called a cliff.”

The 2023 budget allocated at least $3.7 billion to the university sector; under Finance Minister Nicola Willis’s call for 6.5 per cent cuts in all budgets, that would mean the sector could lose $240 million in this year’s budget.

That may be compensated for by ending fees-free, which is currently budgeted at $318 million.

But for a sector already up against the wall, the likelihood of any relief from the government would seem slim which must mean that sooner or later both Massey and Victoria are going to have to make some very hard decisions.