New Zealand¡¯s universities have sidestepped repeated warnings of a sector-wide deficit, but tough times lie ahead as administrators brace for a ¡°tight¡± budget on 22 May.

Five institutions have so far published their 2024 accounts and all finished the year in the black. They included Massey University and Victoria University of Wellington, whose financial circumstances were deemed ¡°high risk¡± last year by the Tertiary Education Commission (TEC).

The two universities recorded surpluses of NZ$17 million (?8 million) and NZ$4 million respectively, after trimming their salary bills. Massey also boosted its earnings by NZ$25 million through increases to its government grants, tuition fee income and trust funds.

Wellington analyst Dave Guerin said universities¡¯ published accounts reflected domestic and international enrolment growth and ¡°a fair bit of cost-cutting¡±. This had affected student-staff ratios, which were at their highest levels in about a decade.

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The Education Ministry has that there were 19.6 students for every academic in 2024, up from 18.7 in 2023, after staff numbers across the eight universities fell by 0.3 per cent.

Guerin, chief executive of the Education Directions consultancy, said universities faced fresh challenges after finance minister Nicola Willis almost halved the allowance for new spending measures in the forthcoming budget. ¡°There will be no lolly scramble in Budget 2025,¡± she .

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The NZ$70 million surplus recorded by the top-ranked University of Auckland was less than half of the previous year¡¯s ¡°exceedingly strong¡± result, which had been credited by the TEC for keeping the overall sector out of deficit. Auckland¡¯s NZ$152 million surplus in 2023 owed much to a NZ$58 million sponsorship agreement and a NZ$36 million ¡°fair value¡± gain on its financial liabilities, both recorded as one-offs in its accounts.

But vice-chancellor Dawn Freshwater warned that the sector¡¯s financial outlook remained ¡°challenging¡± amid rising geopolitical tensions, funding uncertainty, debates over indigenisation and academic freedom and the rise of misinformation, disinformation and generative AI. Gloomy economic forecasts and the country¡¯s brief 2024 dive into recession had made the challenges ¡°even more pronounced¡±, Freshwater .

Guerin said university administrators did not anticipate significant funding growth in the budget and many expected ¡°real cuts¡±. He said the government appeared unlikely to renew its predecessors¡¯ 4 per cent increase to subsidy rates in 2023 and 2024.?

This was adding to concerns that current funding arrangements would not be able to accommodate the ¡°solid¡± growth in domestic demand, as a decline in job opportunities rekindled kiwis¡¯ appetite for honours and master¡¯s degrees.?

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Guerin said the government would ¡°have to really work hard¡± to find the resources to meet the burgeoning demand. He said it could consider cutting existing activities to fund new ones ¨C known euphemistically as ¡°reprioritisation¡± ¨C or ¡°play around with student loan valuations¡± to boost repayment projections, at least on paper. ?

Another option might be to authorise increases in tuition fees ¨C something the government did in last year¡¯s budget. Guerin said this had been ¡°a bit of catch-up¡± after the previous Labour administration had kept fee rises below inflation, and it was unclear whether the current government would allow tuition costs to creep ahead of inflationary trends.

He said he did not expect large funding reductions, but smaller cuts were likely. ¡°A few million here, a few million there, alongside some big-ticket items ¨C it¡¯ll be messy, I think.¡±

john.ross@timeshighereducation.com