A $521 million spend over four years includes a 5% funding increase for tertiary institutions - the biggest increase in at least 20 years.
However, university acting vice-chancellor Prof Helen Nicholson said yesterday’s announcement needed to be viewed in context.
It was also the longest sustained period of significant inflation the country had faced in recent decades, she said.
"While that increase - to take effect in 2024 - is a little ahead of forecast inflation for next year, it provides a minimal catch-up for recent years of tuition subsidy funding rate increases well below inflation."
The increase in the tuition subsidy - by far the largest component of government funding the university received - would mean roughly $4 million more income than expected for 2024.
However, there was a $60 million funding gap that needed to be closed, she said.
"Today’s Budget contained some small slivers of good news, but overall will make only a minimal difference to the financial challenges facing the University of Otago."
This follows the university’s announcement last month that it is seeking to save money due to a $60 million budget shortfall, options including asset sales, reduced course offerings and potentially "several hundred" job losses.
The benefit of yesterday’s increase was further eroded as it was the sixth successive year there was no boost to the Performance Based Research Fund, Otago’s second-largest source of government funding, she said.
However, the university recognised government funding was tight and and anticipated a slightly lower increase.
"In that limited sense the 5% announcement was a positive surprise."
Minister of Education Jan Tinetti said the funding would help tertiary institutions manage increases in delivery costs and maintain quality and accessibility.
"We know global inflationary pressures and the tough economic outlook have had a profound impact on our tertiary providers. The Budget is responding to those pressures."
Universities New Zealand chief executive Chris Whelan acknowledged the increase, but said the situation remained "precarious".
Factoring in inflation forecasts for 2023 and 2024, the consumer price index would have gone up 34% over a 10-year period, he said.
"With today’s announcement, average student funding will have risen by 16% over the same period - a drop in real terms of 18%."
The Government controlled nearly 80% of university funding, and its decisions determined the extent to which universities could deliver quality teaching and research, he said.
"Our hope is that as the economy recovers, the Government will see that further investment in our universities is actually an investment in this country’s future."
Tertiary Education Union (TEU) national secretary Sandra Grey said the increase was the first sign of genuine recognition of the significant underfunding the tertiary education sector had been grappling with for decades.
In last year’s Budget, funding was budgeted to increase by 1.2% from January 2022 and 2.75% from January 2023 at a time when inflation was running at 6.9%.
"The 5% funding boost announced today should go some way to ensuring students have access to quality education, provided the institutions invest in people.
"With large-scale staff cuts already under way at Otago, imminent at Te Pūkenga and Victoria University, and expected elsewhere, now is the time for institutions to rethink plans to cut jobs."
Otago TEU organiser Philip Edwards said given the increasing gap between funding and inflation there appeared to be little to be happy about.
"I can’t imagine this will give any relief in terms of proposed cuts," he said.
