Tertiary Education Minister Penny Simmonds wants to break up mega polytechnic Te Pukenga and move towards a new model where the financially strongest polytechnics can eventually stand on their own and the rest become part of a federation model overseen by the Open Polytechnic.
However, the Tertiary Education Commission’s February briefing papers — released to the Otago Daily Times this week — provided an outline of the financial position of all the polytechnic divisions.
They revealed the Otago Polytechnic division ran an unaudited deficit of $8.3million last year, and its net cash position was likely to be about -$23m.
Back in 2019, when it was last stand-alone, it had a surplus of about $2m and a net cash position of -$12m.
"Their net cash position is worrying from a stand-alone point of view in this new environment.
"This could lead to them being forced to sell assets or cut staff and courses in order to stand on their own.
"I don’t think this would be good for the health of Otago Polytechnic or for staff and students."
Otago Polytechnic Te Pukenga executive director Megan Pōtiki said its deficit had been primarily caused by a large drop in government funding of $5.9m due to the unified funding system — which reduced funding for campus-based learning and increased it for work-based learning.
"We are working with specialist consultants hired by Te Pūkenga to ensure we have a solid pathway back to financial viability and sustainability, which includes continuing to drive numbers in domestic and international students and regular reviews to ensure individual programmes are sustainable.
Dr Pōtiki said its focus was on "making sustainable changes rather than one-off cost cutting".
Higher interest charges were also incurred in 2023, primarily around the effective interest rate calculation of a loan facility, she said.
"A final and significant reason for the difference in revenue across 2022-2023 is the income we gained for our shovel-ready project.
"We were given $3m by the government in 2022 for our trades training building, which was built to enable our community to flourish.
"He Toki Kai Te Rika, the gifted name given to this space by mana whenua, was officially opened on September 2023 and will be used to develop the next generation of Otago’s tradespeople and engineers."
The TEC briefing papers said compared with 2019, all individual polytechnics were in a worse position by the end of last year.
"While the forecast results for 2025 and 2026 show an improving position [for each polytechnic], it overstates respective financial performance as it does not include all costs that are presently centralised and incurred by head office."
Centralised costs would include legal fees, audit fees, insurance costs and software licences.
"These costs will need to be borne by the polytechnic network once individual entities are re-established and may increase given the movement from one single organisation to many," the papers said.
"These forecasts also do not allow for the re-establishment of certain functions in [individual polytechnics] that are now undertaken by head office (finance and property, digital, HR) as well as the re-establishment of senior management teams and councils.
"These costs are difficult to estimate as they are dependent on the number and structure of the future ITP network as well as whether a shared services entity is established."
The TEC assumed extra government funding across the network would be required in order to re-establish individual entities.
Mr Hernandez said officials were advising Ms Simmonds to use profits from work-based learning providers to assist polytechnics to become independent.
"This could lead to further confusion in the system."
Ms Simmonds has been approached for comment about what would be required for polytechnics to show they were financially stable enough to stand alone, and whether net cash position would be a factor.
Consultation on the proposed changes closes on September 12.
