Profile & Trends 2007: New Zealand's Tertiary Education Sector

Sector capability

The financial performance of the public tertiary education institutions¹ recovered somewhat in 2007 after having declined since 2004. For the first time since 2004, the institutions collectively met all four benchmarks set for prudent operation of a tertiary education institution. The aggregate operating surplus rose from 1.9 percent of revenue to 3.4 percent – above the benchmark of 3 percent. Net cash flow strengthened. While the liquid assets measure – liquid funds as a percentage of annual operating cash outgoings – fell to 13 percent, this compares to a benchmark of 12 percent.

This result was achieved despite a difficult operating environment.  The reduction in international student enrolments continued while institutions faced increases in costs. The government provided additional support for polytechnics and wānanga through the Quality Reinvestment Fund, which is designed to help institutions move to a more sustainable business model.

There was considerable variation among the tertiary education institutions, with some recording very strong performance, while six of the 31 institutions had an operating deficit in 2007, compared to 12 in 2006, nine in 2005, six in 2004 and none in 2003.

Overall, the universities performed more strongly than the other sub-sectors.  Like other sub-sectors, they experienced a further decline in international students (of 18 percent) but their income was more diversified than that of the other sub-sectors. All universities recorded a surplus and, collectively, their surplus was 3.9 percent of revenue, compared to 3.1 percent a year earlier and to the benchmark of 3 percent.

The polytechnics had a stronger year than in 2006. The collective surplus, at 2.1 percent of revenue, was below the benchmark 3 percent, but substantially above the figure for the previous year (which was close to zero) and also above the 1.6 percent in 2005, but well down on the 7.7 percent result achieved in 2003, before the  government made changes to the funding of community education.  In 2007, polytechnic international enrolments dropped by 9 percent, following a 23 percent fall in 2006. In response to the changed operating environment, polytechnics moved to reposition their provision, supported by the Quality Reinvestment Fund. Polytechnics’ costs continued to rise but at a slower rate. Cost per student increased by 5 percent, compared to the 14 percent increase they experienced in 2006 as they shifted out of shorter courses. In 2007, five of the 20 polytechnics recorded an operating deficit, compared to seven in 2006.

Another notable feature of 2007 was the improved performance of Te Wānanga o Aotearoa after several years of substantial rebuilding.  This institution recorded a surplus of 4 percent of revenue. One consequence of this return to an operating surplus is that the three wānanga collectively recorded a surplus – 3 percent of revenue – for the first time since 2003.

In 2007, for the first time in three years, capital expenditure in the tertiary education institutions was below the operating cash surplus generated from operations, leading to an increase in cash reserves.

The overall number of staff employed by tertiary education institutions remained virtually unchanged from 2006 to 2007 while staff numbers in private training establishments decreased for the second consecutive year.

A small decrease from 2006 to 2007 in the number of academic staff at tertiary education institutions was offset by an increase in the number of non-academic staff. Over the same period, in private training establishments the decrease in the number of academic staff was slightly larger than the fall in the number of non-academic staff.

In the three wānanga, the student numbers fell at a slightly faster rate than the reduction in the number of teaching staff, lowering the 2007 student to academic staff ratio to 34 to 1 compared to 36 to 1 in 2006. The student to academic staff ratio in universities and polytechnics remained virtually unchanged.

Total expenditure on personnel in public tertiary education  institutions rose from 2006 to 2007, while personnel costs as a percentage of total operating expenditure was 57 percent in 2007, unchanged from 2006.

An analysis of the income information as collected by the 2006 Population and Dwellings Census revealed that the gender gap in the technical and higher education workforce is reducing at lower grades but increasing at higher grades and in leadership positions.  An article on this income analysis of the tertiary education workforce is included in chapter 15.

Footnote

1. In 2007, there were 33 public tertiary education institutions. However, to allow comparisons  to be made over time, the data from the colleges of the education has been merged with that  of the universities in this report unless otherwise stated. In January 2007, the last two colleges  of education, the Christchurch and Dunedin Colleges of Education, merged with the University  of Canterbury and the University of Otago, respectively.