The Government is to spend $126.8 million to ease in changes to the way tertiary education is funded.
Tertiary Education Minister Michael Cullen said the upcoming budget would include $36.8 million for operating spending over four years and $90 million in capital expenditure.
It will be mainly used to help institutes of technology and polytechnics (ITPs) to adjust to a funding system based on providing education that the country needed, rather than the number of students going through courses.
Dr Cullen said part of the spending would be funded from the savings made from changing the funding system from "bums on seats" to "investment" in education priorities.
He was unable to say how much of the new initiatives would be funded from savings and how much would be newly injected.
* Over half of the money ($21 million of operating funding and $55m of capital funding over the next two years) would go to ITPs to develop new initiatives such as distance learning, and greater collaboration with their communities and business.
It will also allow ITPs to find ways to encourage students to go on to higher qualifications.
* Another $15.8m of operating funding will be spent over four years to help Industry Training Organisations (ITOs) identify training needs and respond to them.
* There would also be $35m of capital funding over the next two years for the Quality Reinvestment Programme.
This fund supports ITPs and wananga to change the way they operate in order to meet the needs of students, employers and communities.
The Government has been introducing reforms of the way tertiary education is funded.
Dr Cullen wants to move away from payments based on the number of students attending courses, to more funding for education seen to meet the needs of employers and the Government.
"This shift in focus is important if our tertiary education system is going to offer taxpayers greater value for money," Dr Cullen said.
"We are looking at a significant reprioritisation of tertiary funding, and I do not want to pretend otherwise."
Dr Cullen said the Tertiary Education Commission will now be talking to individual institutions about their funding packages, which will cover a three year period.
The Government hopes the changes will move the tertiary sector from providing high volume, low value courses towards more relevant education.
The reforms were partly sparked a by a raft of embarrassing stories about some tertiary institutions providing courses such as twilight golf.
The Council of Trade Unions (CTU) welcomed the announcement.
"Getting the investment in skills development and education right is a vital part of building a high wage, robust economy," CTU secretary Carol Beaumont said.
"The CTU welcomes additional funding for Industry Training Organisations to help identify current and future industry skill and training needs, which recognises and funds the important role they are required to play in offering leadership in their industry."