Government warned of risks with polytech merger break-up: ‘Similar, if not worse’ financials

Treasury advised the Minister of Finance to seek reassurance the de-merger would improve the financial situation of tertiary institutions. Photo / Peter de Graaf

Numerous risks and financial concerns were raised by Treasury officials as the Government was working towards unwinding Te Pūkenga and setting polytechs up for regional governance.

The minister in charge is adamant the Government is taking a “responsible approach” in vocational education, but the Green Party is calling the move “deeply concerning”.

A Treasury paper, circulated in mid-March and released under the Official Information Act, warned the Government’s changes may not be enough to help ease financial challenges in place before the merger.

“This is because the proposed future state for ITPs [institutes for technology and polytechnics] appears to be similar, if not worse, than the situation faced by ITPs pre-Te Pūkenga,” the advice read.

A total of 10 polytechnics are returning to regional governance at the start of 2026, with a number of others technically remaining a part of the ill-fated merger before decisions are made later down the line on potential closures.

Vocational Education Minister Penny Simmonds has described the merger, established under the previous Labour-led Government in 2020, as a “financial mess”.

Officials recommended the Minister of Finance, Nicola Willis, seek assurance from the Minister for Vocational Education that the Government’s plans would be financially viable.

Willis was advised to seek “reassurance” that the changes would lead to an improvement in the financial position of polytechs.

“The per-student funding rates provided to ITPs have decreased in real terms, and the $20 million in funds are unlikely to be material for the network as a whole, given it represents around 4.4% of total funding provided to Te Pūkenga in 2024,” Treasury advised.

The paper, released publicly by Treasury, concluded by saying officials remained concerned about the overall risk of disestablishing the polytech merger. It highlighted the scale of changes, a “short timeline” for this to be implemented, and the complexity of the changes.

Simmonds told Newstalk ZB the reform would restore decision-making to the regions and ensure vocational education is financially sustainable.

Budget 2024 put a $157m contingency in place, which is expected to be either partially or fully used, depending on debt levels and transition costs.

On this, Simmonds noted some polytechnics had significant reserves going into the merger, while others had significant debt. “We can’t responsibly re-establish institutions that are not solvent,” the minister added.

Simmonds expected to have a “clearer picture” of the different financial positions by October or November.

Green Party tertiary education spokesman Francisco Hernandez said the advice showed the de-merger was a “risky reform”, whilst calling out the implementation timeframes.

Hernandez suggested some regional institutions were “begging for financial scraps” with the changes.

He expressed concern about proposals to disestablish in-person teaching in some courses, including proposed programme cuts to NorthTec’s forestry and horticulture programmes.

“Northland is one of the biggest places for forestry and horticulture in New Zealand. Why would you disestablish much-needed skills training in the regions? It just doesn’t make sense,” Hernandez added.

The Tertiary Education Commission is currently working on Establishment Advisory Groups for each of the 10 polytechnics being established in 2026. Those groups will set chief executives and approve transition plans.

Community advisers are working alongside each business division within the current model to ensure they are “on track with their agreed implementation plans to improve financial viability of each division prior to transition”, the minister’s office has confirmed.

The Government has set up a $20m annual fund across two years to support vocational education provision in “strategic regions” while longer-term funding is looked at.

Azaria Howell is a multimedia reporter working from Parliament’s press gallery. She joined NZME in 2022 and became a Newstalk ZB political reporter in late 2024, with a keen interest in public service agency reform and government spending.