University of Otago announces responses to challenging financial times

The University of Otago has detailed its challenging financial position which will have implications for jobs, capital projects, and future paper and programme offerings.

Acting Vice-Chancellor Professor Helen Nicholson made the announcement to staff this afternoon.

“Otago started this year in a challenging financial position with an expected deficit budget that required substantial savings to achieve,” Professor Nicholson explained.

“Student enrolment numbers for 2023 are now clear and they are down on what we had budgeted for. Overall, our enrolments are down by 0.9 per cent on last year. Compared to final 2022 results, international students are up by about 495, but domestic students are down by about 670,” she said.

“The reasons for the domestic drop include: fewer domestic students gaining university entrance nationwide and many choosing to enter the workforce or take a gap year instead of study; as well, there was an unexpected drop in domestic student retention. This was, likely, caused by factors including the cumulative impact of ongoing COVID-19 disruption, the rising cost of study, and a buoyant job market.

“This means our domestic pipeline for students over the next three years will be worse than we projected, with associated effects on our bottom line.

“Externally, we are absorbing the cumulative impact of successive years of below-inflation funding rate increases from Government. It is now also likely that the Government won’t be able to adjust for this in its upcoming budget as it needs to address the massive issues arising from the devastating North Island weather events earlier this year.

“Alongside this, a recession is coming. In some scenarios, a recession helps us. If unemployment grows, people turn to higher education. However, current expectations are that there will be a recession in which employment remains relatively high.

“What all of this means is that we are worse off today than we predicted in February, and we need a new plan,” Professor Nicholson said.

A strategic plan, called Pae Tata - Strategic Plan to 2030, currently being developed, will lay out detailed steps the University will need to take over the next seven years to put it firmly on the path to 2040. Another all-staff forum will be held in about six weeks, to outline the plan and decisions, and next steps.

This will include a clear direction on where the University will increase revenue and cut costs.

“If we do nothing, and even if our enrolments recover more quickly than we expect at our current rate, we will still have a budget in the red for several years. That is not tenable for us as a university,” Professor Nicholson said.

“We need to reduce our annual operating budget by about $60 million and salary savings will need to be a significant component of this. It is likely that this will result in changes across the entire University.”

She highlighted many initiatives currently underway to work on cost savings and revenue generation, which include these areas:
• Continuing the international reset and recovery programme
• Reviewing the scholarships portfolio
• Considering the possibility of asset sales
• Reviewing and streamlining a range of key academic and administrative processes.
• Reviewing the capital development programme
• Considering temporarily reducing repairs and maintenance budgets
• Divisional strategic reviews

Additionally, a paper and programmes working group looking at:
• Low enrolment papers
• Policies and processes
• Programme architecture

Applications for voluntary redundancies open on Monday, 24 April and close on Friday, 2 June.

A further round of redundancies is expected to follow. Several hundred roles are expected to be affected. The University’s capital programme will also be significantly impacted.

Students were reassured this afternoon that they will be able to complete the qualification and papers they are currently enrolled in, even if there are future changes to the papers and programmes we offer.

Professor Nicholson acknowledged this is clearly challenging and unsettling news for University staff and their families. She thanked staff for their commitment to the University and said that everything possible would be done to support affected people over the weeks and months to come.