As reported yesterday, the university expects to post a $9 million deficit next year, an improvement on the $15.5m deficit planned for this year.
Tertiary Education Union branch co-lead Associate Prof Craig Marshall noted the "mismatch" between government funding and revenue from students and other sources.
"In real terms, government funding is declining, particularly when you take into account ... inflation," Assoc Prof Marshall said.
"It is underfunded — that’s the basic problem."
The university’s budget summary said from 2018 to mid-2025, the consumer price index had increased 30%.
Government funding rates for many areas would decline by 3.67% next year while other targeted disciplines would increase by 0.91%.
"We can argue about how the cake is divided, but if the cake isn’t big enough, it doesn’t really matter how you divide it — it doesn’t go around," Assoc Prof Marshall said.
Yesterday, acting vice-chancellor Prof Jessica Palmer said the university had taken a staged approach to reduce its deficit and return to surplus since 2023.
To date, it had saved more than $45m and was expected to return a small surplus in 2027, she said.
Assoc Prof Marshall said the deficit budget would help manage the situation, although a surplus must be achieved in the long term.
"To deal with the issue of having more students, you need a surplus to invest in the resources required to teach those numbers.
"You must end up at least earning as much as you spend.
"We will see — it depends on all kinds of things between now and [2027]."
Meanwhile, the universities’ financial watchdog still felt the university needed to tighten its belt and seek new funding in the wake of the institute’s latest budget.
The Tertiary Education Commission has continued to class Otago University as a "medium" financial risk, it said yesterday.
Deputy chief executive Gillian Dudgeon said it received three detailed financial returns from the university each year, which were key inputs into the Financial Monitoring Framework (FMF).
"The FMF has multi-year calculations and weightings, so it is not focused on one particular year.
"The University of Otago has made good progress.
"However, there is a need to lift their underlying profitability and carefully manage their capital programme within the growing debt position."
