Staff were told on Monday that the Phoenix Centre in Forth St, which has provided short-term programmes for 40 Dunedin pupils a year for the past 10 years, will close at the end of term 1.
The centre's two full-time teachers and one part-time staff member will lose their jobs.
A letter from the Ministry of Education's Otago district manager, Patrick Crowley, dated March 1, said the decision to close the centre was based on several factors that reflected "shifts in direction for the Ministry of Education in addressing the needs of students with challenging behaviours".
These included the provision of services with evidence-based outcomes, more support for schools to help children with behavioural issues and "fiscal environment and budget constraints".
The three pupils at present in the programme would be returned to mainstream schooling and schools would be supported in dealing with them.
The core funding for the centre ($142,000 a year) would be used either by the schools or the ministry to develop behaviour services, the letter said.
Educationist Dame Pat Harrison, of Dunedin, said last night the ministry was being "incredibly short-sighted" in closing the centre, the value of which was "indisputable".
"The problem education has, is to rectify the so-called 20% tail of underachievers.
"That is what [the centre] was doing.
"And it had done it successfully over many years."
Children who were disengaging from school and were losing motivation and underachieving, received specialist attention at the centre, something which schools neither had the time nor resources to provide.
It also defied belief that the centre was being closed at the same time as Education Minister Anne Tolley was raising concerns about the level of truancy, she said.
Otago Secondary Principals Association president, Kaikorai Valley College principal Philip Craigie, described the centre's closure and the loss of the skills of those running it as a tragedy.
"It's really sad.
"It's another resource from outside school that has been closed off.
"It just makes it that much more difficult."
The programme was regarded as successful by Dunedin schools, and pupils in the programme often came back to school as better pupils, he said.
Many of the pupils would have likely been suspended otherwise, and without the programme he expected to see an increase in suspensions across the city, as well as the number of children being excluded from school.
He was aware agencies such as the police and social services joined the schools in lamenting the centre's passing.
He hoped the funding went to schools so they could work together on providing a similar service, but was cynical as to whether advice promised by the ministry on how to deal with these pupils would transpire.
Doreen Blackwood, who has fostered children in Dunedin for more than 40 years, said she had had three foster children in her care attend the Phoenix Centre.
Two of them successfully went back to school.
"I can't say enough about Phoenix.
"I think it is wonderful.
"It will be a tragedy if they close."
Another mother described the centre as a "lifesaver" after staff there got her son back to school and learning.
A year later, he was attending school regularly and achieving.
Everyone, even the most difficult children in his class at the centre had been able to get better adjusted, through a combination of the children being viewed holistically and using good old fashioned respect, she said.
