It ended the year with a net deficit of $337,000 - $316,000 below the tiny $21,000 surplus it had budgeted.
The deficit would have been higher but for an injection of $182,000 for the institution's share of the surplus achieved by the City College student residential facility.
Lower than expected enrolments in some classes last year saw positions abolished or hours reduced for about 20 staff across four departments.
Chief executive Phil Ker said yesterday the polytechnic would have easily achieved its budgeted surplus but for the "extraordinary level of redundancies", and a requirement from auditors to treat funding received from the Tertiary Education Commission as capital when the polytechnic believed it was operating revenue.
The deficit was disappointing, he said, particularly when a "vigorous programme of productivity improvements and cost reductions throughout the year" had resulted in cost savings of $1.4 million going into this year.
However, cost reduction had come at a high price - job losses - and a redundancy bill of $1.09 million.
The polytechnic recorded modest surpluses in 2007, 2005 and 2004, and a $220,000 deficit in 2006.
In his comments in the polytechnic's 2008 Annual Report, Mr Ker said the 2008 deficit was set against "the continuing backdrop of inadequate government funding".
The results of a 2008 benchmarking exercise comparing the financial results of all 20 polytechnics showed the sector was, on average, making losses of 8.1% on its core business of teaching and learning, he said.
Only two institutions made surpluses and they were small.
"This is surely a sign of a sector starved for funding.
Otago polytechnic performs very well, compared with the sector, losing a mere 5.6% on core business."
Mr Ker yesterday described funding cuts announced for the sector from 2011 as "savage, to say the least".
"... they are clear evidence that polytechnic education is simply not valued, and that naive understandings of the state of funding of the polytechnic sector still abound in Wellington."
