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Job cuts and the closure of some programmes are likely as the University of Otago tries to trim its budget ahead of a significant drop in Government funding from 2011.
In an email sent to more than 3000 staff at the weekend, Vice-chancellor Prof Sir David Skegg announced he had established a task force of senior academic and financial managers to oversee cost-cutting across all departments over the next 18 months.
There was no intention to introduce a general freeze on new appointments or on the filling of vacancies, he said.
However, he warned of "very difficult decisions" ahead.
"The task force will undoubtedly identify some efficiencies that can save money without impairing our academic performance.
Unfortunately, however, it seems inevitable that we will need to contemplate some reductions in the numbers of academic and general staff. If this is to be done in a way that does not unduly increase everyone's workload, we may well have to close some programmes.
"I realise that this is an unsettling time, but wanted all staff to be aware of the process that we are embarking on," he said.
The university received $233 million in Government education, health and research funding last year.
But in its May Budget, the Government announced major funding reductions for all tertiary institutions from 2011.
Some institutions estimate their core funding will drop by 10%, but the exact impact is difficult to calculate yet because institutions get their funding from several different sources.
Asked yesterday how much Otago might lose from 2011, Prof Skegg said it would be at least "several million dollars" because of the Government's decision to end tripartite salary funding which was earmarked to narrow the salary gap between New Zealand and Australia.
Tertiary Education Union president Tom Ryan, whose union represents almost 1400 staff at Otago, said, when contacted, all tertiary institutions were facing similar financial pressures and there was widespread concern about job losses.
"One has to have sympathy for those trying to handle growing rolls and reducing incomes," he said.
Dr Ryan said the Government's decision to cut tertiary funding during a recession was "bizarre economics" and at odds with what almost every other government in the Western world was doing.
If the Government did not change its mind, New Zealand institutions would "slip down the ranks internationally" and would have trouble attracting students, staff, researchers and research funds, he said, something which would be a disaster for the country.
University of Otago budget woes
Significant decline in funding expected from 2011.
Financial challenges unlikely to be short-lived.
Task force set up to oversee efficiencies and cost-cutting measures.
No intention to place freeze on new appointments or filling of vacancies.
Seems inevitable staff numbers will have to be cut.
Some programmes may close.