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The education sector has had to come up with more than half of the $1.9 billion to fund new education initiatives over the next four years.
Of the $1.9b, $1b has been reprioritised and $900 million is new money.
The reprioritised money comes largely from changes to the student loan scheme, cuts in tertiary education capability funding which helps institutions develop their roles and deliver quality and aligning early childhood education funding rates with teacher registration targets.
Schools will benefit with a 4 percent increase in operational funding, worth $155.9m over four years, and $349.3m in new operating and capital funding for school property over four years.
The capital funding will build new schools and repair existing ones - including leaky buildings (worth $82m in 2010/11).
Education Minister Anne Tolley said the investment in schools included the purchase of two new school sites, opening of three new schools in 2013 and redevelopment of a special school.
"Unsightly" surplus property will also be removed which will reduce anti-social behaviour and vandalism in those areas, she said.
Mrs Tolley said the Government would not pursue the school staffing reductions signalled in last year's budget.
"This increased funding for schools delivers on promises made last year to provide more resources and allow better flexibility in how schools can use resources to raise skills and achievement levels."
Early childhood education (ECE) will get $91.8m over four years. The 20 hours ECE will continue to be funded but with requirements for 80 percent of teachers to be registered.
Tertiary education will get a boost with $527m over four years focused on providing 4908 more places in universities and polytechnics and providing a higher tuition subsidies per student.
The Government will also replace fee maxima with an annual maximum fee movement of 4 percent in 2011.
Tertiary Education Minister Steven Joyce said the sector already got its "fair share" of government money and needed to look at working better.
"We need the sector to become more productive and responsive to the needs of individual students."
This budget was about laying the foundations for a more flexible and high-performing sector, he said.
Other education initiatives:
• $48.1m over four years to increase places by 500 in the Youth Guarantee scheme;
• $15m over two years to support the availability of the Positive Behaviour for Learning Action Plan;
• $14.7m over four years to ensure staff in rural schools with students' years seven and eight receive the correct level of funding;
• $48.3m to build ultra-fast broadband support for schools.