Tertiary Education Union secretary Sharn Riggs says universities, polytechnics and wananga will struggle as a result of the Budget.
For the second year in a row, public tertiary institutions have got no increase in the subsidies they receive for student enrolments.
Ms Riggs says institutions will have to make cuts.
"There's no other answer to it ... They have a finite number of resources and if that money is not being increased to at least the very level of inflation, then things have to be cut and that's just the way budgets work."
Ms Riggs says inflation is eroding institutions' ability to deliver quality education.
Under the Budget announced on Thursday, the only funding increases are for private tertiary institutions and for engineering and science enrolments in public institutions.
The private sector will get $28.7 million more over four years, which closes even further the gap comparsion with the public sector, following an increase in the 2012 Budget.
Subsidies for engineering and science courses will rise by 2.2% at a cost of $28 million over four years.
The Budget includes an additional $32.4 million over four years to increase the number of 25-to-34-year-olds with a qualification at level 4 or higher (above senior secondary school), and sets aside $24.5 million as a contingency to pay for skills training for the Canterbury rebuild.
Increases in apprenticeship funding are confirmed, bringing the total value of new spending in this area to $130 million over four years.