Napier and Gisborne polytechnics are planning to merge.
The Eastern Institute of Technology in Napier and Tairawhiti Polytech in Gisborne have agreed in principle to merge, taking effect next year.
Their chief executives say combining the organisations will mean significant educational and economic benefits for both regions.
The head of Tairawhiti Polytech, Judy Campbell, says a change in government funding means $4 million less in the bank next year.
That would mean a financial loss of more than $2 million and the threat of having to close down.
EIT chief executive Chris Collins says the merger is a logical step and will provide new opportunities for students.
The final decision rests with the Tertiary Education Minister.
