Jobs are to be cut at the Tertiary Education Commission. A review by consultants at Deloitte says the agency is hindered by its structure and lacks strategic capability.
Radio New Zealand's education correspondent says TEC proposes to cut more than 100 of the nearly 300 jobs at the TEC.
The cuts would be offset by 39 new positions and about 40 of the threatened positions are now vacant.
TEC board chair Sir Wira Gardiner says the government is demanding better value for its spending.
The Public Service Association says employees there are shocked by the scale of the proposed cuts.
However, national secretary Brenda Pilott says the last restructuring did not work and there is some agreement that further change is needed.
But she says the commission could be left with too few people to do its job, which includes distribution of more than $3 billion per year.
Sir Wira says the plan could change as a result of feedback and final decisions will be made in April.