Tairawhiti Polytechnic in Gisborne is considering a merger with the Eastern Institute of Technology in Hawke's Bay.
It is the second small polytechnic this year to consider becoming part of a larger institution.
Tairawhiti council chair Geoff Milner says the polytechnic will lose 20% of its income next year because of Government funding cuts.
He says it is exploring closer ties with the Eastern Institute and will consider a range of options, one of which could be a merger.
Mr Milner says the institute already provides payroll and human resource services for Tairawhiti.
Telford Rural Polytechnic in Balclutha is also considering a merger, with Lincoln University.
