Universities say the Government should remove all controls on student fees if it won't give them more money.
The Vice Chancellors Committee has issued a nine-point plan urging greater investment in the sector, in which, it says, underfunding has reached a critical point.
The committee says the Government's $1.1 billion annual funding for universities falls short by $230 million.
It says successive Governments have boosted financial support for students ahead of funding for institutions.
If more Government investment is not forthcoming, the council says universities should have greater control over fee-setting so fees better reflect the cost of different courses.
At the moment, caps on fees at the eight universities mean restrictions on any fee increases.
Other points in the plan include lower compliance costs, greater access to contestable research funding and more support for Maori and Pacific students.
The plan has been sent to Government ministers and the vice-chancellors say they're optimistic they will respond positively.
However, Tertiary Education Commission chief executive Roy Sharpe, who is a former vice-chancellor himself; told the inaugural conference of the Tertiary Education Union this week that there would be no extra money to go around in the current economic environment.
He said institutions would need to get by on their current budgets.
