The West Coast's Tai Poutini Polytechnic has no hope of repaying its debts and will get a $33 million bailout, Education Minister Chris Hipkins has announced.
The announcement accompanied the revelation the polytechnic conducted $21.2 million less teaching than it was paid for between 2010 and 2015 in 13 courses - the biggest case of under-delivery yet discovered.
Mr Hipkins said the Tertiary Education Commission would write off the debt as well as a further $3.65 million Tai Poutini should repay because it enrolled fewer students than expected in 2016.
He said the government would give the institute $8.5 million so it could stay open this year and into next year.
"Effectively TPP [Tai Poutini Polytechnic] is in a receivership situation, but the Crown is continuing to provide support because it is critical for tertiary education provision on the West Coast," Mr Hipkins said in a Cabinet paper.
"TPP will never be in a position to repay the total $24.878 million owed due to its ongoing deficit position and its small size," he said.
Tai Poutini had been struggling for several years. In 2015 it made a $1.6 million deficit, most of its governing council resigned in 2016 and 2017, and a Crown manager was appointed in late 2016.
Last year the polytechnic received the Qualifications Authority's lowest possible quality rating, the first such rating for a public institution, and the Auditor-General refused to confirm the institute was a going concern.
The institute formerly had more than 2000 equivalent full-time students, but Mr Hipkins' cabinet document said it was now funded for 750, with only 350 of those based on the West Coast.
It said that since historical under-delivery had been dealt with the polytechnic's off-coast courses no longer provide enough profit to subsidise its West Coast operations.
"TPP has been having long-term governance and management problems which mean it is under serious financial strain and is no longer viable," he said in the paper.
Mr Hipkins said Tai Poutini could merge with another institution or continue as a Crown institute with local support.
However, he said he would defer a decision on the polytechnic's future until the completion of work on the wider polytechnic sector.
The Tertiary Education Commission's monitoring and Crown ownership manager, Dean Winter, said Tai Poutini Polytechnic had delivered far fewer hours than required across courses including scaffolding, search and rescue, and other areas including quarrying, mining, crane operations, and occupational safety and health.
"In some of the scaffolding programmes, students were receiving as little as 10 percent of the teaching hours they were meant to. That means that in a course where students were expected to receive nearly 200 hours of training, they only did 20," Mr Winter said.
Tai Poutini Polytechnic's chief executive Alex Cabrera said the government's financial support was great news for the future of tertiary education on the West Coast.
He said the institute was working on new ways of providing education in the region.
Entire polytechnic sector at risk
Mr Hipkins warned that more polytechnics and institutes of technology were also at risk.
The minister said falling student numbers had put pressure on some institutions.
"This situation has left us with a group of ITPs some of which, like TPP, are facing immediate and pressing challenges to their financial viability and sustainability, and are unable to modernise teaching and learning to better meet the needs of learners and employers," Mr Hipkins said.
"For others the challenges are less imminent, but getting closer."
A Cabinet paper said most polytechnics and institutes of technology would soon be making deficits: "Using current trends the TEC expects 50 percent of ITPs to be in deficit by 2020 and 80 percent of ITPs to be in deficit by 2022.
"This is due to declining enrolments and rising cost pressures."
Mr Hipkins said he would report back to Cabinet in March on work to ensure the financial stability of institutes of technology and polytechnics.
"It is critical we address these challenges across the whole network, rather than just one organisation at a time. We need a lasting solution to this long-standing challenge."