A newly-published TEC report for Education Minister Chris Hipkins dated 9 June said actions the institute had taken to date, such as requiring more frequent financial reporting from polytechnics and restricting their hiring of new staff, would not have a big effect on this year's financial result unless a large number of staff left and were not replaced.
It also suggested job cuts were needed.
"Hiring restrictions are likely to have the biggest impact on reducing the deficit. This will particularly be the case if staff turnover is high, and vacancies are not filled," the report said.
"However, from our point of view, this is not only about responding to the decline in enrolments in 2022. It is also about reviewing and right-sizing the cost base of the organisation, to meet both the current and medium-term predicted level of enrolments.
"Over the past five years, there has been a 16 per cent decline in enrolments across the ITP [institutes of technology and polytechnics] subsidiaries while FTEs [fulltime equivalent enrolments] have only fallen by 9 per cent."
TEC figures indicate polytechnics had about 7800 staff.
The report said Te Pūkenga was predicting significant savings as a result of its takeover of polytechnics and industry training organisations.
They included $31.4 million from council and board fees, $20.5 million in auditors' fees, and $44.7 million on course development and maintenance - though the latter would require significant set-up costs.
The report said Te Pūkenga was also reviewing its property.
"This is expected to lead to the rationalisation of underutilised assets across the network to raise funds," it said.
The report said the institute had revised its forecast deficit for this year from $110 million to $90.8 million.
Te Pūkenga told RNZ a new forecast would be presented to its governing council on Monday.
Its acting chief executive Peter Winder said in a statement the figure would be "substantially closer to the earlier budgeted deficit of $56 million".
He also confirmed the dates for fully taking over the 14 polytechnics that were not already within the institute had been brought forward from December.
"Whitireia and WelTec [Wellington Institute of Technology] will become business divisions of Te Pūkenga on 31 August. The remaining 12 are expected to transition in two tranches on 30 September and 31 October," Winder said.
The TEC report said the institute had made progress in developing a business model that was sustainable.
"The largest financial benefit assumed in the PBC [programme business case] however is that Te Pūkenga's new operating model will result in increased enrolments in future - both through attracting new students and by improving retention. This is expected to lead to increased revenues through greater Government funding, tuition fees, and other fees," it said.
"From the draft material we have reviewed, the PBC does begin to demonstrate a pathway for Te Pūkenga to return to a surplus position. However, this is strongly reliant on growth in both domestic and international enrolments. A failure to achieve this growth will result in increased financial difficulties."
Winder said the institute was trying to find a model that would be resilient to changes in enrolments.
"We know that when there are plenty of jobs, people take up work-based learning opportunities, and in times of economic downturn people turn to campus-based and online options. That's why we are bringing together learners from across Institutes of Technology and Polytechnics (ITPs), and Industry Training Organisations. Once transition is complete, we expect around 50 percent of our learners to be in work-based learning," he said.
"We are currently reviewing the PBC and all of the assumptions about future enrolments and workplace learning agreements and need to ensure that our assumptions reflect current and expected economic conditions."
Tertiary Education Union president Tina Smith said there should be no staff cuts in polytechnics because they were already operating on low staff numbers.
She said a lot of staff had resigned from the institutes recently and their absence was exacerbated by high rates of staff illness and absence due to Covid-19.
Meanwhile, a separate report to Education Minister Chris Hipkins said Te Pūkenga's polytechnic subisidiaries had the biggest drop in start-of-year enrolments of any sector this year with 4145 or 5 percent fewer domestic students than the same time last year.
RNZ reported earlier this week that the fall in foreign student enrolments due to pandemic-related border restrictions cost polytechnics more than $100 million in lost fees last year, with bigger losses expected this year.
