He said institutions received less money from domestic students than from internationals, and any rise in domestic student numbers would be accompanied by an increase in expenses.
"The big problem is no matter how many extra domestic students you get extra, it won't make up for that shortfall in international students and that's just because the fees per student are so much higher and the margin is so much higher for international students," he said.
"Three or four domestic students will make up in revenue, or in the margin of revenue that they provide, for one international student, but of course that requires teaching and supporting those students and that requires more capacity and so there will be a crunch."
Gilchrist said the Government needed to fast-track plans for a new funding system for polytechnics.
"The problem is the timeframe at the moment is set at the end of 2023 so that it can be applied in 2024. We're saying that needs to come forward by two years, it needs to be ready by the end of next year. We know that puts a strain on developing it but that has to happen because it underpins everything else."
Chief executive of the Waikato Institute of Technology, Wintec, David Christiansen, said its mid-year enrolments were 50 per cent higher than at the same time last year, though total enrolments for the year would only be a few per cent higher than last year.
He said he was not expecting the number of domestic students would grow enough next year to cover an expected 600-student drop in foreign enrolments next year.
"The other problem we're going to have is where we're losing internationals is not going to be same profile as where we grow in domestics," he said.
"So the reality is we're going to end up probably next year with some areas where we have a net decline and in other areas we're going to have an increased cost with increased delivery. So that will be a net negative for sure."
Christiansen said the 15 polytechnics, which were all now part of the New Zealand Institute of Skills and Technology, would deal with the problem in different ways.
"At the moment we're looking at increasing borrowings, in effect living off our balance sheet. How that goes through next year across the sector as a whole, I think it will be a mixture for different organisations. Some have cash reserves which they can live off for a year or two, others less so and then obviously conversations with the Government around additional funding or support."
The director of Universities New Zealand, Chris Whelan, said the eight universities were expecting about 10 per cent more domestic students next year.
He said that would not be anywhere near enough to make up for the expected loss of internationals.
"It's going to be a massive struggle next year. We constantly hear that universities have big balance sheets. Well, look, the answer is yes we have an awful lot of assets in libraries and laboratories and lecture theatres, but they're not things that we can sell to cover pay or keep the lights on."
Whelan said universities needed roughly two domestic students to provide the same income as one foreign student.
