A learning curve
New Zealand looks a very, very attractive place for parents to send their sons and daughters.
Patrick Drumm,
Mt Albert Grammar
We have 65 per cent of our international students coming from China . . . it would only take a decision of one person to turn that off overnight.
Steven Hargreaves, Macleans College
We made cuts to our staffing numbers through attrition to try to maintain surplus. Patrick Gale,
Rangitoto College
For years, some of our biggest secondary schools relied on fees paid by international students to top up the funding they get from the Government. Alex Spence reports that tens of millions of dollars of revenue evaporated during the Covid outbreak, forcing schools to rethink day-to-day spending.
The tuition fee revenue Auckland secondary schools received from international students fell by tens of millions of dollars after the Covid-19 outbreak, squeezing a vital source of operating funds, a Herald analysis has revealed.
Between 2019 and 2022, a sudden drop in overseas students travelling to New Zealand caused the tuition fees collected by the 20 Auckland state high schools with the most international enrolments to decline by two-thirds, from $52.9 million to $17.9m, our analysis shows.
Border closures wiped out as much as 85 per cent of the annual international fee income generated by the schools we examined, and principals said it could take years for it to return to pre-pandemic levels at some high schools.
At Macleans College, which had the most international students before the pandemic, international fee revenue fell from $5.5m in 2019 to $2.8m in 2022. At Westlake Girls’ High School, it dropped from $4.5m to $920,995 in the same period.
Our analysis starkly illustrates the financial dilemma many school boards faced when the Covid-19 outbreak began. For years, some of our biggest state schools have relied on foreign fee-paying students to top up the funding they get from the Government but a huge chunk of that income suddenly vanished because of geopolitical events beyond their control.
The schools we analysed remain broadly financially sound. Some managed to offset the lost income by growing their domestic rolls, which attracted more money from the Government. However, principals say the sudden drop-off in international fees added significantly to the financial pressures they faced and had a material impact on their operations.
Schools responded by laying off staff, curtailing non-essential expenditures, and deferring planned investments, according to interviews and email exchanges with the heads of several major schools. Some have rethought their reliance on international funds and have decided to admit fewer international students than they used to.
Patrick Gale, principal of Rangitoto College, said: “We made cuts to our staffing numbers through attrition to try to maintain surplus. We had to put on hold significant capital investments into the school as a result of the loss of income.”
Steven Hargreaves, head of Macleans College, said: “We have examined our operating model and realised that we can’t keep relying on [these] funds to the extent that we have. We’ve had to look at our overheads and reduce them where we can.”
State schools receive most of their funding from the Government. This mostly comes in three tranches: Money for teacher salaries (their biggest source of revenue), money to build and maintain property, and money to pay for day-to-day operations.
Some principals say these funds are inadequate to cover the cost of providing the services that parents and local communities expect from big, modern schools. In its 2019 financial accounts, for example, Long Bay College said it received $14m from the Government but this was “significantly less than the $15.28m needed to run the school”.
But public schools are allowed to top up the money they receive from the Government with “locally raised funds”, including donations from parents, income from renting out facilities for events, and tuition fees from overseas students. Over the years, international student fees have been by far the most substantial source of these “locally raised” funds.
With international students paying up to $25,000 a year in tuition and other fees, they are highly profitable. In recent years, some schools accumulated large surpluses to pay for expenditures such as hiring guidance counsellors and teacher aides, or building new classrooms.
To attract these students, the biggest schools spend hundreds of thousands of dollars yearly on commissions to education agents and international travel for marketing purposes. In 2019, Epsom Girls’ Grammar spent $122,000 sending staff on recruiting trips to locations including Turkey, Vietnam, and Mexico. Westlake Girls’ spent $146,750.
That activity paid off: In the decade before the pandemic, the number of international students at all New Zealand high schools grew by more than a third, peaking at 17,700 in 2019, according to Ministry of Education data. That generated tuition fee revenue of $177.6m nationally that year.
As the market boomed, there were warnings that some schools were getting too reliant on overseas income. The Office of the AuditorGeneral, which monitors school financial statements, said that some schools could be pushed into financial trouble if there was a sudden decline in international student numbers, without healthy cash reserves and cuts to spending.
As a result of the border closures, the number of international students at New Zealand secondary schools collapsed to 5130 in 2022, according to the Ministry’s data. Total revenues fell to $58.9m that year — a 67 per cent reduction from the peak.
In 2020, at the start of the pandemic, the Ministry of Education provided $20m in emergency relief to state and integrated schools, based on an estimate of how many international students they would lose because of the outbreak.
The ministry said it has not analysed how individual schools were impacted financially by the loss of international income.
Several principals said their schools had avoided the worst potential financial impacts because of factors they had not anticipated: Reductions in costs during the Auckland lockdowns and growth in domestic enrolments, which brought additional funding directly from the Government.
Patrick Drumm, headmaster of Mt Albert Grammar, said his school temporarily increased the number of out-of-zone enrolments it admitted in the past few years, filling places that would normally be taken up by international students with locals.
Under the ministry’s funding arrangements, each of those domestic students brought thousands of dollars of additional Government money which offset the sudden loss of international tuition fees.
With the pandemic now over, principals said international students will still be an essential source of funding for many big schools.
Auckland high schools resumed actively recruiting overseas as soon as the borders reopened and numbers started to climb again last year after hitting bottom in 2022, although principals say it could take years for the numbers to return to prepandemic levels across the sector.
Hargreaves said Macleans College has capped international student numbers at 170, compared to the 320 international enrolments it had four years ago.
The school’s leadership is mindful that international fee income is “very vulnerable” to geopolitical shocks, Hargreaves said.
“We have 65 per cent of our international students coming from China and we all know that it would only take a decision of one person to turn that off overnight. And then we would have a very big hole in our revenue that would put lots of pressure on our school operations.”
However, Hargreaves said, “That money’s still going to be critical”.
“International students are returning and we are almost back to pre-Covid numbers,” said Charles Wallace, deputy principal at
Northcote College. “We have been actively marketing overseas.”
“We are now expecting high demand and are determining the numbers of international students that will be accepted,” said Mary Nixon, principal of Takapuna Grammar School.
She added that it was unlikely Takapuna would take on as many overseas students as it did before Covid-19.
Gale at Rangitoto said: “Our numbers are bouncing back as a result of the board strategically maintaining their commercial investment in our international department during Covid, thereby supporting relationships with agents and students in the multiple countries that we draw students from. We now have students from 25 different countries back studying with us.”
Drumm said Mt Albert Grammar is back to “full noise” on overseas recruitment and targeting enrolment of 200 international students within three years, up from 171 in 2019.
“It’s just good business,” Drumm says.
He said New Zealand was slower than other countries to return to international recruitment after its borders reopened, but that he believed it was still well-positioned to attract fee-paying foreigners: “There’s a lot going on in the world [that means] New Zealand looks a very, very attractive place for parents to send their sons and daughters.”
TO UNDERSTAND how that sudden decline in international students impacted individual schools, the Herald focused on a group of Auckland state and integrated secondary schools that had the most overseas pupils before the pandemic started.