Rising costs forced the government to cut back its plans for education spending in the May Budget, documents show.
The Budget advice published by the Treasury and Ministry of Education today show the government was warned in November last year that funding for its education commitments was "extremely tight".
Treasury advice warned "that anticipated education operating cost pressures for Budget 18 of [deleted] over four years exceed the $2.82 billion funding signalled for the education sector in your fiscal plan, excluding the 100-day plan tertiary commitments."
The document said the pressures included $984 million in unavoidable costs caused by growth in student numbers for school and early childhood.
The document said a further $728m could be scaled back and included cost pressures in special needs education, and operating costs caused by capital charge and depreciation.
Treasury suggested the government scale back funding increases for special needs children, and advised that increases to funding rates for early childhood services and schools were not a priority because there was no evidence they could not cope.
It also recommended deferring cost increases for tertiary education rates.
"We recommend that the cost adjustment for tertiary tuition and training subsidies be deferred. While there are some signs that individual providers are struggling it isn't clear that this is a systemic problem. At the same time, there are a number of reviews underway that could change the funding mechanisms for the tertiary education sector and the shape of the ITP sector. We don't think additional baseline funding should be considered until these reviews have taken place."
The May Budget did not include any increase for tertiary education subsidies, but it did include increases for schools and early childhood.
The Education Ministry told the government that funding for universities had largely kept up with rising costs, but in other parts of the sector, such as polytechnics, it had not.
It also told the government that it and the construction industry were approaching the maximum number of building projects that they could handle.