COUNTRY kids could be the big losers if the Victorian Government adopts a recommendation to slash $230 million from TAFE budgets.

Victorian TAFE Association executive director David Williams said the potential cuts could mean 20 per cent of all TAFE campuses could close within four years.

"This would significantly limit the training choices of country Victorians," he said. "All the threatened TAFEs are small campuses in country Victoria.

"The levels of higher education are already much lower among young people in regional areas and this decision would make this much worse."

An Essential Services Commission review recommended the government pay private institutions and TAFEs at the same rate for each hour a student is taught. TAFEs currently receive a slightly higher differential funding rate than private businesses.

But the VTA says TAFEs have more costs because they provide higher-cost trades training, more quality services - such as libraries and support officers that are often not provided by private organisations - and because they must comply with public service employee conditions.

Mr Williams said an explosion in private training businesses in the past two years had blown the Government's budget and TAFEs may cop the brunt of any cuts. It could mean TAFE campuses would be forced to reduce the range of courses offered and some would become unviable.

"In towns like Bairnsdale and Morwell, TAFEs are some of the biggest employers and they support a diverse range of communities and businesses ... if they're not vibrant organisations it'll hurt communities," he said.

But Higher Education and Skills Minister Peter Hall said the Government was not cutting overall funding for training. It expected to spend $1.3 billion in 2012, up from $1.2 billion in 2011.

"The Victorian TAFE Association is doing their members a disservice by (this) scaremongering," he said. TAFEs continued to deliver the lion's share of training and operated in a competitive environment with other not-for-profit and private providers, he said.

The Government had already reduced the TAFE differential for big institutions by 25 per cent but had not decided whether to follow through on the review's recommendation, Mr Hall said.