Hong Kong's education sector could face funding cuts as Financial Secretary Paul Chan prepares to deliver his budget speech on Wednesday amid a projected HK$100 billion deficit.

Victor Kwok, deputy research director at Our Hong Kong Foundation, said the education budget has ballooned from about HK$70 billion a decade ago to around HK$110 billion now.

Kwok thinks the government should avoid blanket budget cuts that could harm daily operations and teaching quality.

"Now you risk sacrificing some of the things that people have always been doing on a daily basis, because they will be scrambling to find resources and replacements for things that they have always been doing... education quality may be going down as a result of that cut," he said.

The finance minister previously said universities had relatively large amounts of reserves, calling on everyone to play a part in tackling the budget shortfall.

While universities have substantial reserves totalling almost HK$140 billion, Kwok cautioned against relying on these funds to offset budget cuts.

"Ultimately, [a] reserve is a fixed amount and the spending is ongoing. You have to spend every year. So if you're saying, 'oh, they have HK$100 billion in reserves, so let's give them less, and they can spend their reserves first', but one day their reserves will dry up," he said.

Instead, Kwok said officials could consider reducing spending on research and encourage universities to develop more sustainable funding models.

"How do you encourage the university sector in Hong Kong to become more linked to the industry, such that it has more diversified funding resources, and not just solely depending on the government for funding... so that's one area that we can look at," he said.

For primary and secondary schools, Kwok thinks the government should support merging smaller schools to improve teaching quality and make sure resources are well spent.