New research shows Victoria receives almost $2 less than the national average in funding per hour of TAFE education delivered.
The research also reveals Victoria's TAFE teachers are working almost a day extra each week unpaid.
Educators say demand has outpaced resources since some courses became free in 2019, sparking warnings the state will struggle to fill skills shortages.
Early education teacher Elizabeth Chiarelli loves training the next generation of childcare workers in her TAFE classes.
"You meet a lot of talented students," Ms Chiarelli said.
But Ms Chiarelli said since the introduction of the Free TAFE program, bigger classes have meant less time to work with individual students, many of whom have additional needs, such as language, literacy and numeracy support.
"[It's meant] different types of students where you require more contextualised learning for each student," she explained.
"That can be really difficult sometimes."
Free TAFE started in Victoria in 2019, with the state government paying fees to encourage students to take on vocational studies in high-demand industries.
It rolled out nationally with the assistance of the federal government four years later.
More than 80 free courses are now available in Victoria, in areas like construction, agriculture, finance, hospitality, health and aged care.
But teachers say the increase in enrolments has not been met with a commensurate increase in resources, leaving staff to fill the gaps.
New research from independent think tank Per Capita, commissioned by the Australian Education Union (AEU), shows Victorian TAFE has the lowest funding per hour of education delivered in the country.
Data compiled in the report, pictured from highest to lowest funding per hour in the following table, shows that funding in Victoria is nearly $2 below the national average.
AEU Victorian president Justin Mullaly warns the funding deficit is threatening the state's ability to fill skills shortages.
"It means that the instructional time — so the time that TAFE students spend in class — has been cut time and time again," Mr Mullaly told the ABC.
"And it means that teachers don't have enough time to actually provide their students with the skills and the education that they need."
The report found Victoria's TAFE teachers are working an average of seven unpaid hours every week, which equates to up to $108.7 million in unpaid wages across the workforce every year.
It states that nearly 60 per cent have considered leaving TAFE.
Report author Wesa Chau said the government funding model, which pays subsidies per student enrolment hour, means TAFEs cannot rely on revenue to plan courses.
"Currently the funding goes towards the enrolment hours of students, which is the delivery hours," she said.
"But there are other things that need to be done."
TAFE accounting and bookkeeping teacher Teghan Day said a shortfall in funding hours meant students were often left to do work on their own, which is difficult for courses where practical skills are required.
"What that ultimately means is teachers across Victoria are focused on delivering the content, making sure that we cover that essential knowledge for our students," she said.
"But often it doesn't leave enough time for students to be able to apply that.
"Students [have to] do work outside of class and they don't necessarily have the resources or the tools and equipment at home, especially when you look at trades and hands-on areas."
The report recommends changing the per hour enrolment model to "block funding" per course while raising the per hour rate as an interim measure.
Lt also recommends linking any expansion in the Free TAFE program to commensurate funding.
But the peak body for independent tertiary providers argues that government funding should be aimed at students, not institutions.
Felix Pirie, CEO of the Independent Tertiary Education Council of Australia, is calling for a review of government funding for vocational training.
He thinks students should also be given the opportunity to study for free in the private sector.
"[Students] don't have an opportunity to undertake training with the support of government unless they go to a specific type of institution that may very well not suit their needs," he said.
"I think we should invest in students that go to independent providers … whether that's private not-for-profits, whoever that might be."
The CEO of the Victorian TAFE Association, Alex White, is calling for more campuses and classrooms alongside an increase in funding for subsidised TAFE places.
"Our population is increasing and the skills demands that Victoria is facing in the future — whether it's for clean energy, health, cyber security — are enormous," he said.
"There's going to be about 1.4 million new workers over the next 10 years in Victoria and TAFE is the only way that we can train such a large number of people in the skills that our economy needs."
Mr Pirie said it was "not an either-or proposition".
"We can't go down the path of only funding or investing in a particular provider type, whether it be TAFE or just an independent provider."
The Shadow Minister for Jobs and Skills, Bridget Vallence, told the ABC that a Coalition government would work collaboratively with TAFE teachers to strengthen the state's vocational education and training system, but did not say whether that would include an increase to TAFE funding.
"The state relies heavily on TAFE teachers to educate and skill up Victorians and provide them with the qualifications they need to get decent jobs and help grow our economy," Ms Vallence told the ABC.
A government spokesperson told the ABC that Free TAFE had been a "game-changer", with more than 278,900 students commencing a free course.
"Our TAFE teachers are world-class and we'll always back them which is why in the most recent TAFE Teachers Agreement we delivered pay rises, better leave provisions and more time for assessment and planning," the spokesperson said.
The latest union campaign follows a protracted battle with the state government to reach a pay deal for public school teachers and education support workers.
But Justin Mullaly said this fight was not about pay for teachers.
"This is about making sure that we've got our TAFEs funded in a way that meets the ultimate needs of students."