The public school board is preparing to set aside $18 million over the next nine years to fund retirement gratuities under new Ministry of Education guidelines its superintendent of business says is taking money from classrooms.
The Upper Canada District School Board will set aside millions of dollars annually for the next nine years, beginning with about $4.5 million this school year, to fund a long-term liability for retirement gratuities.
A portion of the money will go into the board's reserve fund, while the remaining money will fund retirement gratuities on an ongoing basis.
Rick Gales, the board's superintendent of business, said the liability extends over 30 years, but the ministry wants to fund it over the next nine years.
“We'd have to spend, or take out of the classroom, about $4.9 million a year,” Gales said. “Now, some of that would be spent on actual retirement gratuities, but the rest would be put away in a cash reserve over nine years.”
Once collected, the $18 million will be used to disperse retirement gratuities for the following 20 years.
Ten years ago, the public school board begin recording its expense and liability for Employee Future Benefits on its balance sheet; however, there was no offsetting asset to cover the liability, so a negative equity position was created.
Beginning in 2012-2013, the Ministry of Education made it mandatory for school boards to phase into compliance, or fund those liabilities.
Gales said the new regulations will put significant pressure on the school board's budget for the next nine years.
“It's money we owe, there's no question about it,” he said.
“The issue is collecting over nine years what we would normally pay out over 30 (years).”
Board chairman Greg Pietersma and director of education David Thomas will be lobbying the provincial government about the impact of the nine-year term on the board budget.
“It's going to create an issue; how big of an issue is unclear,” said Pietersma.
While other boards in the province have reserve funds, the Upper Canada District School Board does not. Gales said the board had around $5 million in reserves in 2004, which was taken by then-Minister of Education Gerard Kennedy.
“The board never had an appetite to create a surplus, or reserves, because the last time they did, it was taken,” Gales said.
Pietersma said having to set aside additional funds for retirement gratuities will not affect student learning.
“We will be consistent with the fact that we will do whatever we can to ensure our schools have the resources they need,” he said.
Pietersma said he and Thomas will first correspond with other school boards to find out how they are dealing with the issue before going to the Ministry of Education.
He said the board just became aware of the new guideline in recent weeks.
“We need to understand how it's going to impact the board before we can go to the ministry,” he said.
“I think it will be just talking with ministry staff and making sure they understand that there's some arbitrariness to this.”
The Upper Canada District School Board needs to fund staff retirement gratuities ($36.9 million), post-retirement benefits ($0.26 million) and workplace safety and insurance ($2.3 million).
There is a $1.9 million reserve for workplace safety and insurance liability.