A Deep Dive into the 2021-2022 Budget
When preparing an annual budget, you must consider the revenue coming in and the expenditures going out. Based on this information, a projected operating (annual) surplus (or deficit) is identified. Ideally, at the end of the year, any funds remaining in the operating surplus becomes part of the accumulated (year-over-year) surplus. We cannot run a deficit in the Louis Riel School Division (LRSD), but we are facing unparalleled expenditures related to the pandemic and an arbitration award. This means that we must rely on our entire accumulated surplus to balance the budget. The alternative is:
- unprecedented staff layoffs
- considerable increases to class sizes
- significant reductions to school budgets
- stopping all school renovations that are not funded by the province.
We can’t in all good conscience choose these alternatives, especially not while we continue to navigate a pandemic.
As directed by the Auditor General of Manitoba, school divisions should accumulate a surplus between 3 and 4 per cent of annual operating expenditures. This is similar to a household putting aside some money to guard against unforeseen expenses like a furnace breaking down or weather damage to the roof.
Through prudent fiscal management, LRSD has always maintained an accumulated surplus in line with the Auditor General of Manitoba’s recommendations. Until now.
Pandemic Related Expenses
The division had pandemic-related savings from the spring that were reflected in the June 30, 2020 accumulated surplus. These savings were used to offset additional COVID-19 expenses this school year. Learn more about the impact of the pandemic on LRSD’s finances.
In 2020-2021, the accumulated surplus is rapidly depleting because of:
- continuing pandemic expenses
- significant reductions from the International Student Program revenues
- the $8 million arbitration award and its ongoing cost
We will touch on the latter two factors in upcoming additions to this story.
The provincial government has assisted LRSD with pandemic-related expenses by committing to provide the division with $6.46 million. We would like to also acknowledge the federal government’s assistance in funding pandemic-related costs in public schools. We are appreciative to both levels of government.
Nevertheless, we hope to secure additional government funding to offset the current projection of $2.4 million in unfunded pandemic expenditures. If not, we project that our available accumulated surplus will be completely depleted by June 30, 2021.
The International Student Program and Accumulated Surplus
The consistent growth in the Louis Riel School Division’s (LRSD) International Student Program (ISP) has contributed significantly to the accumulated surplus in the past 10 years. As provincial and municipal funding has decreased in relation to increased costs due to inflation and enrolment growth, the ISP revenue contribution to the accumulated surplus has been instrumental in allowing the division to fund a variety of important community and infrastructure needs.
The ISP revenue has never been used to fund the core operations and staffing of schools. Until now!
Here are some recent examples of how the ISP revenue has been used to enhance equity and fund school renovations not supported by the province:
- ASPIRE: an equity-based summer program for students in early years
- The complete funding of a new Boys’ and Girls’ Club in Lavallee School
- Enhanced nutrition programs in schools
- Equity-based cultural enrichment opportunities for LRSD students
- Additional teachers in high schools to support learners in the International Student Program
- École Guyot multi-purpose room renovation related to a shift in enrolment
- École Sage Creek School (ESCS) renovations to accommodate increased enrolment
- Renovations to accommodate enrolment shifts from ESCS to Windsor Park Collegiate and Collège Béliveau
As a result of the pandemic and the significant drop in international students enrolling in the ISP, it is no longer a major contributor to the accumulated surplus. A return to pre-pandemic contributions could take several years to achieve, but it’s unknown at this point if a full recovery is even possible. If there is any revenue from the ISP program toward the 2021-2022 accumulated surplus, it is not expected to exceed $200,000.
Bill 28, Interest Arbitration and Negotiated Collective Agreements
School divisions were directed by the provincial government to not budget for pay increases outside of the Manitoba Public Services Sustainability Act (Bill 28). Effective 2017, the LRSD Board of Trustees complied with Bill 28 to provide the allotted salary increases as outlined above to the small group of non-unionized LRSD employees.
Over the same four-year period, LRSD’s unionized employees received a yearly average salary increase between 1.9 per cent and 2.5 per cent, negotiated prior to Bill 28.
In April 2020, an arbitration board issued an $8 million award to the Louis Riel Teachers’ Association (LRTA). This award included a 1.6 per cent wage increase in 2018-2019 and 1.4 per cent for 2019-2020 for teachers in LRSD.
Under Bill 28, LRSD could only negotiate the following salary increases at the conclusion of any collective agreement or contract:
- freeze salaries for two consecutive years
- allow an increase of 0.75 per cent in year three
- allow an increase of 1 per cent in year four
In 1956, teachers in Manitoba gave up the right to strike in return for binding arbitration. This means when the employer and employee group cannot come to a negotiated settlement, we resolve the matter through arbitration. The arbitration board is made up of three appointed members. One member is agreed upon by the employee group and the employer to chair the board. The employee group and the employer each select one additional member. The board decision issued in April 2020 was unanimous and binding.
In January 2020, LRSD cancelled planned surplus-funded expenditures and directed schools to stop any non-essential spending to set aside as many surplus dollars as possible for the looming arbitration award. In the end, the redirection of the accumulated surplus has allowed LRSD to avoid catastrophic staff layoffs, increased class sizes and cancelling school renovations that are not funded by the province.
Teachers are without a collective agreement as of July 1, 2020.
All other unionized employee groups are without negotiated collective agreements. These unionized groups include:
- Educational Assistants, CUPE Local 3473: Expired June 30, 2019
- Clerical and Technical, CUPE Local 4642: Expired Dec. 31, 2019
- Custodial, Maintenance and Bus Drivers, CUPE Local 4642: Expired Dec. 31, 2019
The fourth year of Bill 28 comes to an end for the small non-unionized employee group in June 2021.
With the future year salary increases outlined in the recent Pembina Trails teacher interest arbitration award, potential bargaining outcomes for all employee groups in LRSD continue to be top of mind as we finalize the upcoming 2021-2022 budget.
Community Feedback
Thank you to everyone who shared their feedback about the upcoming 2021-2022 budget. Here is a quick summary of the top themes that emerged from the ThoughtExchange:
Many of the thoughts our community shared through ThoughtExchange are similar to our priorities for the 2021-2022 budget. As we reiterated during the Draft Budget Town Hall Live Event, our goal is to achieve a balanced budget while maintaining manageable class sizes and protecting core investments. Some of those core investments include teachers and educational assistants, student and clinical services, recent investments to increase equity and inclusion and our ability to navigate the pandemic.
To protect these investments, LRSD is planning to use its entire accumulated surplus, a first in the division’s history. This unprecedented measure is necessary to balance the 2021-2022 budget unless we are able to secure additional government funding to offset the current projection of $2.4 million in unfunded pandemic expenditures. Exhausting the surplus will leave the division without a contingency fund and will compromise the divisions ability to accommodate unforeseen or emergent expenses.
As I stated at the start of our deep dive, if we don’t use our entire accumulated surplus to balance the budget, the alternative would be a combination of the following.
- Unprecedented staff layoffs relative to pre-pandemic staffing levels
- Considerable increases to class sizes relative to pre-pandemic class-size
- Significant reductions to school budgets
- Stopping all school renovations that are not funded by the province
The LRSD Board of Trustees will approve the 2021-2022 budget at the Tuesday, March 9 board meeting. If you'd like to attend the meeting, click here.
Christian Michalik, Superintendent
During the week of March 1, 2021, staff, students and families can learn more about LRSD’s budget through this spotlight series that will provide further insight and context into the decisions made to achieve a balanced budget.