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How Province Erased $22 Million in School Funds

While finance minister brags of 'record' increase.

By John Malcolmson 13 Mar 2007 | TheTyee.ca

John Malcolmson has analyzed public school finance for many years and works as a researcher with CUPE. This article is from FinanceWatch, the newsletter on school financing he publishes. You can subscribe by sending an e-mail to financewatch@shaw.ca.

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Finance Minister Carole Taylor

Release of the recent provincial budget has offered yet another opportunity for the Ministry of Education to remind us that 2006/07 has seen the largest ever dollar increase in levels of funding for public school education.

This was how the finance minister's budget speech put it: "In education, even with declining enrolment, this school year B.C. school districts received their single largest funding increase ever. Budget 2007 builds on this achievement. Total funding will rise to an estimated $7,900 per student in 2007/08, an increase of 4.1 per cent over the current fiscal year."

Technically, there is truth to the assertion. New funding was triggered by last year's contract settlements with teachers, support workers and excluded staff. Add to this the near quarter billion spent on signing bonuses within the K-12 system.

It should be noted however that the latter are strictly "flowthrough" monies. Negotiations with support staff, teachers and others are conducted under a centralized regime ultimately directed by the minister of finance.

The provincial government is therefore honour-bound to cover the costs of contract settlements. For B.C. to fail to cover these provincially sanctioned cost increases would take the term "bad faith" to dizzying new heights.

So, while negotiated increases do mean new funding for K-12 education, they don't give rise to new funds districts can use to extend programs to students or to address unmet needs within the system. When these settlement-related costs are stripped away, actual funding levels are far more modest. In March of 2005, the annual funding increase projected for the current year was pegged at $20 million or .5 per cent. In the spring of 2006, a similar amount was forecast. However, the December finalization of 2006/07 funding levels shows that even this modest figure outstrips actual levels of financial support.

What is the 'holdback'?

According to a report currently circulating amongst district secretary-treasurers, the Ministry of Education has quietly decided to revise the rules governing funding allocations to districts. The specific object of this change is the funding allocation holdback.

The holdback is a portion of the ministry's annual funding allocation to districts that is reserved from distribution when the funds start to flow. This is because the initial allocation figures are estimates, based on projected student enrolments. These estimates are readied in the spring that precedes the start of the coming school fiscal year on July 1. When actual student counts and other data elements are known, the funding holdback is released to allow for necessary district-level funding adjustments based on accurate figures.

That is the way it has worked historically. Until this year. Now the rules have silently been changed.

The report, prepared by Nechako Lakes Secretary-Treasurer Sterling Olsen, examines the scope and nature of the funding rule change. A total of $45 million was originally allocated to the holdback in 2006/07, roughly one per cent of all operating funding. About $10 million of this amount was reserved to fund certain formula-based changes.

Another $12 million is still to be disseminated to pay for mid-year tallies of special education and distributed learning students. That leaves over $22 million which in previous years would have been used to increase the per pupil allocation paid in support of regular programming by districts. But this year, the holdback funds are truly held back.

The money is the money

The ministry's Operating Grants Manual for 2006/07 makes no mention of a change to rules governing allocation of the holdback. This document is like a rule book governing the allocation of K-12 dollars. In past years, the manual has meticulously itemized each and every significant rule change affecting the way provincial funds are disbursed to districts.

In the spring of 2006, the ministry forecast total K-12 spending at $4,055 million. This year's final allocation reports show a total of $4,473 million committed to the system. When allowance is made for $254 million in signing bonuses, and $196 million in negotiated contract increases, the net amount at the disposal of school districts comes to about $4,023 million.

That's $32 million less than last year's forecast. When allowance is made for $10 million in "second count" monies still to be released into the system, the net drop will be about $22 million. This represents the net impact of the lost holdback.

Ministry officials confirm the nature of the change but are guarded in describing it as an actual change in ministry policy. One source said that funding was still "within the scope of the mid-December funding decision."

Repeated declarations by the minister of education that the "money is the money" have widely been seen as efforts to hold the line on demands for more dollars to support the implementation of Bill 33 mandated limits to class size. However, the holdback change shows that holding the line now means less money than that forecast at the start of the school year.

Why the vanishing act?

The simple answer to this question of why is that money is in tight supply around the provincial capital these days. Despite recurring annual budgetary surpluses, the government faces a need for massive amounts of capital investment to renew and extend provincial infrastructure. Figures from the provincial budget bear this out:

Construction projects for B.C. Hydro: $995 million. Highways construction: $922 million. Postsecondary education: $857 million. Health: $819 million.

With the run-up to the Vancouver Olympics in 2010, the pressure is obviously on to meet capital spending requirements in these and other areas. With continued shortages of skilled labour and rises in construction costs, this pressure is reflected in a tightened squeeze on most areas of provincial spending. And K-12 schools are not immune to the effects of this squeeze.

The curious quality to all of this lies in the surreptitious nature of the change in rules. Possibly, with all of the settlement and signing bonus money flowing through the system, there was a belief that no one would notice the vanishing holdback. To some extent the secretive nature of the change has been abetted by the absence of any significant district-level dust-up. Some secretary-treasurers speculate that the extent of contract settlement funds paid to districts is a factor. There is also the fact that the current funding formula has a number of cushioning provisions that temporarily soften the impact falling enrolment has on district revenues. All of this may be serving as financial inducement for districts not to kick up a major fuss about the holdback.

Zero sum finances

Original funding projections for 2006/07 made a year ago had $20 million in new money set aside for K-12 education. The scale of this year's vanishing holdback is a near-equivalent amount. Balancing these two variables lends an eerie zero sum quality to current year funding support. Despite the continued hype surrounding record levels of public school funding, there is evidently more than a little sleight of spreadsheet thrown in to help leaven this year's K-12 funding mix.

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