School District 43 has been given its marching orders to deal with a $25-million unfunded liability for employee future benefits such as sick leave, vacation and pension.
The plan, recommended by district staff and approved by SD43 trustees on Tuesday would see the district pay off the liability by 2034 by putting $1.5 million aside school years 2016 to 2018 and another $1.1 million each year for the next 15 years.
It was a letter from deputy education minister Dave Byng that prompted the school district action.
In the April 25 letter to board chair Judy Shirra, Byng acknowledged the obligation dates back to when the province moved to generally accepted accounting principles (GAAP) in 2004; SD43 is one of only six B.C. districts that still has an unfunded accrued employee future benefit liability on the books.
With the district in a good financial position, the letter suggests it's time for the district to deal with the unfunded liability.
The letter acknowledges that the switch to GAAP in 2004 resulted in 47 districts with accrued employee future benefit liabilities. To deal with the issue, the province gave $152 million to B.C. school districts, including $8.3 million to SD43 between 2003 and 2007, with the expectation that the "unfunded amount needed to be systematically reduced over a reasonable number of years."
After 2006/’07, the funding became part of the overall block funding provided to boards but wasn't targeted, the letter states.
In the following years, SD43 managed to whittle down the liability to $25 million from $40 million, and in February trustees agreed to put $500,000 in anticipated surplus funds from unspent employee future benefits towards the liability and extended the amortization period to June 30, 2034.
At the time, trustees expressed concern about being locked into a payment plan and wanted the flexibility to deal with the issue each year at budget time.
But the ministry letter calls for a more formalized plan, which must be approved by the minister of education by the end of June.
The district's new payment plan for unfunded employee future benefits will result in larger payments than those envisioned when trustees last discussed the issue publicly in February. However, using the interest generated from the funds could reduce the obligation much faster or provide the board with more flexibility, according to a district report on the issue.
