Chinook School Division running out of financial reserves to deal with annual budget deficits

Posted on 27 April 2022 by Ryan Dahlman

The Chinook School Division is running out of financial reserves to address a growing deficit due to inflationary costs that are not covered by provincial funding.

Director of Education Mark Benesh made a presentation about the school division’s approach to the use of reserve funding to deal with budget shortfalls during a regular Chinook Board of Education meeting, April 11.

He also made this presentation to school community council members at the SCC Spring Forum, which was hosted by the Chinook School Division in Swift Current on April 12.

Chinook Board Chair Kimberly Pridmore said during the board meeting it was important to share this information about the manner in which the school division has been using financial reserves.

“We do have some reserves in Chinook,” she mentioned. “We’re one of the few divisions that are fortunate, and so we think it’s important to not only have a conversation ourselves, but to try to help educate our constituents with what our reserves look like and what we do with them and just how little time we actually have with them.”

She noted that the Chinook School Division took various efforts over the past few years, including the use of reserves, to avoid any impact on teacher staffing positions, but it is not possible any longer.

“It’s taken us that many years to have to get down to the teachers and people in front of our kids, but we’ve been saying for five years it’s inevitable,” she said. “We can only delay it for so long.”

Katelyn Toney, the trustee for Subdivision 4 in the Chinook School Division, said there is a lot of concern among people that any cuts to teaching staff positions, especially in smaller schools, will be the first step towards school closure.

“I keep telling them that’s not a conversation that we need to have and we have no interest in closing schools, and that’s not what these cuts mean at all,” she emphasized.

Benesh noted that the school division’s current financial situation is connected to a significant reduction in funding from the provincial government in 2017-2018, when the Board had to find efficiencies and make reductions.

“I think it’s really important for people to connect our circumstances,” he said. “We were in this exact same position just over four years ago, when we were having to cut over $5 million from our budget.”

For the 2017-18 budget the school division had to find efficiencies and it made various reductions that were mainly focused on the central office in Swift Current as a means to keep cuts away from classrooms.

Those budgetary reductions included a 35 per cent reduction in governance, 25 per cent reduction in senior administration costs, 25 per cent reduction in coordinator positions in the learning department, 20 per cent reduction in the technology department, as well as a 25 per cent reduction in student services that included youth workers, counsellors, educational psychologists, occupational therapists, and speech language pathologists. There were also reductions in expenses related to transportation, maintenance and instructional coaches.

There were additional reductions through attrition and retirements from 2018-21. It included the removal of the position of financial controller, which was a senior administration position at the central office.

“So steps have continued to be done, but unfortunately each of these years the inflationary costs were not covered by the province’s funding,” he said. “So our structural deficit kept getting added to.”

Chinook School Division has a budgetary cash deficit of $5 million for the 2021-22 school year, and this entire amount will be covered through financial reserves.

Inflationary costs in the 2022-23 budget are projected to add another $1.5 million to the school division’s cash deficit. Transportation costs is an important factor that impacts the budget due to the large size of the school division.

The Chinook School Division covers an area larger than the country of Belgium. There are 116 rural bus routes with an average ride time of 61 minutes. Rural buses drive a combined total distance of 24,259 kilometres per day and vehicles therefore need to be replaced frequently.

“Basically, it means we almost average out a bus a month, because of the number of kilometres we put on each month,” he said. “So transportation is expensive. We have a huge space to cover.”

The school division has implemented various measures to reduce transportation cost, including a right-sizing process to use smaller, more cost-effective buses, a review and consolidation of bus routes, doing bus repairs and maintenance in-house to save dollars, and delaying the purchase of new buses. However, there is still going to be a projected shortfall of $2 million in the area of transportation.

The school division has a projected budgetary cash deficit of $5.1 million for the 2022-2023 budget. It is considering various measures to address this shortfall, including a reduction of up to 20 teaching positions, reducing the daily work hours of educational assistants with 30 minutes, reducing curricular resources, and reducing the purchase of buses. These measures will reduce the 2022-23 budget shortfall by about 50 per cent, and the remaining $2.5 million will come out of financial reserves.

“So we battle with that and plan to use reserves, as people are advocating that we do,” he said. “The issue is at some point we will soon run out of those reserves.”

Benesh felt it will not be a realistic option for the school division to only rely on reserves to cover the financial shortfall without any staff reductions.

“The problem with doing that is that our yearly deficit grows each and every year,” he said. “When inflationary costs aren’t covered, it just creates a structural deficit that grows and grows and grows that compound and increases our deficit.”

He noted that $5.7 million of the current financial reserves are in any case restricted and it cannot be used to cover budgetary shortfalls. These restricted reserves include local school budget dollars, professional development funds for teachers, textbook curriculum renewal funds for new programs, and school generated funds.

It therefore means the school division currently has $18 million in reserves that are available to cover budget shortfalls. But $5 million of that amount will be used for the 2021-22 cash deficit and that will only leave $13 million for future use.

“Now if we’re projecting to use between $2.5 million and $3 million next year, it puts us down to $10 million,” he explained. “And so what we’re seeing is that we’re almost in half within just the next year of what we used to have.”

Benesh referred to a chart during his presentation that projects the school division’s financial situation if it only uses financial reserves to address the cash deficit with no staff reductions. Chinook will then only have $2 million in reserves in the 2024-25 school year to deal with a projected $7 million cash deficit. That cash deficit is projected to increase to $8 million in the 2025-26 school year.

“We’re assuming all through here that our funding is at the same level they have for the many past years, where we lobbied for additional funding, but we still get what we get,” he said.

He is not anticipating that future funding allocations in the provincial budget for the Chinook School Division will increase to such an extent that it will allow the school division to address the structural deficit.

The school division’s intention therefore is to continue to use financial reserves to address the annual budget shortfall, but it cannot do this without other cost saving measures, because there are not sufficient reserves available.

“So the basic premise is that we need to be smart, we need to elongate that time and using and managing our reserves or basically we’re going to be in a situation by the time the 2024-25 school year, which is just over two years, that we’ll be in a more dire circumstance,” he said.