Richard Pickard, Treasurer of the UVic FA, provided these answers to questions asked at Monday’s general meeting:
Question #1: When the FA’s Treasurer talks about past deficits, how large are these annual deficits, and how consistent have these annual deficits been?
Answer: The FA has run a deficit in four of the six budget years since 2009. We had a small surplus for 2008/2009 (just under $30,000, or 6.5% of revenues), and a large surplus for 2011/2012 (over $108,000, or 19% of revenues). However, the year ending January 31, 2012, should be considered something of an outlier, because a combination of factors meant that the FA had dramatically lower expenses in two major areas: legal fees, and consulting expenses. On the consulting side, the FA spent only $27,000 in 2011/12, compared with $92,000 in the previous year and $144,000 in the following year; its legal fees were less than $9,000 in this year, less than 1/4 the size of the next smallest total for legal fees across the period, and less than 15% of the average across the period. If we exclude 2011/2012, the average annual deficit in recent years has been approximately $50,000. The proposed mil-rate increase will ensure that this pattern ceases, as well as enabling the Association to build up a defense/legal reserve.
Question #2: Looking at the last several budget years, where has the FA been spending its money?
Answer: In each of the last six years, spending in six combined areas has accounted for between 82.5% and 90% of expenses: CAUT dues, CUFA/BC dues, wages and benefits for office staff, course releases for service undertaken by Members (e.g., for the President, bargaining team members, and for service that would be undertaken by an Executive Director or Member Services Officer in other Associations (e.g., UBC or SFU)), legal fees and consulting. Our payments to CAUT have grown in this period from $112,000 to $136,000 (on average, growing 3.3% per annum), and our CUFA payments have increased from $47,000 to $57,000 (on average, also increasing approximately by 3.3%).
There has been considerable volatility in each of the other four areas (wages and benefits for office staff, course releases, legal fees, and consulting expenses), which to some extent represent overlapping expenses since in all cases the intent is to have services performed on behalf of the FA (by an employee, a volunteer, a lawyer, or a consultant, respectively). In each of these four categories, the lowest expense across the last six budget years is less than 50% of the largest expense, indicating the variability in these expenses given the way that the Association has been operating. In each year, though, these four areas have accounted for between 45% and 63% of the FA’s overall expenditures (that is, from from a low of $203,000 in 2009, to a high of $453,000 in 2013).
Question #3: Given the volatility year over year in the different expense categories, especially those related to services that the FA needs to have performed, what has the FA been doing in its budgeting and planning to control expenses and to smooth out the year to year volatility?
Answer: Controlling and smoothing out these expenses is a fundamental goal of the current professionalization plan of the Executive. The FA has just hired a permanent Executive Director (with a significant background in negotiations) and is in the process of hiring a Member Services Officer (who will be responsible for, among other things, receiving questions and complaints from members that need to be pursued as possible grievances). Hiring these two individuals is expected to substantially reduce the FA’s need for outside lawyers and consultants, and for some of the payments for ad hoc course releases for Members to undertake needed work, as well as to generate consistent expenditures each year in the area of wages and benefits, rather than the volatile annual expenditures we’ve seen in recent years in legal fees, consultants’ bills, and course releases.
Question #4: Given that the majority of FA expenses are in six general areas (CAUT dues, CUFA/BC dues, wages and benefits, course releases, legal fees and consulting), what projections have led to the proposed mil-rate increase from 5.0 to 7.5?
Answer: As noted above, the FA’s budgets have seen considerable volatility in most of these areas. While the Treasurer is still developing a draft budget for 2015/16 (which under the Constitution must be presented at a November AGM), the following represents current forecasts:
- CAUT dues: $150,000
- CUFA/BC dues: $60,000
- wages and benefits: $250,000 (assuming an Executive Director, Member Services Officer, and Administrative Assistant, including 20% for benefits)
- course releases: $75,000 (negotiating a first Collective Agreement, plus releases for the FA’s elected officers, plus paying out some accumulated entitlements from past service)
- legal fees: $30,000 – $90,000 (bargaining assistance, grievances)
- consulting: $0 – $30,000 (no determined projects at present)
We thus project that for 2015/16, these six areas will cost between $565,000 and $655,000. Over the last six years, as noted above, these areas have accounted for between 82.5% and 90% of the total budget. In theory, these forecasts project an overall budget of between $625,000 and $795,000, but the last two years of expenses argue for 2015/16 expenses of at least $700,000. (Expenditures in 2012/13 were $720,000, and in 2013/14 were $690,000.) The proposed mil-rate of 7.5 would lead to revenues of approximately $820,000. These projections thus suggest, for 2015/16, a surplus of $25,000 to $195,000, which will be used to build up a legal and defence reserve fund.
Question #5: How large a defense fund does the FA need, whether or not it joins the CAUT Defense Fund?
Answer: The FA has long attempted to maintain a legal reserve, but in the last few years, this reserve has been depleted in the service of grievances and contract negotiations, as the current mil-rate did not enable the Association to meet its annual expenses. The legal reserve once stood at $186,000 in 2009; it is currently empty (though we have an operating reserve of $340,000, up from $290,000 in 2009). It is the Association’s fiduciary responsibility to have an adequate legal and defense reserve, so that the FA is equipped to defend the rights of individual members and of the membership collectively. This was true in our past non-union environment, but certification imposes an additional burden on the FA to fulfil certain fiduciary obligations to the membership. As well, if the FA retains the right to strike and the Administration the right to a lockout, it is incumbent on the FA to be able to exercise this right: members would need strike pay and benefits coverage during a strike and/or lockout, meaning that either the FA would have to supplement the amounts received from the CAUT Defence Fund, or it would have to pay this directly (if we don’t join the CAUT Defence Fund). In addition, there would be substantial legal expenses along with a need for the rental of off-campus office space for the Association to continue to operate during such a period (for which dues would not be funding operations). It is difficult to project how much should be contained in such a reserve but our current plan is to build it up to around 120% of annual expenses. Assuming steady state, the proposed mil-rate of 7.5 is projected to allow the gradual but consistent growth of this essential reserve over a five to eight year period.