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B.C.T.F president Jim Iker speaks to media before heading into the B.C Court of Appeal in Vancouver, British Columbia on October 14, 2014.

Ben Nelms/for The Globe & Mail

British Columbia Finance Minister Mike de Jong says a possible cash settlement with the province's teachers in a court dispute is one of the "major risks" to Canada's only provincial and territorial surplus budget.

At issue in appeal court is whether 2002 legislation introduced by the BC Liberals illegally stripped teachers of their rights to bargain class size and composition. The case with the province's 40,000 teachers is before the courts, but was a point of uncertainty in a budget introduced on Tuesday.

The budget included a $576-million increase in government funding for kindergarten-to-Grade 12 education over three years – the second-highest increase for a ministry, after health.

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The uncertainty over the court case stands as a reminder of chronic turmoil in B.C. education. A five-week strike last year by the province's teachers ended with a six-year deal. In tabling the budget, Mr. de Jong noted there will be a $485-million increase in funding allotted for labour settlements in public schools.

Although the labour dispute is over, a legal fight over classroom working conditions continues.

Budget documents describe the appeal as one of several "major risks" to the fiscal plan that the government has no control over. Other such risks include uncertainty around global economic activity, potential changes to federal transfer allocations, and utilization rates for government services.

Mr. de Jong said contingencies have been built into the budget to cover risks. But he told a budget news conference he was wary about speculating on a decision that the courts are considering – or the amount B.C. may have to pay.

Jim Iker, president of the B.C. Teachers' Federation, said he was hoping for a court ruling on the issue within the next two months.

In an interview, Mr. Iker said he had hoped the government would negotiate a settlement with the union. But now he said it was incumbent on the government to pay any compensation deemed appropriate by the courts.

"Public education is appropriate in democracy and they should be funding it appropriately," Mr. Iker said.

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Of the budget as a whole, Mr. Iker decried an order to kindergarten-to-Grade 12 schools to find $29-million in savings by being more efficient in 2015-16 and a further $25-million in 2016-17.

The B.C. School Trustees Association slammed the budget for the cuts to administration and related services, saying in a statement the funds were being removed from the education system.

BCSTA president Teresa Rezansoff said in a statement that it was "unacceptable" that dollars saved from school districts would not be used to address school needs.

"It is clear the new provincial education budget will mean further cuts in school districts across the province," Ms. Rezansoff said. "The money allocated in the 2015/16 provincial budget for public education simply will not cover our increasing costs, and now we are seeing millions of dollars taken away from school districts for other uses."

Also, the organization said that despite increases in the education budget, the extra money was going to pay for collective agreements for teachers and support staff.

In a possible olive branch to teachers, Mr. de Jong also announced that, starting this tax year, teachers engaged in extra-curricular sports and arts activities will be eligible for a $500 tax credit.

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Mr. de Jong said the Ministry of Advanced Education's three-year allocation for postsecondary education has been increased by $92-million over the amount allotted in 2014.

Increases in postsecondary fees are pegged as part of a 3.4-per-cent increase in revenue growth for the government from various sources.

Zachary Crispin, chairman of the B.C. wing of the Canadian Federation of Students, said the fee situation was exasperating.

"The B.C government is making a profit off B.C. students," he said, adding that a more reasonable interest rate for student loans or even the elimination of student loans would have been helpful measures for students seeking postsecondary education.

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