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The Arts and Administration building at Dalhousie University in Halifax.Paul Darrow

Dalhousie University has won an exemption from making massive payments to its under-funded pension plan, brightening the school's budget outlook and making it less likely the school's professors will walk off the job on Monday.

Nova Scotia's universities had long fought to be released from the province's rules on pension solvency deficits – the amount they would need to add to their plans such that if the university suddenly went out of business, they could honour their obligations.

On Thursday, the Nova Scotia government confirmed that solvency tests will no longer apply to all five of the province's universities with defined benefit pension plans, which promise a set retirement income based on service and salary, though they are still subject to other benchmarks. The rationale was that universities are well-established, publicly funded, and own substantial assets, making them especially unlikely to suddenly shut their doors.

In Dalhousie's case, that means being released from looming $50-million annual payments to close a $270-million solvency gap, which the university warned would necessitate deep cuts to its operating budget and massive layoffs.

"That would be, for us, a seventh of our budget," said Tom Traves, Dalhousie's president, in a recent interview with The Globe and Mail. "[The solvency deficit is]an artificial problem because it's based on, what if you go out of business tomorrow? Well, that's not a real problem."

Barb Jones-Gordon, Nova Scotia's executive director, labour services, said Dalhousie and its faculty are still contributing more than $43-million per year to the pension plan, so "they still have quite a serious obligation to fulfill every year." But she noted that most other provinces have already granted similar exemptions, with Ontario and Saskatchewan remaining notable exceptions.

"It does go to the competitiveness of the university, but also to how they're faring vis-à-vis others in other provinces," Ms. Jones-Gordon said. "We had a lot of feedback on this."

The government's move also has short-term impact for Dalhousie. Negotiations on a new contract for faculty members had turned acrimonious in recent days, and both sides cited proposed changes to the way the pension plan is run as the main obstacle. Many students had already begun bracing for their classes to be cancelled if 870 professors, instructors, librarians and counsellors elected to begin picketing Monday morning.

The government's announcement means those proposed changes won't be necessary, leaving wages as the only major component of a deal left to be settled, and the tone from both camps noticeably lighter.

"I am considerably more optimistic now. I think that the pension thing has been a huge problem," said Anthony Stewart, president of the Dalhousie Faculty Association. "We're hopeful that with the resolution of this, we'll be able to take all of that considerable pressure off of the kids, because there are a lot of students on this campus who are really, really stressed."

A spokesperson for Dalhousie agreed that the government's decision created greater optimism that a deal can be reached in time to allow classes to continue as planned for the university's 17,000 students.

Talks between Dalhousie and its faculty union continue Friday. A separate group representing administrative and clerical staff is also in negotiations, and could be in a legal strike position on Mar. 22.

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