All districts — During most elections, it is not uncommon to see an operating millage request from a local school district on non-homestead properties on the ballot, which prompts some residents to question why.
An operating millage request can be confusing because, while districts are not collecting property taxes on primary residences, such as homes, they are on non-homestead/non-residential properties such as hotels, businesses, commercial, rentals and vacation homes, explained Julie Davis, Forest Hills assistant superintendent for finance and operations.
All of a district’s operational expenses, such as employee salaries and benefits, school supplies and textbooks, are funded annually through the state’s foundation allowance, received on a per-pupil basis. Schools receive other operational funding from grants, county special-education funding, federal funding and, per Proposal A, a non-homestead operating millage.
What Is Proposal A?
Per Proposal A, which was passed in 1994, non-homestead properties are levied 18 mills with the millage being collected by the school districts.
Primary residencies have a millage levy of six mills, which is collected by the state and used toward the state per-pupil foundation allowance that the state gives the schools.
When calculating the state’s portion of a district’s foundation allowance, they include the amount of non-homestead taxes a district collects, Davis said.
For example, if a district receives $100 million for its foundation allowance based on its student counts and collects $15 million from its non-homestead, the state gives the district $85 million, Davis said. She added that, regardless of whether the district is levying the full 18 mills, the state determines its allocation under the assumption that the district is levying the full 18 mills on non-homestead properties.
“It does just seem strange,” Davis said. “I’m voting on it but I don’t pay for it, but if I don’t vote for it … if our community hasn’t authorized that renewal, the state is still assuming we’re collecting that $15 million, and if we’re not collecting it, we’ve got to figure out how (to) reduce costs that total $15 million. (The district asks) ‘How do we find some revenue that would total that, or do we go back to our community with another renewal (request)?’”
The Headlee Amendment
Another reason districts have to return to voters to maintain the 18 mills is because of the 1978 Headlee Amendment.
The Headlee Amendment requires that the growth of taxable values be limited to the lesser of either the inflation rate or 5%. Basically, if the taxable value goes up, the millage must be reduced. That is a good thing, Davis said, in that it caps property taxes for homeowners. Without that cap, homeowners’ taxes “would go up astronomically,” she said.
“There’s a formula that schools have to follow every year to figure out if they can levy the full 18 mills on non-homestead property,” she said. Most districts work with Kent County’s Equalization Department to determine the millage levy for non-homestead properties.
A school district must have its residents approve the renewal in order to reinstate the full 18-mill levy on non-homestead property, called a Headlee override.
It’s up to each district to decide when and how often to put the renewal on the ballot. Some districts may propose the operating millage request annually, while others wait until the loss begins to significantly affect their budget, Davis said.
Davis explained that residents might notice some districts requesting more than the 18 mills. While a district can only levy 18 mills on non-homestead property, seeking a higher rate creates a buffer against the required rollback, allowing the district to maintain the full 18 mills for a longer period.
For example, Forest Hills will request on the May 2025 ballot a renewal of its non-homestead property tax with a 0.5 mill increase. This would allow the district to go six years before needing to request a non-homestead renewal, she said.
What about bond money?
A bond proposal is how a public school district asks its community for authorization to borrow money to pay for capital improvements.
According to state law, voter-approved bond funds may be spent on projects described in the proposal and the bond money must be kept separate from a school’s operational dollars.
For day-to-day operations of a school district, most funding comes from the state’s annual per-pupil foundation allowance.
If residents have additional questions about school finances, Davis recommended reaching out to local districts, as they can provide detailed information on how each manages the renewal of operational millage on non-homestead property and other school funding.
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