Ludington Area School District will be heading into different territory as it expects to receive its funding under what is called “out-of-formula” for the 2020-21 academic year.

Each year, the governor and legislature determine what the minimum foundation allowance is going to be based upon how much money is in the state aid fund to distribute to each school on a per-pupil, or “in-formula,” basis. If a district’s taxable value, though, is more than what it could receive from the state, the district is considered “out-of-formula” and receives the local property taxes.

“How the out-of-formula school district works is the money is distributed on a per-pupil basis, “ said Ludington Superintendent Jason Kennedy. “The state then looks at the non-homestead properties that is calculated on a per-pupil basis. If that calculation for the non-homestead is greater than the calculation for the minimum foundation allowance fund, the district keeps all of that local revenue.”

Other nearby school districts that have been out-of-formula include Pentwater Public Schools and Baldwin Community Schools. Last year, according to a school funding slide show presented to the state senate, there were 381 “in-formula” districts and 177 “out-of-formula” districts. Before this coming academic year, Ludington Area Schools was dependent upon the state’s per-pupil funding formula.

“That can either increase or decrease,” Kennedy said. “In recent years, it has increased. We have seen some decent increases over the last couple of years. As a result of COVID-19, the conversation have been about decreasing the foundation allowance.”

The state aid fund distributions are paid on a per-pupil basis. The per-pupil foundation allowance fluctuates between school districts. Last year, the minimum was $8,111 per pupil with the maximum being around $8,500, Kennedy said.

“Ludington’s minimum foundation allowance was $8,112,” he said. “For us here, in Mason County, the $8,112 goes back to the fact that in ‘94, when Proposal A passed, the taxable value of our community was slightly higher so we were guaranteed a dollar more.”

Under the per-pupil, or “in-formula” basis, those districts must await the state legislature and governor to approve a budget each year for the foundation allowance. Kennedy said that has created some uncertainty with schools, districts that are dependent upon creating a budget are in a difficult position because the state budget has not been announced yet.

The funding model for schools changed with the passage of Proposal A in 1994. Before its passing, schools were primarily funded through local property taxes. After it was passed, the foundation allowance received money from a variety of sources, including sales tax.

Officials with the district knew the taxable value of the properties inside the district from reports earlier this year, and the likelihood of being “out-of-formula.”

“We already know what our revenue is because we get the taxable value number from the county in April or May each year,” he said. “We have that number to be able to establish our budget. So the budget we presented at the board meeting Monday night was based on significant growth in the 18 mills of non-homestead tax that is collected locally.”

Kennedy said as the taxable value of our business community and non-homestead properties increased above the level at which the foundation allowance was going to fund the district. That pushed Ludington “out-of-formula.”

In 2019, the taxable value for Ludington Area Schools was $1.38 billion and of that number, $924 million was non-homestead, according to Kennedy. This year, the taxable value for the district jumped to $1.45 billion with $988 million being accounted for by non-homestead properties.

“I believe there are about $72 million in taxable value improvements and $70 million of those are in Ludington Area School District, (for Mason County),” Kennedy said. “The main reason for that is the (Ludington) Pumped Storage Facility.”

The district may not always be “out-of-formula,” however. There could be some factors that change that designation. Kennedy said there are two factors that could happen where the district would not be “out-of-formula” for the 2020-21 school year. One would be a significant increase in student enrollment.

The second would be where the state would increase the foundation allowance in per-pupil funding by more than $400. The second scenario is unlikely as reports out of Lansing indicate cuts in the per-pupil funding may occur for the school year.

Kennedy was encouraged by what the district could do to serve the community by the funding change.

“Ludington is in a really good position,” Kennedy said. “The district is blessed from an equity point of view. This has the ability to help us continue to expand programs and opportunities whereas maybe some others may not have the same opportunities.”

Kennedy said the district is blessed that the Ludington Pumped Storage Facility is contributing significantly to the non-homestead and property tax values here in the community.

“We will continue to be good stewards of this money, but it gives us the opportunity to continue to expand the programs and offerings to continue to expand upon the educational experience that we provide for students,” Kennedy said. “There will be some significant planning including working through the development of a new strategic plan.”