Hemlock's and Michigan's 18-mill school tax
About 15 miles west of Saginaw, Michigan is a (statistically speaking) typical school district of about 1,250 students. After a recent election, more Michiganders will become familiar with Hemlock.
On Nov. 3, Hemlock voters rejected an 18-mill school non-homestead operating tax levy renewal. This makes Hemlock noteworthy for three reasons:
Each one of Michigan's 537 non-charter school districts collected this tax in 2024–25. Hemlock would be leaving this list.
By rejecting the renewal, Hemlock's general fund will lose about $3.1 million a year, about 18% of its revenue, starting in the 2027–28 school year.
As a reference point, the non-homestead levy supplied 16% of Hemlock's general fund revenue in 2024–25, a little higher than the 13% for the median Michigan district.
We're not here to speculate on why voters rejected the renewal, or weigh in on the bond proposal that voters rejected at the same time. We're also not here to question the voters' decision.
The topic is relevant beyond Hemlock because in 2024–25 every traditional Michigan school district levied this tax, making a rejection of the tax an interesting and rare event while the act of levying it and renewing it is extremely common.
Let's examine Michigan public schools' 18-mill non-homestead levy and use Hemlock to understand the related financial mechanics.
The core: the foundation allowance
For Michigan public schools funding discussion commonly begins with the per-pupil foundation allowance. Let's start there.
For every Michigan school district the foundation allowance is its largest source of operating revenue. The foundation allowance is the amount per student set by Lansing lawmakers used by school districts to pay for their operating expenses, the largest of which are school district employee salary and benefits followed by purchased services and supplies. In 2026-27 Hemlock's total foundation allowance is $10,300 per pupil.
The foundation allowance has two revenue sources. The first is the one Hemlock voters rejected: a locally levied 18 mills applied against non-homestead property. In 2026-27 Hemlock's non-homestead portion is about $2,500 per pupil. The rest, about $7,800, comes from the state's School Aid Fund, which is paid for by sales and use tax, income tax, the 6-mill State Education Tax, lottery revenues and other smaller taxes.
Here's how Michigan's Senate Fiscal Agency describes the 18-mill non-homestead tax (linked this presentation for your convenience).
"Local taxation for operations (not including debt/capital or sinking fund) is capped at 18 mills levied on the taxable value of non-homestead property, with no operational mills levied on homesteads (there is an exception for “hold-harmless” districts);
Homesteads are a Taxpayer’s primary residence, including noncommercial agricultural property.
Non-homesteads are all other property such as business, rental property, vacation homes, and commercial agriculture."
The catch? These 18 mills are not automatically levied. Voters must locally authorize that portion for a term not longer than 20 years. When the term ends, voters are asked to renew it. This is what Hemlock voters were asked to do on Nov. 3.
Again let's use the Senate Fiscal Agency's own language to understand this tax further:
"Each district must levy 18 mills on non-homesteads.
1. Local revenue from 18 mills is calculated at the State level on a per-pupil basis.
2. State deducts the per-pupil local revenue from the lesser of the foundation allowance or hold-harmless “guaranteed” per-pupil amount."
In practice, the state's foundation allowance math assumes the 18 mills are levied. If a district determines not to levy its non-homestead millage, the district forfeits that revenue.
The state's math assumes the full 18 mills are levied and subtracts that amount from the foundation allowance. If a district doesn't levy the tax, the state's School Aid Fund doesn't fill the gap. The money is just gone.
The result: owners of non-homestead property pay less (more on who they are below), and the district's operating budget, the money for salaries, benefits, supplies and services, shrinks by the same amount. Lansing's treasury doesn't feel a thing.
Increasing reliance on non-homestead tax revenue
This tax design has a second-order effect.
When property values grow, the 18 mills bring in more, and the state’s share of the foundation allowance gets smaller. When enrollment falls, the district’s total foundation money falls with it, but the tax base doesn’t. Either way, the state’s costs go down. The local district carries more of the risk, because more of its core funding depends on the local levy.
Here’s how that played out in Hemlock.
In 2005–06, Hemlock’s 18 mills brought in $1.3 million, about 13% of its foundation allowance. By 2024–25 the 18 mills brought in $2.75 million, about 23% of the foundation allowance. The 18 mills were constant. The levy more than doubled because Hemlock’s tax base grew, much of it from new industrial property. Meanwhile, the state’s payment inched up from $8.7 million to $9.2 million. Why? Because Hemlock's growing local levy was covering more of the total foundation allowance.
The chart below puts Hemlock next to all of Michigan’s traditional districts combined. Hemlock started well below the statewide figure, 13% against 19%. By 2024–25 it had caught up, 23% against 22.6%.
Lots of numbers, but here’s the main point. Hemlock schools have become more reliant on the non-homestead millage, and so have Michigan’s districts overall. Hemlock is not unique there.
One note: a small group of higher-spending districts, known as “hold-harmless” districts, are funded under different rules, so we leave them out of the statewide numbers.
Revenue per student is not the same as the foundation allowance
A word of caution: school funding commentary sometimes compare a district's revenue per student to the foundation allowance. They're not the same thing.
On top of the foundation allowance, districts get state, county, and federal money earmarked for specific purposes. Examples include special education and at-risk student funding. That money comes with strings. It can't be shifted to cover gaps elsewhere in the general fund.
On this broader measure, Hemlock per pupil revenue was $14,249 in 2024–25, according to state figures. That's below the median for traditional districts, about $15,400. Meanwhile Hemlock's foundation allowance per pupil was $9,608.
The 18-mill tax is part of the foundation allowance. It's part of the flexible money available to local districts, and it's what's on the line in a renewal vote. An earlier Michigan Benchmark piece, Declining discretionary portion for Michigan's local school districts, looked at the growth of earmarked state aid.
Who pays it in Hemlock
Who pays the non-homestead tax depends on where you live. In a lot of districts, it's small businesses, landlords and people with second homes.
In Hemlock it's predominantly a few large companies. According to Saginaw County records, four businesses account for about 70% of the property value this tax applies to: Hemlock Semiconductor, Consumers Energy, METC and DDP Specialty Electronic Materials.
Owner-occupied homes don't pay the non-homestead tax. Hemlock's vote won't reduce a typical homeowner's property tax bill. If the levy isn't renewed, the owners of non-homestead property would owe less. The four companies listed above are examples.
How big is Hemlock's dependence on the operating millage?
In size, Hemlock is about as typical as it gets: roughly 1,250 students, against about 1,260 for the Michigan's median traditional district.
In 2024–25, the 18 mills brought in about $2,200 per Hemlock student, compared with a statewide median of about $1,960. The non-homestead tax supplied 16% of Hemlock's general fund revenue, versus 13% for the median district. So Hemlock leans on it a bit more than most, but it's hardly an outlier. More than 200 Michigan districts get at least 15% of their operating money from this tax.
What $3.1 million means in Hemlock's budget
Hemlock spent $17.1 million from its general fund in 2024–25, roughly what it took in. It finished the year with a general fund balance of $7.3 million, about 43% of a year's spending. The median district held about 25%. Of Hemlock's $7.3 million, $1.9 million was assigned to specific purposes and $5.4 million was unassigned.
That's a healthy reserve but not a long-term plan to replace the non-homestead tax revenue.
Here's how Hemlock spends its money compared with the median traditional district. (The district count will vary because Hold Harmless districts are excluded.)
A couple of additional factors influence Hemlock's numbers. It runs a child care program, mostly paid for by parent fees (according to district reports), and it pays for some building and equipment work out of its general fund. Those two take 7.9% of its spending, against 2.1% for the median district, and that pulls down Hemlock's share in every other category.
Statewide, the median district spends 77% of its general fund on salaries and benefits. Hemlock spends 69%. That's mostly because Hemlock contracts out its child care and preschool staff. That spend gets binned as purchased services instead of payroll, and because it pays for some equipment and building projects from its operating budget. Count those contracted workers as staff and set aside the one-time building costs, and Hemlock lands between 75% and 79%, generally in line with most districts.
The $3.1 million loss works out to 18% of Hemlock's general fund, or about $2,500 per student. That's roughly a quarter of the 2026–27 foundation allowance of $10,300. The ballot estimate is higher than the $2.75 million the tax brought in for 2024–25 because taxable values in the district have grown since then.
The bond is a different question
Hemlock voters also turned down a bond of up to $17.75 million on the same ballot. Bonds pay for buildings and equipment. They're a separate tax that goes into a separate fund, and by law that money can't be used for salaries or day-to-day operations.
It doesn't work the other way around. A district can pay for buildings and equipment out of its operating budget, and Hemlock spent about $0.9 million that way in 2024–25.
Hemlock's bonded debt came to about $36,900 per student in 2024–25. That's the highest among nine nearby, similar-size districts we compare it with, and three times their median of $12,300. At the same time, Hemlock homeowners' school debt and sinking fund tax rate was below the group's median every year from 2015 to 2024, and about even with it in 2025 (4.9 mills versus 4.8). Unlike the 18 mills, debt millage is paid by homeowners as well as businesses.
The operating millage and the bond were separate questions, with separate consequences.
What can other Michigan districts observe from Hemlock
The big lesson from Hemlock: the non-homestead levy is part of the foundation allowance, not money on top of it. When it goes away, the state doesn't make it up.
Statewide, the levy's share of the foundation allowance has grown from about 19% to about 23% over the past two decades. Not every district followed that path, but in districts that are losing students, the math pushes in the same direction. More than 200 districts now get at least 15% of their operating money from the levy.
More broadly, as this entry painfully illustrates, this is a dense and complicated topic. It takes time and research to put it into context and in terms that make sense to voters and all stakeholders.
That is no judgment on Hemlock. Objectively this is a complicated topic that school districts and their advocates must endeavor to explain to voters. We hope this entry demonstrates that is what Michigan Benchmark can help districts do.
Notes and Data Sources
Foundation allowance shares: district general fund revenue reported to the Michigan Department of Education, FY2006 and FY2025. Traditional public school districts combined; hold-harmless districts excluded.
Medians: the median of 492 traditional districts (hold-harmless excluded), FY2025. Each spending category's median is figured separately, so the medians don't add to 100%.
Levy coverage: 537 traditional districts reported complete 2024–25 revenue data, and all of them collected the levy. One more district shows no local revenue of any kind in the state's 2024–25 data, a reporting gap; it collected the levy in every prior year.
Sample sizes: counts differ by measure (537 districts for levy coverage, 497 for levy dependence, 492 for spending medians, 488 for fund balance) because some districts lack complete enrollment, revenue, spending or fund-balance data, and some analyses exclude districts below a minimum general-fund threshold.
Hemlock revenue and spending: FY2025 general fund reports. Spending by area uses state function codes; by type uses object codes. General fund revenue is pooled, so spending shares describe the whole general fund.
Revenue per student: total revenue per pupil from the state's Bulletin 1014, 2024–25.
Fund balance: general fund ending balance as a share of total general fund spending, including transfers out, 2024–25. Median of 488 traditional districts.
Retirement: part of each district's retirement cost is state money that passes through the district to the state retirement system. It shows up as both revenue and spending, so it neither adds to a revenue gap nor closes it. The state sets the rest of the retirement rate as a share of payroll.
Coding: districts record some costs differently, especially services bought from their intermediate school district, so category comparisons are approximate.
Loss estimate: from the district's ballot language.
2026–27 foundation allowance: FY2026-27 School Aid budget, signed July 21, 2026.
Business equipment exemptions: two separate exemptions apply. Since 2008, industrial personal property has been exempt from the 18 school operating mills, and commercial personal property from 12 of them (Revised School Code, Section 1211). Separately, eligible manufacturing personal property has been exempt from all property taxes under a phase-in completed in 2023 (General Property Tax Act, Sections 9m and 9n).
Taxpayer figures: Saginaw County's 2024 report of the district's largest ad valorem taxpayers, compared with 2024 non-homestead taxable value ($150.5 million). Because of the exemptions above, these values are mainly land, buildings and taxable utility property.
Debt comparison: FY2025 bonded debt per student and homeowner debt and sinking fund millage, Hemlock and nine nearby districts. The districts are within about 30 miles and stayed between about 900 and 1,900 students every year from 2012 through 2025.
Legal references: State School Aid Act, Section 20; Revised School Code, Section 1211; General Property Tax Act, Sections 9m and 9n; Michigan Constitution, Article IX, Section 6; Michigan Election Law, MCL 168.641.
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