BLUE HILL, Maine — An error in a state funding formula resulted in George Stevens Academy being underpaid by more than $800,000 over eight years, funds that were specifically meant to help with building maintenance, according to a legal memo to the school.
At the heart of the issue is the Insured Value Factor, or IVF, a formula used to determine maintenance funding for independent schools based on the number of students and the value of private buildings, land and additional assets required to operate the school. The IVF is set by the Maine Department of Education to help cover infrastructure and maintenance costs for independent schools that do not have town-owned buildings and property. The IVF rate factors into the total cost incurred by towns to send pupils to GSA, a cost ultimately borne by local taxpayers.
The amount of money provided via the IVF was decreased statewide in 2013, but with built-in annual incremental increases in the following years.
But since the state Department of Education had applied the wrong formula, those increases were neither reflected nor requested in overall tuition rates for GSA students. In a Jan. 10 memo obtained by Penobscot Bay Press, the Portland-based law firm Bernstein Shur notified GSA that it had been underpaid due to the formula error for years.
“Recently, we discovered the Maine Department of Education (the ‘MDOE’) has been calculating IVF incorrectly — artificially low — for at least eight (8) years. The Department has confirmed that it agrees with our legal analysis of this miscalculation and is revising its calculation for the 2024-2025 academic year and going forward,” the memo stated.
The law firm estimates the error meant GSA was underpaid by at least $821,670 since 2016 and said the miscalculation has “unsurprisingly” had a significant financial impact on the school. Officials at GSA agreed.
“This is critical infrastructure funding that would have made a huge difference for our school,” GSA Board Chair Deb Ludlow said in a statement on Jan. 14. “We are still figuring out what this means for GSA and hope to work with the state to make GSA whole so we can put this overdue funding to work and ensure our students have access to a campus and facilities that are safe, well-maintained, and contribute to the high-quality educational experience GSA provides.”
Over the past decade, the school has faced significant maintenance issues.
In November 2023, a $50,000 donation from an anonymous Penobscot resident funded emergency repairs to the roof of the school cafeteria. The work, completed by volunteer contractors from Jaffray Construction of Blue Hill, owned by GSA graduate Curtis Jaffray, prevented the closure of the school’s entire east wing, which houses the cafeteria, kitchen and two classrooms.
Breaking down the numbers
The IVF is set as a percentage of an independent school’s maximum allowable tuition, or MAT, which is the amount a school may charge sending towns for tuition. In 2013, the IVF was reduced from 10 percent to 6 percent of the MAT, with the understanding that it would incrementally increase back to 10 percent over the following years, according to the memo.
In 2014-15, the IVF was set at 6 percent, amounting to $585 per GSA student. By the 2023-24 school year, the IVF payments should have increased to $1,330 per student — or 10 percent of GSA’s established MAT, the memo stated.
The memo stated that the IVF for GSA has “never been adjusted” and “has resulted in a loss of more than $800,000 to GSA.”
“The Department has confirmed, through counsel, that GSA’s reading of the applicable law regarding IVF is correct,” the law firm stated. “It is our understanding that MDOE is currently reviewing the matter internally and determining next steps.”
A spokesperson from the Maine Department of Education said on Jan. 14 that it’s aware of the issue but declined further comment.
Correction: An earlier version of this story misstated the source of the funds that were underpaid to George Stevens Academy.
This story appears through a media partnership with the Penobscot Bay Press.