UPDATE: Fayette school board may ask for occupational tax increase to solve budget issues

The Fayette County Public Schools board is set to consider asking the fiscal court to increase the occupational license tax rate for schools from 0.5% to 0.75% of wages of individuals and net profits of businesses.

Tuesday’s school board meeting agenda, posted on the district website Sunday afternoon, shows that Fayette Deputy Superintendent Houston Barber will present the resolution at the regular monthly meeting.

“We look forward to having that discussion on Tuesday,” Barber told the Herald-Leader on Sunday.

Fayette school board chairman Tyler Murphy did not immediately respond to text questions from the Herald-Leader.

Earlier in May, district officials said all department budgets will be reduced by 20% to help address rising costs, but another $16 million must be cut from the general fund budget. Raising new revenue and reducing expenditures are necessary for the proposed tentative $848 million budget for fiscal year 2026, officials said.

The current occupational license tax is expected to bring in $57 million to the district for the next fiscal year.

The resolution on Tuesday’s agenda says that present sources of revenue will not be sufficient to provide for the building of enough classrooms for thousands of school children, or to furnish adequate school services for all public school children in Fayette County.

The Fayette school board currently imposes an occupational license tax for schools at a single, uniform percentage rate of one-half of one percent (0.5%) of salaries, wages, commissions, and other compensations of individuals for work done and services performed or rendered in the county, and the net profits of all businesses, professions, or occupations, from activities conducted, the resolution says.

It says the school board wants the Fiscal Court of Fayette County to raise the rate to three-fourths of one percent, or 0.75%.

But this is an unusual revenue move from the school board, which usually funds schools through property taxes.

Unlike the occupational tax, which is overseen by Fayette County Fiscal Court under language from the 1974 merger that formed the Lexington-Fayette Urban County Government, the school board can set property tax rates higher to get more revenue.

However, they can only take 4% more than the year before without it being subject to recall. Thanks to Fayette’s continuously growing property assessments, they can often receive a 4% increase without raising the tax rate.

So, even at the same tax rate, Fayette gets more money.

The Fayette Public Schools tax collection office would administer and collect the tax, the resolution says.

The tax shall not be collected from any individual who is not a resident of Fayette County, according to the resolution.

Fayette County Judge Executive Mary Diane Hanna told the Herald-Leader that an Occupational License Tax for Schools is currently imposed by the Fayette County Public School district at a rate of one-half of one percent (0.5%). The Fayette County Board of Education can request the Fayette County Fiscal Court to levy a special Occupational License Tax which can increase by one-quarter of one percent (0.25%), Hanna said.

“I guess we will watch and wait to see what ensues at the school board meeting on Tuesday. Our next Fiscal Court meeting is on June 5,” said Hanna.

Hanna said Sunday that the resolution could be on the docket for a special meeting of the fiscal court.

Fayette County Public Schools remains in solid financial standing, Barber told the Herald-Leader earlier this month.

“Much like families across the nation who have had to adjust household budgets due to inflation, rising costs, and global economic uncertainty, FCPS, like most districts across the commonwealth and country, is making prudent adjustments in response to these external pressures,” Barber said.

“The projected gap in revenue vs. expenditures is exactly that — projected, based on forward-looking models and conservative budgeting assumptions. Our current year’s budget is balanced and being managed with a high level of competence, care and fiscal responsibility,” he said.

Reaction to the proposal

In a Facebook message posted Monday, school board member Monica Mundy said she was informed about the agenda item regarding the Occupational License Tax on Friday afternoon, and the resolution was shared with board members on Saturday.

“ As of now, I have not seen a draft of the tentative balanced budget. Given these circumstances, I still have several unanswered questions that I plan to raise during Tuesday’s meeting,” Mundy said in the message to constituents.. ‘Given the short notice, I want to make sure you know how your voice can be heard.”

Mundy said people could email all board members and district staff at: feedback@fayette.kyschools.us or email her directly at: monica.mundy@fayette.kyschools.us.

She said people could attend the board meeting and speak during public comment at John D. Price Administrative Building 450 Park Place Tuesday at 6:00 PM (arrive by 6:00 PM to sign up to speak.)

Former school board chair Stephanie Spires said she thinks “the community has the right to ask questions and understand the need for this tax increase.”

“Unfortunately giving the community three days notice over a holiday weekend, does not promote transparency and encourage collaborative community conversations,” Spires said.

Spires cited an op-ed in the Herald-Leader she wrote last year: “The 2023-24 budget was irresponsible. It was passed using funds from the fund balance, with no long-term plan for revenue to offset this ongoing expenditure increase. Here we are, one year later, cutting arts, language, and other classroom expenditures to build a balanced budget.”

“Now two years later, the school board has proposed a tax increase without any explanation to the community. I would encourage Chairman Murphy to take the resolution off the agenda on Tuesday and engage his fellow board members and constituents to work towards a unified solution to the budget shortfall,” Spires said.

Parent Matthew Vied is among those constituents unhappy about the proposed increase.

“What FCPS has proposed is stunning in its audacity and disrespect for those who live, work and pay taxes in Fayette County,” said Vied.. “As it pertains to the ever-increasing budget at FCPS, the public’s attention is typically trained on the all-important property tax; an unprecedented increase to the the lesser-known OLT (Occupational License Tax) is perhaps an attempt to evade much notice.”

This story was originally published May 25, 2025 at 6:09 PM.