Fayette school board pauses controversial tax increase after state audit threat

Under threat of state audit, Fayette school board chair Tyler Murphy on Monday suggested to the superintendent and board that they “pause” raising the occupational license tax for schools.

The Fayette County school board agreed and canceled a June 23 public hearing and vote on increasing the tax.

The school board at its Monday planning meeting reached a consensus to convene a committee — a diverse, broad-cross section of people, including students and staff, community members, business leaders, faith leaders, and others - to dive into budget issues.

“There would not be any further action on revenue streams until we could gather this group,” Murphy said.

The school board’s May 27 vote to increase the tax had led to a threatened state audit, lawmakers’ criticism, a Kentucky attorney general’s opinion of unlawfulness and a public outcry.

Republican Kentucky Attorney General Russell Coleman ruled last week the school board failed to provide the legally required notice to the public before its May 27 vote to ask the fiscal court to raise the occupational license tax for schools.

According to Coleman’s opinion, the school board’s 3-2 vote to ask the Fayette Fiscal Court to increase school tax rates on residents and businesses’ net income from 0.5% to 0.75% was improper.

Under state law, school boards must notify the public and hold a formal hearing before voting on new or increased taxes, Coleman said.

Tax attorney Tim Eifler with the law firm of Stoll Keenon and Ogden has been advising the Fayette school board. He said at Monday’s meeting that he disagreed with the attorney general’s opinion that the school board’s process in voting to ask the fiscal court to raise the vote was unlawful.

He said because the fiscal court would have been voting on the increase, the notice was not necessary.

Sen. Amanda Mays Bledsoe, R-Lexington, who asked for an attorney general’s opinion, said the board’s decision to table the proposed occupational license tax—at least for now—is the right move.

“We can only hope it isn’t just a last-minute attempt to change the narrative,” Bledsoe said.

“To those who have spoken up and joined the chorus of frustration over the board’s lack of transparency—this moment is a direct result of your voices. Make no mistake: this is a response to mounting public pressure, not yet a change of heart.”

Bledsoe added: “The board may be hitting pause, but accountability isn’t on hold.”

School board members did not immediately respond to Bledsoe’s statement.

Parents and other people in the community, Democrats and Republicans, have expressed concerns about a lack of transparency in how the school board handled the vote. Notice of the May 27 vote was made known to the public only when it was attached to an online meeting agenda on the Memorial Day weekend before.

State Auditor Allison Ball announced Tuesday morning she is conducting a special examination of the school district.

Murphy said the district committee could look at what it takes to run a district the size of Fayette County and review revenue sources and spending patterns. The district has a $16 million budget shortfall.

Committee members would work closely with district officials, Murphy said, and make recommendations for the 2025-2026 working budget and for the long term that are focused on students.

“FCPS takes pride in the progress we have made,” Murphy said. “We welcome every opportunity to engage with our community and expand awareness of how our investments are driving historic gains for students, staff, and families.”

“This pause allows those avenues for engagement and public education to expand, ensuring that more stakeholders are informed, included, and heard,” Murphy said.

Superintendent Demetrus Liggins said the committee could be convened immediately.

“We grow in our communications with the public in this way,” said vice-chair Amy Green.

Green and Murphy along with board member Penny Christian, in May voted to ask the fiscal court to increase the occupational license tax.

Board members Monica Mundy and Amanda Ferguson voted against it. The fiscal court did not vote after receiving the AG’s opinion.

If raising the tax is still an option, Green said Monday, the board will want to get the committee recommendations in a timely manner.

The committee is expected to work through the summer and into fall before making recommendations.

The committee should look at cost savings and repurposing buildings, Green said.

Liggins said the committee could work on a long-term budgeting plan.

Christian said someone who represents schools that have large numbers of low income students — the Title 1 schools — should be on the committee.

The school board has already submitted an $848 million tentative budget for fiscal year 2026 to the Kentucky Department of Education.

Liggins said the new committee will make further recommendations on that budget, which could involve more cuts or a different source of revenue.

Mundy said she had heard from people from all walks of life who wanted the district to look at options outside the occupational license tax increase.

When Ferguson and Mundy asked for the May 27 vote to be postponed until the public could weigh in, Murphy and others in the district had said that wasn’t possible because the district had to submit a balanced budget to the state in May.

It was unclear at Monday’s meeting whether the school district would have received any sanctions if the board had waited at that time.

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

The proposed increase in January 2026 would have been $13 million to $16 million, with an estimated $27 million to $32 million annually had it been fully implemented, Fayette Deputy Superintendent Houston Barber previously said.

The average Fayette County worker is paying $26 per month under the current Occupational License Tax Rate for schools. Under the increase, the average worker would be paying $39 per month, or $13 more.

On an annual basis, the average Fayette County worker is paying $312. Under the increase, they would have been paying $468 per year.

KY United 120 - AFT Fayette’s statement said group members were glad that the Fayette County Board of Education paused the process of increasing the Occupational License Tax to gather more input from the community and to make the budget process more inclusive.

“Moving forward we encourage the board to work together to create change in the budget process and to be better to each other and the constituents they serve,” the statement said. “We also urge the board and the district to work with state auditor, Allison Ball, in her upcoming audit. We ask them to work with their rank-and-file staff and finally allow a vote on collective bargaining, as the need for formal staff input is much needed. “

“We ask them to embrace the opportunity to highlight the amazing work our district provides to students but also to embrace any criticism as a call to action on how we improve - not as a political attack,” the statement said.

“Trust is easily broken, but even harder to rebuild,” the statement said.

This story was originally published June 10, 2025 at 6:49 AM.