FCPS leader: ‘We are at a crisis point,’ as contingency fund could shrink by millions

Faced with a gaping $16 million shortfall in its fiscal year budget, Fayette County Public Schools leaders turned to local business and community leaders in July for a solution. Their recommendation: Dip into the district’s anticipated $42 million contingency fund to cover the gap.

On Thursday, Superintendent Demetrus Liggins revealed there’s a significant problem with that path — the district’s fund is perilously much lower. That anticipated $42 million is actually closer to $15 million to $22 million.

“We are at a crisis point,” Liggins told the Herald-Leader in an interview, blaming rising inflation as “contributing significantly” to the district’s predicament.

Without additional revenue sources to ease the financial crunch, cuts will be made during the 2025-26 school year, with additional adjustments likely in the years ahead, Liggins said.

“There are things we are looking at to tighten our belt,” he said, promising the district would be more prudent and efficient.

“Unfortunately, this is something that’s happening across the nation when it comes to (public pre-school to 12th grade) P12 schools. We’re not the only district that’s suffering with having to try to balance the budget with fewer funds, with the inflation and all the dynamics of the economy, and so it’s just something that we’re dealing with. “

He added: “We’re going to make sure that Fayette County is in a position to continue to serve our students.”

On the job since July 2021, Liggins acknowledged he had not been a perfect leader and must be a better communicator.

But he said he has done everything he could given the circumstances.

“We’re going to fix it,” Liggins said. “It’s that simple.”

“I’m committed to working with our community to build back that trust. I know that is something that, for whatever reason, has been lost, and I think a lot of it has to do with communication or lack thereof.”

But Liggins said there had been no improprieties or mismanagement of funds to create the budget crisis.

“We’ve discovered nothing ...to imply someone did something wrong or illegal or unethical for us to get here again. This is not something that Fayette County is dealing with alone,” he said. “There’s nothing nefarious happening by any stretch of the imagination.”

In a message this week to school board members about the district’s budget, Liggins wrote: “It is in moments like these that tough decisions must be made, and the board and superintendent must stand firmly behind decisions that are in the best interest of students.”

School board members are elected by Fayette County voters. Three had not commented on the newest budget developments by late-afternoon Thursday: Monica Mundy, Amy Green and Amanda Ferguson.

“I will not comment on pending board business,” board member Penny Christian said Thursday. “Official statements come from the chair.”

“The board has received communication from the superintendent and his team regarding preliminary information about the contingency,” said board chair Tyler Murphy. “As previously planned, it will be among the matters discussed at our next board meeting.”

The board meets next on Monday August 18.

Kentucky Department of Education district spokesperson Jennifer Ginn said school districts must submit a tentative budget by May 30 and a working budget by Sept. 30. Those budgets are checked to make sure districts are following the minimum 2% contingency fund balance. Fayette County’s tentative budget on May 30 met this requirement, Ginn said.

“KDE is always willing to aid districts that reach out for support. Fayette County has not asked KDE for additional support on its budget,” Ginn said.

Liggins said the fund balance (or beginning balance) is the actual year-end amount that rolls forward into the next year’s budget.

“This fund balance is the district’s true cash balance and, in practice, serves as our real contingency,” he told school board members in a budget update memo earlier this week.

“The district’s contingency is projected to fall below the 6% target required by FCPS policy, though we do anticipate meeting the state-required 2% minimum,” Liggins said.

“As a result, reducing contingency will not be a viable budget-balancing option this year. We will likely recommend maintaining the 2% level in the 2025-26 budget and rebuilding it over the next several years.”

Liggins was asked Thursday why there was a discrepancy in what community members on the Budget Solutions work group were told in a meeting July 30 and the information given to school board member this week.

“While every budget cycle involves adjustments and unknowns, this year’s mix of delayed tax collections, cost increases due to tariffs, persistent and unprecedented inflation, and other unpredictable variables makes accurate forecasting even more difficult,” Liggins’ budget update said.

Liggins’ total salary, pension and benefits for the 2024-2025 school year was $381,767. His pay is among the very highest among Kentucky superintendents, with only Jefferson County’s previous and current superintendents earning more.

Liggins’ raise of $12,625 (up 3%) over the previous year is contractually mandated, reflecting both an annual percentage increase and a step-up for experience that is standard for eligible district employees.

District officials want to raise the occupational license tax. However, Kentucky Attorney General Russell Coleman ruled their announcement of that proposal in May was unlawful.

That led Kentucky Auditor Allison Ball to launch a special examination of district finances.

District officials scrapped the first proposal. It was the least priority among the recommendations the budget solutions work group offered. Representatives from Keeneland, the University of Kentucky and the business community said in public statements they did not think the tax should be raised.

Instead, they said, that money should be taken from the contingency fund.

“We can’t tax our way out of this process. The reality is that the budget is structurally imbalanced,” representatives from UK and Commerce Lexington wrote in an op-ed column to the Herald-Leader earlier this month.

Liggins said the contingency amount has been somewhat uncertain, but, “We are now getting closer to an actual estimation.”

The final amount will be confirmed around Aug. 25 following a year-end analysis and preliminary external audit. It will be further refined after the district’s full external audit and any final internal adjustments later this fall.

Liggins said due to the declaration of statewide and national disaster areas earlier this year in Kentucky related to tornadoes and floods, the IRS has allowed taxpayers to pay their taxes as late as November 2025.

That’s months later than the typical timeline in which districts know all tax collection amounts before the fiscal year-end. This fiscal year started July 1.

That delay impacts the district in that many collections and payments will be delayed until then, Liggins said.

As a result, actual collected tax amounts will not be fully known until later this fall, which affects the district’s year-end balances.

In addition to that, Liggins pointed to three other significant cost pressures where expenses have outpaced revenues: employee retirements, preschool and nutrition services.

In preschool, there are approximately $2 million higher in transportation expenses this year that cannot be recouped in revenue.

Related to nutrition services, or school meals, revenues have not kept pace with inflation, with $4 million in cash on hand in that fund, creating a cash flow challenge.

There’s $2 million in charges for retired teachers who come back to substitute teach, he said.

These conditions will require close monitoring and possible mid-year adjustments to ensure the district remains financially stable while meeting the needs of students and staff, he said.

In response to Liggins news Thursday, Commerce Lexington board chair Carla Blanton community and business leaders “remain confident” they can find a solution with district officials that “doesn’t involve raising the occupational tax through using a smaller portion of the contingency, targeted cuts to the administration that don’t impact students and long-term cost savings and partnerships.”

This story was originally published August 14, 2025 at 12:28 PM.