Under fire, Fayette superintendent nixes controversial payroll tax rate increase

After intense public opposition, Fayette Superintendent Demetrus Liggins is recommending taking off the table a controversial proposal to increase the occupational license tax rate.

Liggins’ suggestion at a special Thursday Fayette County Public Schools board meeting to no longer consider the tax hike is a sharp reversal from previous public conversations in which district officials and the majority of school board members were in favor of increasing the rate.

“I’d like to outline a path forward that does not include any changes to the occupational license tax rate,” Liggins said. “I feel that there is path forward to a balanced budget without it.”

Liggins said the tentative budget presented in May included $16 million that would have come from the occupational license tax increase. The proposed working budget that will be voted on in September won’t include the proposed tax increase.

Liggins has faced extreme criticism from parents and community leaders who say the public was not clearly or promptly informed the district has an estimated $16 million budget shortfall, and the contingency fund balance for emergencies and unexpected costs was much lower than expected.

Thursday night, he told families in a letter, “I presented a path forward that balances the budget without increasing the occupational license tax rate, minimizes impact to school-level investments and continues to provide excellent educational opportunities that lead to increased achievement for our students.”

At the board meeting, Liggins said every expenditure in the budget is being evaluated with heightened scrutiny and saving money will be a priority.

Members of the business community on the district’s Budget Solutions Work Group, including representatives of Commerce Lexington, Keeneland and the University of Kentucky, spoke out about the school district’s push to increase the payroll tax despite significant opposition.

The recommendation to raise the tax created controversy when the board’s first attempt was deemed unlawful by Kentucky Attorney General Russell Coleman this summer. It was the lowest recommendation on the budget work group’s list.

“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 summer.

Thursday night, after the school board meeting, Commerce Lexington issued a more positive statement.

“We appreciate that the school board listened to the Budget Solutions Work Group and the community as it finalizes a budget that will support the continued success of FCPS students. We remain committed to collaborating with Dr. Liggins and the district to find additional long-term solutions as we work toward increased budget stability together,” the statement said.

The district’s Budget Solutions Work Group had recommended using money from the fund balance to solve the shortfall.

Liggins revealed Thursday night that the FCPS fiscal year 2026 contingency fund balance is $26.3 million.

“We now have more complete calculations from the 2024-25 fiscal year, and although the numbers are not yet audited, we feel confident that we will end the year with a carry-forward balance of $26.3 million,” he told families in the letter after the school board meeting.

That’s much less than the $42 million district officials estimated earlier this summer, but higher than the $15 million to $22 million Liggins previously told board members the fund balance could have dropped to.

The amount of the budget fund balance has been the topic of much discussion in recent weeks.

The planned contingency is a portion of the general fund set aside in the budget specifically for emergencies and unexpected costs. Kentucky law requires at least 2% of the general fund budget be reserved. FCPS board policy is 6%.

The fund balance is the actual audited cash remaining in the general fund at the end of the fiscal year after all revenue and expenses are finalized. It is carried over into the next fiscal year. The contingency is planned, while the fund balance is confirmed.

Board member Amanda Ferguson asked Liggins at the Thursday meeting who had moved money from the contingency fund and how the money was spent.

“There is an ongoing investigation to look into that,” Liggins said.

Ferguson then asked how the community could have confidence in the budget information Liggins presented Thursday night, given that previous numbers were not accurate.

“I’m very confident in the numbers that I’m presenting to you this evening. I am much more involved than I’ve ever been before,” he said.

Liggins said while he didn’t have an exact percentage, the contingency is lower than the 6% board policy requires. The tentative budget for the year that began July 1 was $848 million.

Liggins recommended several cost-cutting measures Thursday night that don’t require school board approval.

The proposed measures to balance the budget, address the shortfall and save a total of $6 million include:

A hiring freeze except for classroom positions and bus drivers to save $2 million.

Restricting overnight trips for professional learning, restricting food for district meetings, not replacing furniture in district offices, no more sponsoring tables at community events, no more purchasing staff appreciation gifts for total savings of $1 million.

Eliminating the executive coach for Liggins for a savings of $25,000.

Implementing an additional $2 million in cuts to district-level departmental budgets.

Discontinuing non-traditional instructional days, which will reduce staffing costs. (Savings variable depending on the severity of winter weather.)

Reassigning staffing allocations not justified by current student enrollment numbers, saving up to $1.2 million.

Liggins asked for school board member’s guidance on whether the district should sell real estate, raise school meal prices or absorb legal costs by using in-house legal staff. Those proposals do require approval from school board members.

After the meeting, he said in the letter to families, “This evening, I also asked board members to provide input about the possibilities of selling property, raising school meal prices, or moving some litigation responsibilities in-house. Based on that feedback, we will not bring forward an increase to meal prices. We will continue to look for savings in legal costs and explore the potential sale of the former Southside Technical Center. “

Liggins said he will examine options suggested by board members, including reducing staff at the John D. Price Central Office building, requiring unpaid leave for some year-long staff and engaging the community in offsetting student meal costs.

Selling the former Southside Technical School building could bring in $8.9 million or more, Liggins said.

If the school board raised student meal prices, it could save the district between $400,000 and $800,000. But none of the five members were interested in raising those costs.

Students who qualify or free and reduced priced meals would not have been affected by any meal cost increase.

Though school board members are no longer contemplating raising the occupational license tax rate, they kept a Sept. 5 meeting on the calendar to talk more about the budget.

Liggins has largely blamed the district’s current financial problems on inflationary conditions he says are affecting school districts across the country.

Members of the budget work group previously said FCPS’ budget was structurally imbalanced.

On Thursday night Liggins said, “We’re not only balancing this budget, but we are really truly building a stronger, more transparent process to guarantee that future budgets are accurate, responsible, and fully aligned with board and community expectations.”

The school district is facing a special examination from the Kentucky Auditor’s Office that is expected to be completed by the end of 2026.

This story was originally published August 29, 2025 at 4:30 AM.