Moody’s downgrades FCPS credit ratings, citing ‘weak governance and budget management’

The financial services company Moody’s Ratings has downgraded Fayette County Public Schools two notches in its credit ratings, saying the district has $938 million in outstanding debt and there are concerns over budget management.

FCPS’ issuer and general obligation unlimited tax ratings were downgraded to A2 from Aa3, dropping from the fourth-highest rating to the sixth-highest.

FCPS’ lease appropriation rating was downgraded from A1 to A3, the seventh-highest rating.

Moody’s evaluates the financial stability of companies and government entities. When an organization’s ratings fall, it means their credit profile has weakened, which can leave the agency paying higher interest rates when borrowing money while also hurting bonding capacity.

“The downgrade reflects the narrowing of the financial position to levels naturally below the district’s projections from late fiscal (year) 2025, weak governance and budget management are key drivers of this rating action,” Moody’s said in a report. “The district’s structurally imbalanced operations will make it difficult to stabilize and replenish reserves over the near term.”

FCPS’ ratings outlook has upgraded

Despite a drop in current ratings, the future outlook for FCPS has been revised from negative to stable. The stable outlook reflects an expectation from Moody’s that the district’s reserve and liquidity will remain relatively trim over the near term, the report says.

Fayette County Public Schools approved an $800 million-plus budget in September.

Fayette County schools respond

FCPS acknowledged the ratings change in a statement from district spokesperson Miranda Scully Thursday, in which Scully said the ratings were still firmly “investment grade.” Scully also said that despite the downgrade, FCPS bonds still “carry an enhanced Aa3 rating from Moody’s due to Kentucky’s state intercept provision for school debt.”

“This provides an additional layer of security for bondholders and reflects structural credit strength beyond the District’s standalone profile,” Scully said.

Scully also said Moody’s revised its nationwide outlook for school districts from stable to negative in December.

Scully said SP Global, another financial firm that issues ratings, did not change FCPS’ ratings, and FCPS is “one of only a handful of school districts in Kentucky that have a rating in the AA category or better from SP Global.”

Investigations, conversations surround FCPS budget issues

Much has been made of FCPS budget issues since last year, when the district confirmed it was facing a $16 million budget shortfall with a reduced contingency fund.

Liggins has since said the district’s budget is balanced again.

But those financial issues have prompted multiple investigations. One inquiry by an outside law firm found that Liggins failed to follow multiple district policies as well as board governance with the way he handled oversight of budgeting. Another investigation, by a separate law firm, found that employees under Liggins’ direction should have had better communication about budget issues. But no one was found to have deliberately done anything wrong, according to reports from those investigations.

Liggins has admitted to needing to provide better oversight for budgeting, and says he has taken more direct oversight of financial matters.

School board members have met in closed session twice since the release of the report that showed Liggins had violated policy, but they have not taken any action against Liggins or others. Two board members, Amanda Ferguson and Monica Mundy, said Wednesday night they did not agree with the board majority’s lack of action.

This story was originally published March 5, 2026 at 4:39 PM.