Fayette County Schools faces $20M drop in carry-forward balance, superintendent says

LEXINGTON, Ky. (ABC36 NEWS NOW) — Fayette County Public Schools Superintendent Demetrus Liggins is alerting district leaders and stakeholders about a significant drop in the school system’s carry-forward balance for the 2025-26 budget year, citing multiple factors that will reduce the amount available compared to earlier projections.

In an email to the district’s Budget Solutions Work Group and other stakeholders, Liggins said preliminary figures show the beginning balance for this year’s budget will likely range between $15 million and $22 million — far lower than the $42 million listed in the Tentative Budget adopted in May. He emphasized that while the district is still in good financial standing, the reduction creates a challenge that must be addressed.

“We are not alone in facing this situation, and we are in a much better position than many of our peers in Kentucky and across the nation,” Liggins wrote. “That said, I have a sense of urgency to accelerate our approach.”

Reasons for the lower balance

According to Liggins, the change is the result of several factors that surfaced during the district’s year-end closeout process:

1. Delayed tax collections – Because the IRS extended Kentucky’s income tax deadline to November following natural disasters, occupational license tax revenue normally received in April and July won’t be counted for the 2024-25 fiscal year. Instead, it will be recorded in the 2025-26 budget.

2. Child Nutrition debt – The district’s Child Nutrition program still owes roughly $6 million to the General Fund, including unpaid student meal balances, indirect costs, and payroll expenses from May and June. Liggins said food services may not be able to repay the debt in full until later this fall, too late to count toward last year’s balance.

3. Retirement overages – Payments tied to retired employees who have returned to work will cost the district an estimated $2.7 million — a sharp increase from about $255,000 last year. Liggins noted these so-called “penalties” are difficult to predict and were not included in the budget.

4. Preschool costs – While the state’s preschool grant is meant to reimburse the General Fund for transportation costs, Liggins said state funding has not kept pace with rising expenses.

Contingency recommendation

Liggins said the top recommendation from the Budget Solutions Work Group earlier this year was to reduce the board’s policy-mandated contingency from 6% to 4% of the General Fund. Given the current situation, he will instead recommend maintaining only the state-required minimum 2% contingency — about $14.35 million — and applying any excess toward the group’s proposed solutions.

For example, if the final carry-forward is $22 million, about $7.75 million could be applied to help offset the shortfall.

Next steps

Liggins said a more accurate figure will be available later this month after the district’s year-end analysis and preliminary external audit, with further refinements possible this fall. He also plans to reconvene the Long-term Budget Solutions Work Group by early September and is exploring other immediate measures.

“Working with our community, we will find solutions, and we will continue to communicate openly and regularly,” Liggins said in the email.