For the last year, Fayette County Public Schools (FCPS) has been in the middle of a heated public debate over the district’s budget. FCPS reported a $16 million budget shortfall for 2025-2026. The district proposed to increase its occupational license tax to help address the challenge but then withdrew the plan under pressure. FCPS instead reduced its contingency fund, cut staffing and department budgets, put in place a hiring freeze for certain positions and made plans to sell off real estate for revenue. It is now considering an additional $1.9 million in cuts for the next school year, including layoffs and reduced staff hours for librarians and child nutrition workers. The debate includes multiple claims of financial inaccuracies and audits both underway and completed.
While there are many issues at play, missing from the discussion is the role state education budget cuts played in helping create the situation. If state lawmakers had simply restored funding for the core K-12 formula Support Educational Excellence in Kentucky (SEEK) to its inflation-adjusted 2008 levels, FCPS would have $76 million more per year by 2028, a number that far exceeds the $16 million shortfall that began the controversy. Even going a portion of the way toward restoring the past cuts would prevent loss of important education staff and services. But the budget passed by the Kentucky General Assembly last month will result in further lost ground in state funding for FCPS.
School districts are facing cuts to state funding, inflation and the end of federal COVID monies
Kentucky school districts face at least three growing financial challenges. The primary issue is the erosion of state education funding over time. Since 2008, state funding through the SEEK formula has declined by 25% after adjusting for inflation. That trend did not improve this legislative session. The final budget passed by the General Assembly continued to underfund school transportation by $93 million below what the law requires (an amount that districts have to make up from their own funds) and made only small increases in the SEEK base per pupil guarantee.
Additionally, inflation has become even more of an issue in recent years. Consumer costs have increased by 28% since 2020. Pay for teachers and other school employees has not kept up, making it more difficult to attract and retain staff. Other costs have grown rapidly as well. Rockcastle County Schools’ superintendent reports that a school bus that cost $94,000 in 2019 now costs $153,000. Also increasing are costs for diesel, maintenance and insurance. The cost of new school construction is up 37% since 2020 and utility bills are much higher.
School districts are also grappling with the loss of over $3 billion in federal COVID relief funds that had to be spent by March of this year. These funds helped districts address learning loss and student mental health needs, and many districts hired additional staff for these purposes. A Legislative Research Commission report estimated that with the loss of these funds, 1,500 positions state-wide would need to be eliminated despite the ongoing existence of many of those learning, behavioral and social needs. State lawmakers could have provided state funding to ease or prevent the funding cliff that resulted from the end of these funds but declined to do so.
Shortfalls are resulting, and they are far from unique to Lexington. Fayette and Jefferson counties get more attention because of the media presence there, but a quick Google search shows that budget deficits have been major issues in Woodford County, Spencer County, Berea Independent, Newport Independent, Boyd County and Lincoln County. Some districts are handling it more smoothly than others, but tough choices must be made regardless.
Student needs have grown dramatically in Fayette County, worsening state funding crunch
Growth and shifts in the student body of FCPS make the cuts in state funding particularly painful. The student population has grown by 23% since 2008 while in the rest of the state enrollment has declined by 1%. That has required new investment in school facilities. And the number and share of students with special needs has grown dramatically. While 40% of FCPS students were categorized as At Risk in 2008 — meaning family incomes low enough to qualify for free student lunch — the share will climb to 67% by 2028. The number of Limited English Proficiency students (those whose first language is not English) has climbed 353% over that time and is projected to make up 23% of FCPS students.
These students have greater needs, and those services cost money. The state SEEK formula is designed to take that into account, providing “add-on” funding for each of these categories of students. But when the SEEK base per-pupil guarantee amount falls far behind costs, as it has since 2008, so do these add-on dollars. That’s because they are linked to the SEEK base amount. Districts like Fayette County must rely much more on local taxes, which do not adjust for student needs.
Going part of the way to restoring state funding cuts would have made a real difference in Fayette County
As mentioned, the $76 million in state funding FCPS would receive from simply restoring 2008 inflation-adjusted SEEK base per-pupil funding levels far exceeds the $16 million shortfall that has been the subject of intense debate. Even going part of the way toward getting back on track would have made a huge difference. As KyPolicy reported last summer, increasing state funding for public education equal to the cost of a half-point reduction in the individual income tax (which lawmakers have enacted three times now) would bring an estimated $36 million a year more to Fayette County. That was the request that the Protect Our Schools KY coalition brought to the 2026 budget session.
Instead, the Kentucky General Assembly passed a budget in which Fayette County will only receive an estimated $2 million more a year in SEEK payments than in 2026, which equals a cut of $3.7 million once projected inflation is taken into account. In addition, the 2026 General Assembly passed HB 757 which removed the ability of FCPS to increase its local occupational license tax in the future to help address its budget needs.
While there are legitimate concerns about fiscal transparency in the district, the financial pressures that led to the current controversy started at the state level. A diminishing state education investment in the context of rapidly rising costs and the loss of federal COVID funds is the critical but missing financial context for the controversy at FCPS.
