What to know about FCPS’s proposed tax change
Last Tuesday, the Fayette County School Board (FCPS) voted to increase its Occupational License Tax (OLT) from 0.5% to 0.75%. This Thursday, the Fayette County Fiscal Court is expected to formally adopt the increase — a legal step required by state law.
CivicLex doesn’t typically cover the Fayette County Public School system. But given the amount of public confusion around this proposed tax change — especially around what the Fiscal Court is, how it relates to LFUCG, and how this process works — we thought it would be helpful to explain.
What is FCPS’ Occupational License Tax (OLT)?
FCPS’ Occupational License Tax (OLT) is a local tax that has two parts:
A “payroll tax” on individuals’ wages.
A “business tax” on the net profits of businesses.
Who pays the OLT?
Payroll Tax Component: Only people who both live and work in Fayette County pay this portion.
Business Net Profits Component: All businesses operating in Fayette County, regardless of owner residency.
How is FCPS’ OLT different from LFUCG’s OLT?
You may recall from past budget coverage that LFUCG (Lexington-Fayette Urban County Government) also collects an Occupational License Tax — it’s one of the city’s largest sources of revenue.
But FCPS’ OLT is entirely separate — it is collected by FCPS and used only for the school district.
Some media outlets have conflated the two, but LFUCG and FCPS do not have jurisdiction or control over each other’s taxes.
While Occupational taxes are main revenue streams for LFUCG, they are not for FCPS.
In the 2024-2025 Working Budget, OLT only accounts for around 8% of FCPS budget.
The largest source of revenue for FCPS is property tax, which accounts for 37% of their 2024-2025 Working Budget.
What would the tax increase mean for Lexington residents?
If approved, FCPS’ OLT tax would increase by 50% — from 0.5% to 0.75% — on both wages and business net profits. Here’s how that plays out for different income levels:
| Income Level | Annual Income | Tax at 0.5% | Tax at 0.75% | Annual Increase |
|---|---|---|---|---|
| Lower income (~60% of median) | $40,000 | $200.00 | $300.00 | $100.00 |
| Median income (rounded) | $68,000 | $340.00 | $510.00 | $170.00 |
| Higher income (~150% of median) | $100,000 | $500.00 | $750.00 | $250.00 |
Why is FCPS trying to increase its OLT?
On May 12, FCPS Director of Budgeting and Financial Planning Anna Sampson-Graves presented a draft FY26 budget projecting a $16 million shortfall. The Board asked her team to return with a balanced budget by May 27.
At the May 27th meeting, a budget was presented that was balanced by increasing revenue through the Occupational License Tax.
The tax would take effect January 1, 2026, midway through the 2025–2026 fiscal year.
FCPS estimates that in the second half of this fiscal year (January 1 - June 30, 2025, the OLT increase would generate an additional $13.5-$16 million in revenue.
FCPS estimates that the tax would bring in an additional $27-$32 million during a full Fiscal Year. This would fill the originally projected $16 million deficit in FY26 and would provide double that amount in upcoming Fiscal Years.
The current tax rate brings in roughly $57 million. In FY27, the first full Fiscal Year when the increased tax rate will be in place, it will bring in an estimated total of $90-95 million.
In the May 27th meeting, FCPS administration said it reviewed other options to balance the budget but concluded that increasing the OLT would protect services without requiring cuts.
What is the role of the Fiscal Court?
Kentucky law requires that any increase to a school district’s OLT must be formally adopted by the county’s legislative body — which in this case is the Fayette County Fiscal Court.
What is a Fiscal Court?
In most Kentucky counties, the Fiscal Court is the legislative body for the county, and one of the most powerful political entities.
The Kentucky State Constitution requires every county to have a Fiscal Court, and Fayette County is no exception.
However, because of our how local government was restructured through the merger and Urban County Charter, most legislative authority was transferred to the Urban County Council — but not all.
This left the Fayette County Fiscal Court with very few official duties. It still deals with some funds for rural roads, handles vacancy appointments for some constitutionally-required positions, and a few other responsibilities — including the adoption of school-requested OLT increases.
The Fiscal Court is comprised of three Commissioners and the County Judge/Executive, who are elected every four years. The members are:
Fayette County Judge-Executive: Mary Diane McCord Hanna
District 1 County Commissioner: Brian Miller
District 2 County Commissioner: Alayne White
District 3 County Commissioner: David Lowe
Why does the Fiscal Court have to act on this?
FCPS has no direct authority to increase their own OLT tax rate — they must request the increase from the Fayette County Fiscal Court.
According to LFUCG Interim Commissioner of Law David Barberie, Kentucky law seems to suggest that the Fayette County Fiscal Court does not have an option to disapprove or debate the tax increase — only adopt it.
The Fiscal Court will likely approve the tax in their meeting this Thursday, June 5th, in the Third Floor of the Pam Miller Downtown Arts Center. You can view the meeting agenda and packet here. You can attend in-person.
What questions have been raised?
Before and since the May 27th meeting, some Fayette County residents and some FCPS School Board members have raised concerns about the tax increase and process surrounding it:
Timeline: This tax increase will likely be approved this Thursday, June 5th, meaning there would only be 9 days between introduction of the tax to the public and its adoption by the Fiscal Court.
Internal Communication: School board members Monica Mundy and Amanda Ferguson say they only found out about the increase on Friday, May 23rd, heading into Memorial day Weekend and just four days before the meeting where the school board voted on the tax increase.
Public Notice Legal Concerns: Kentucky law typically requires specific public notice and hearings for school tax increases. Since this OLT increase can only be adopted by the Fiscal Court, there is some ambiguity around whether the hearing requirement still applies.
What are other things to know?
FCPS has long been eligible to levy an OLT increase: Kentucky law prescribes set caps for OLT amounts based on county population size. When a county population increases to over 300,000, school districts are permitted to raise the OLT rate from 0.5% to 0.75%.
Fayette County passed that threshold in the early 2010s.
FCPS has discussed the budget deficit for months: FCPS administrators have insisted that they’ve been publicly discussing the district’s projected budget deficit — and that new revenue could be a path to resolving the issue — since February.
However, Mundy and Ferguson took issue with only having a few days to consider this specific revenue increase option.
The FCPS OLT increase would be subject to a recall petition: Some in Lexington are discussing a recall petition for the increase. Under Kentucky law, a recall petition would require verified signatures from at least 10% of the voters who cast ballots in the last regular election in Fayette County — which amounts to approximately 14,000 signatures.
If those signatures are collected and certified by the County Clerk within 45 days of the tax increase's adoption, the proposed increase would be placed on the ballot for voter approval or rejection.
Depending on timing, that vote could occur in the 2026 General Election, or potentially a special election called for that purpose.
CivicLex will be attending the Fiscal Court meeting this Thursday and will follow-up in next week’s newsletter with any additional information that comes from the meeting.
Adrian Paul Bryant contributed to this story.