FAYETTE COUNTY, Ky. (LEX NEWS) — In a report released Wednesday, credit rating agency Moody's announced it has downgraded Fayette County Schools' credit ranking and revised the district's financial outlook to a negative rating.
According to the agency, FCPS's issuer and general obligation unlimited tax (GOULT) rating fell from A3 to Baa1 and its lease appropriation rating dropped from Baa1 to Baa2.
"The downgrade reflects the continued weakening of reserves following disclosure of inaccurate financial reporting, including inflated fund balance levels and overstated revenue projections, which will result in a deficit general fund balance in fiscal 2026," the agency said.
Moody's found that recent inaccuracies in the district's property tax record resulted in the overstatement of FCPS's revenue and now, the district's general fund is projected to decline to between negative $17 million and $10 million.
"The tentative fiscal 2027 budget included an $11 million contingency to begin replenishing reserves that will now be offset by $12 million of overstated property taxes. As a result, reserves will likely remain negative or near zero through fiscal 2027," the agency wrote.
A history of inaccurate projects and "first-time reliance on cash-flow borrowing to meet expenses," as well as weak budget management, have also resulted in the district's negative outlook.
"Despite significant efforts to reduce expenditures, the lingering effects of inaccurate financial reporting will continue to challenge the district's ability to balance operations and restore fund balance to positive levels," Moody's said.
Fayette County Schools released a statement following the report's release.
"Fayette County Public Schools (FCPS) has received the latest report from Moody’s and are aware of the updated ratings. Addressing these challenges is precisely why the Fayette County Board of Education commissioned the audit through Weaver, L.L.P. – to give us an independent, clear roadmap to guide FCPS to long-term financial stability. We remain committed to implementing those recommendations and taking all necessary steps to restore our fiscal health while keeping student success at the center of our work.”
According to a district spokesperson, it is currently unclear if the rating will impact future capital projects and plans for borrowing.
