The City of Frankfort took a hit it never saw coming in the past year, when the pandemic forced most state employees to work remotely.
The city’s occupational tax revenue plummeted. When it will bounce back, and to what extent, is up in the air.
“In fiscal year 2020 we had $20.7 million in combined state and local business occupational tax and business net profit tax compared to $18.8 million in fiscal year '21,” Frankfort Mayor Layne Wilkerson said. “The difference of $1.9 million is attributed entirely to state employees working remotely since the pandemic began in Spring 2020.”
Occupational/business taxes make up the lion's share of the city's fiscal year '22 $34.77 million projected general fund revenue.
Frankfort’s occupational tax of 1.95% is withheld on the wages of those who work or perform services within the city limits by their employers, which remit the funds to the city on a quarterly basis.
While state employees have been telecommuting, their occupational tax is going to the city or county from which they are working.
“We have no way of knowing for sure if or when the state will bring back employees at full force but will have a better idea once the quarterly occupational tax report and payment is sent by the state in late October,” Wilkerson said. “We plan to discuss this at the commission work session in November.”
City leaders have said that CARES money will help mitigate the loss, but that money won't last forever.
Telecommuting became more widely used during the pandemic, but it had been implemented by state government long before last spring.
“Executive branch employees have historically had the ability to telecommute, while others are not required to work in an office setting due to job duties,” Russell Goodwin, executive director, Office of Public Affairs, Kentucky Personnel Cabinet, said in an official statement.
“However, agencies will continue to employ in accordance with our statutes and regulations, including the ability to telecommute pursuant to 101 KAR 2:095, Section 8 and 101 KAR 3:050, Section 9.
“Through telecommuting, wearing a face covering, social distancing and allowing employees to take a COVID-19 test and receive the vaccine during work time, we have been able work to keep our employees safe from COVID-19, while continuing to serve the citizens of the Commonwealth.”
In 101 KAR 2:095, Section 8, it states “telecommuting shall be a work arrangement in which a selected state employee is allowed to perform the normal duties and responsibilities of his or her position through the use of computer or telecommunications at home or another place apart from the employee's usual work station.”
Once the pandemic started, it was not just selected state employees who were telecommuting.
Some state employees have returned to Frankfort, but the numbers aren’t yet where they were before the pandemic.
Goodwin said as of July 6, 50% of executive branch employees are working exclusively in a state office, 37% of executive branch employees are working in an office on a hybrid schedule, and 13% of executive branch employees are telecommuting exclusively.
Executive branch agencies implemented post-COVID workforce plans provided by the Centers for Disease Control regarding face coverings and social distancing effective July 6.
Goodwin said the cabinet did not have data as relates to telecommuting for the legislative or judicial branches, though the executive branch employs the majority of state government workers.
The Kentucky Bar Association was another employer impacted by the pandemic, remaining completely remote until the first of August.
On average, KBA employees are now working three days at the office and two days remotely.
Because of that, an employee’s local tax liability is split based on hours worked at the KBA and the remote location, according to John D. Meyers, executive director of the KBA.
Cities and counties receiving occupational tax from the bar association are Frankfort/Franklin County, Boyle County/Danville, Lexington-Fayette Urban County Government, Louisville Metro, Owen County/Owenton, Jessamine County/Nicholasville, and Woodford County/Versailles.
No decision has been made on if or when KBA employees will return to the office five days a week.
"It’s really too early for us to tell, but I think our hybrid plan will be in place for some time," Meyers said."So far, it has worked very well for us, but we will be reviewing our status periodically."