Local restaurants and shops that rely on state workers for a portion of their income weren’t the only ones that took a financial hit when the coronavirus pandemic forced many government employees to work remotely. The city’s occupational tax revenue also plunged.
Frankfort Mayor Layne Wilkerson told The State Journal last week that the $1.9 million difference between what the city collected for state and local occupational taxes from 2020 to 2021 is directly attributed to state employees working remotely.
The City of Frankfort relies on its occupational tax — the 1.95% of wages that are withheld for those who work in the city limits — because it makes up the majority of the city’s general fund revenue.
In fiscal year 2020, the city brought in $20.7 million in combined state and local business occupational taxes, compared to $18.8 million that was collected in fiscal year 2021.
Though the lost revenue is roughly one-tenth of the total amount brought in, the main issue is the uncertainty of if and when those working remotely return to the office. Because while state employees are working at home their occupational taxes are going to the city or county where they reside.
“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.
According to Russell Goodwin, executive director of the office of public affairs for the Kentucky Personnel Cabinet, the most recent data available shows that approximately 50% of executive branch employees are working exclusively in a state office building. While 37% are on a hybrid office schedule and 13% are exclusively telecommuting.
Money from the Coronavirus Aid, Relief and Economic Security Act (CARES) — a $2.2 trillion economic stimulus bill passed by Congress last year — is helping to offset the occupational tax pinch, but that is not a long-term solution to the problem.
So what should the city do to mitigate the issue? Is an occupational tax raise on the horizon? The city plans to discuss the matter at the November work session.
In the meantime, we hope city leaders can come up with a solution that will benefit Frankfort and those who live, work and play here.