American workers are becoming fond of flexible work schedules—but are we willing to foot the bill for them? That’s a question currently pending in the Oregon legislature, as Senate Bill 854 could end perks associated with remote work for state employees.
The pandemic has dramatically changed the way that workers approach their jobs. The number of people primarily working from home between 2019 and 2021 tripled from 5.7% (roughly 9 million people) to 17.9% (27.6 million people), according to a 2021 survey released by the US Census Bureau. That trend is continuing—a Gallup poll found that, as of June 2022, five in 10 remote-capable workers are in hybrid positions spending part of their week at home and part on-site, three in 10 are exclusively working remotely, and two in 10 are entirely on-site.
Most high-profile discussions about remote work have focused on private companies like Starbucks
SBUX
As of last year, the state of Oregon employed around 40,000 people. Of those, nearly 20%—7,700 employees—were allowed to work remotely full-time following a December 2021 policy change. As a result, some Oregon state employees, including many considered senior-level, made permanent moves out of state—about 1/3 of those earn at least $100,000 a year and have relocated to more tax-favored locations.
On its face, that might not seem like such a big deal. If companies like Dropbox and Airbnb can manage the transition, why not government agencies? The answer lies with who pays. Last year, Oregon taxpayers learned that some top state employees were living outside the state—and the state was footing the bill for their travel costs. For example, Willamette Week reported that Kathy Ortega, chief financial officer for the Oregon Lottery, moved out of the state on November 19, 2021. Ortega, who earns a government salary of $199,068, moved to income tax-free Texas. When her travels took her back to Oregon for work, state taxpayers paid her travel costs. The director of human resources for the lottery also left the state and had travel costs reimbursed.
Other Oregon agencies have similar policies. Last summer, Oregon Live reported that the Oregon Department of Human Services has the largest number of employees approved to work remotely out-of-state—a whopping 157. If costs for all of those employees are reimbursed on the state’s dime, the dollars can pile up.
Senate Bill 854 doesn’t aim to change whether employees can work remotely—or even out of state—but rather whether taxpayers should be on the hook for their choices. Specifically, the bill would prohibit the state from paying travel costs to or from Oregon for any employee in state service who primarily works outside the state.
SB 854 was introduced on February 2, 2023, with Senator Tim Knopp (R-27) and Representatives Vikki Breese Iverson (R-59) and Anna Scharf (R-23) as the primary sponsors. All 30 state senators have now signed on. A public hearing was held on the issue on February 9, 2023—you can read public testimony here.
Pointedly, at the hearing, some noted that it seemed unfair for taxpayers to bear the burden of costs for state employees who chose to relocate out of the state when those who opted to not go remote paid their own expenses. There is no reimbursement, nor a tax break, associated with most local commutes. Oregon State Treasury deputy treasurer Michael Kaplan said, “I cannot with a straight face justify to our local commuters who come to work reliability that their commuting costs are less important or less meaningful than our employees who may live thousands of miles away.” Treasury joins the Oregon Department of Justice in not reimbursing out-of-state workers for their travel.
However, not everyone is on board with the measure—Service Employees International Union Local 503, the largest public employee union in the state, has signaled opposition. The union has suggested that, at a minimum, those employees who made moves out of state based on a prior policy should continue to receive the benefit of paid travel costs.
It’s unclear whether the measure will pass, even with extensive support in the state Senate. But it does raise interesting questions about the future of remote work and who should pay those costs when it comes to government workers. Currently, at least 11 states have rules on the books that require reimbursement to employees for “necessary work-related expenses” though government workers may have more protective agreements in place. And, even when those law exist, it’s not always clear whether they include costs attributable to remote work.
The reimbursement issue will continue to be a hot one at least through 2025. Under federal law, when an employee receives a reimbursement for expenses, it’s typically tax-free if the employer has done their homework. But if employees pay these expenses and there’s no reimbursement plan in place, there’s no upside—post Tax Cuts and Jobs Act, business expenses that are paid out of pocket are no longer deductible as miscellaneous itemized deductions on federal income tax returns. That’s true even if expenses, like phone and internet, are considered necessary—there is no remote work or Covid exception to the rule. However, the limitation will sunset along with many other individual tax provisions in the TCJA in 2025, unless Congress acts to permanently disallow the deduction.
In the meantime, employees like those in Oregon will have to look to state law to see what’s covered and what’s not. A vote on the government worker reimbursement measure in the Beaver State has not yet been scheduled.