OFFICE OF ECONOMIC ANALYSIS

Economic and Revenue Outlook:March 2016

February 10th, 2016 Oregon Office of Economic Analysis

Mark McMullen

Josh Lehner

OFFICE OF ECONOMIC ANALYSIS

Recent Performance

2

OFFICE OF ECONOMIC ANALYSIS

U.S. Economy Still in Expansion

3

OFFICE OF ECONOMIC ANALYSIS

Best Leading Indicator

4

OFFICE OF ECONOMIC ANALYSIS

Industrial Production is Weak

Date # Neg.

Nov ’74 17

May ’80 14

Dec ’81 16

Feb ’91 17

Apr ’01 15

Jul ’08 15

Dec ’15 7

5

OFFICE OF ECONOMIC ANALYSIS

Oregon: Not Immune to Global Issues

6

OFFICE OF ECONOMIC ANALYSIS

Oregon’s Labor Market

7

OFFICE OF ECONOMIC ANALYSIS

Traditional Advantage Regained

8

OFFICE OF ECONOMIC ANALYSIS

Most Regions Full Throttle

9

OFFICE OF ECONOMIC ANALYSIS

Translates into Stronger Income GainsWage Gains Broad Based, Not Due to Composition Effects

10

OFFICE OF ECONOMIC ANALYSIS

Participation: Mostly Structural

11

OFFICE OF ECONOMIC ANALYSIS

Businesses Casting Wider Net

12

OFFICE OF ECONOMIC ANALYSIS

Economic Outlook

13

OFFICE OF ECONOMIC ANALYSIS

Revenue Trends

14

OFFICE OF ECONOMIC ANALYSIS

Personal Income Tax Collections Remain Healthy

15

OFFICE OF ECONOMIC ANALYSIS

Corporate Taxes Turn Down

16

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Net Corporate Taxes ($ Mil, 12 month sum)

OFFICE OF ECONOMIC ANALYSIS

Herein Lies the Problem

17

0

5,000

10,000

15,000

20,000

25,000

30,000

0

2

4

6

8

10

12

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

20

22

20

24

Stock Prices and Oregon Taxable Capital Gains

March 2016 Wilshire 5000 Stock PriceForecast (Right)

Dec 2015 Wilshire 5000 Stock PriceForecast (Right)

March 2016 Cap Gains Forecast ($ bil)

Dec 2015 Cap Gains Forecast ($ bil)

OFFICE OF ECONOMIC ANALYSIS

Here Comes April

18

Tax Year

Dec-Jan

Estimated

Payments

($ mil) % change

Non-Labor

Income*

(% change)

Q2 Final PIT

Payments

(% change)

2008 268 -28.4% -35.4% -45.4%

2009 227 -15.2% -22.2% -2.8%

2010 253 11.5% 10.9% 17.9%

2011 268 5.6% 0.9% 3.3%

2012 345 28.8% 36.0% 25.1%

2013 346 0.5% -5.2% -7.0%

2014 416 20.0% 23.4% 15.9%

2015 455 9.4% 12.2% 8.5%

Forecast

OFFICE OF ECONOMIC ANALYSIS

Jackpot!

190

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

PB_SALESOregon Weekly Powerball Sales

OFFICE OF ECONOMIC ANALYSIS

Surprising Cigarette Sales

20

OFFICE OF ECONOMIC ANALYSIS

Revenue Outlook

21

OFFICE OF ECONOMIC ANALYSIS

2015-17 Forecast Evolution

22

$17.6

$17.8

$18.0

$18.2

$18.4

$18.6

$18.8

$19.0

$19.2

$19.4

$19.6

$19.8

Dec '10 May 13 Mar '16

Bill

ion

s

2015-17 General and Lottery Fund ResourcesEvolution by Forecast Release Date

Forecast Including Tax Law Changes at Close of Session

OFFICE OF ECONOMIC ANALYSIS

23

March 2016 General Fund Forecast Summary

Positive

Factor

Negative

Factor

Lottery

Sales

Personal

Income

Taxes

Estate

Taxes

Liquor

Criminal

Fines

Court Fees

Spending

Adjustments

(Millions)

2015 COS

Forecast

December 2015

Forecast

March 2016

Forecast

Change from

Prior Forecast

Change from

COS Forecast

Structural Revenues

Personal Income Tax $15,713.5 $15,712.4 $15,692.1 -$20.3 -$21.4

Corporate Income Tax $1,100.0 $1,134.7 $1,134.3 -$0.4 $34.3

All Other Revenues $1,184.6 $1,182.0 $1,179.9 -$2.1 -$4.7

Gross GF Revenues $17,998.1 $18,029.1 $18,006.3 -$22.8 $8.3

Offsets and Transfers -$42.8 -$43.0 -$43.2 -$0.2 -$0.4

Administrative Actions1 -$20.2 -$20.2 -$14.0 $6.2 $6.2

Legislative Actions -$158.9 -$158.9 -$158.3 $0.6 $0.6

Net Available Resources $18,309.1 $18,283.6 $18,319.6 $36.0 $10.5

Confidence Intervals

67% Confidence +/- 6.4% $1,144.9

95% Confidence +/- 12.7% $2,289.8

1 Reflects cost of cashflow management actions, ex clusiv e of internal borrow ing.

2015-17 General Fund Forecast Summary

$16.86B to $19.15B

$15.72B to $20.30B

Table R.1

Full Impact:$36.0 Net IncreaseLess $16.0 Additional SpendingPlus $24.8 Lottery Funds

OFFICE OF ECONOMIC ANALYSIS

2424

Forecast ChangesDifference from December Forecast, $ millions

1.8

-165.7-152.0

-4.7

27.6

-$200

-$150

-$100

-$50

$0

$50

$100

2015-17 2017-19 2019-21 2021-23 2023-25

Personal Corporate Lottery Other Total

OFFICE OF ECONOMIC ANALYSIS

25

Reserves

Effective Reserves ($ millions)

Feb

2016

End

2015-17

ESF $257.5 $375.5

RDF $212.4 $386.5

Reserves $469.9 $762.1

Ending

Balance $319.0 $319.0

Total $788.9 $1,081.0

% of GF 4.4% 6.0%0%

2%

4%

6%

8%

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

99-01BN

01-03BN

03-05BN

05-07BN

07-09BN

09-11BN

11-13BN

13-15BN

15-17BN

17-19BN

Oregon Budgetary Reserves (billions)Gen. Fund Ending Balance Educ. Stability Fund Rainy Day Fund

Forecast -->

Percent ofGeneral Fund -->

Source: Oregon Office of Economic Analysis

OFFICE OF ECONOMIC ANALYSIS

2626

Biennial Revenue Growth

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Personal Income Taxes Total General Fund

OFFICE OF ECONOMIC ANALYSIS

27

For More Information

Standard Contact:

155 Cottage Street NE

Salem, OR 97301

(503) 378-3405

oea.info@state.or.us

www.oregon.gov/das/oea

Social Media:

www.OregonEconomicAnalysis.com

@OR_EconAnalysis