Oregon Economic and Revenue Forecast, December 2014

OFFICE OF ECONOMIC ANALYSIS

Economic and Revenue Outlook:December 2014

November 13th, 2014 Oregon Office of Economic Analysis

Mark McMullen

Josh Lehner


Economic Outlook

2


Oregon’s Job Growth Advantage Has Returned

3

-8%

-6%

-4%

-2%

0%

2%

4%

6%

Jan-95 Jan-00 Jan-05 Jan-10 Jan-15

Employment GrowthYear-over-Year Change

U.S. Oregon


Problems Remain Below the Surface

No Real Progress Real Progress

4


Signs of a Deeper Labor Market Recovery Emerge in Oregon

5


Population Growth Ramping Up

6

-2%

-1%

0%

1%

2%

3%

4%

-40,000

-20,000

0

20,000

40,000

60,000

80,000

1980 1990 2000 2010

Oregon Population Growth

Net Migration Natural Increase Growth Rate, rhs


Household Formation Is Key

7

Why are households not forming?

• Poor wage growth

• Slower immigration

• Lower marriage rates

• Limited access to credit

• Degraded mobility

• Student loan burdens


Higher Demand for Housing

8

0.0

0.5

1.0

1.5

2.0

2.5

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2005 2007 2009 2011 2013 2015

Housing Starts Forecast

Oregon (lhs) U.S. (millions, rhs)


Back to the Future: 1980’s Revisited

9

0%

5%

10%

15%

20%

25%

1978 /2005

1981 /2008

1984 /2011

1987 /2014

Severe Recessions in Oregon

Early 80s U-6

Early 80s U-3Great Recession U-3

Great Recession U-6

1978 1981 1984 1987 1990

-

10,000

20,000

30,000

40,000

50,000

-

10,000

20,000

30,000

40,000

50,000

2005 2008 2011 2014 2017

Oregon's Housing Bust Replay

Early 80s Housing Bubble 1973-2007 Avg


Job Growth Spreads to More Regions

10

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

2007 2009 2011 2013 2015

Uneven Recovery Across OregonEmployment Relative to Pre-recession Peak

Portland

Oregon

Bend, Corvallis, EugeneMedford, Salem

Outside of MetropolitanAreas


Oregon Job Growth Picking Up

• Big cities performing best

• Second tier metros now surging

• Rural Oregon slowly improving along with housing and government

11

-8%

-6%

-4%

-2%

0%

2%

4%

Jan-06 Jan-08 Jan-10 Jan-12 Jan-14

Oregon Employment: Metro and NonmetroYear-over-Year Change

Portland Bend, Corvallis, Eugene, Medord, Salem Nonmetro


This is Unique: Timber Belt Population

12


Revenue Outlook

13


Forecast Evolution: No More Wiggle Room

14

$15.5

$15.6

$15.7

$15.8

$15.9

$16.0

$16.1

$16.2

$16.3

$14.2

$14.3

$14.4

$14.5

$14.6

$14.7

$14.8

$14.9

$15.0

Dec '10 Dec '11 Dec '12 Dec '13 Dec '14

Bill

ion

s

Bill

ion

s

2013-15 BN Personal Kicker Base

$29 Million

-$259 Million

<--2% Kicker Threshold

Expenditures -->

<--COS Forecast


Extension Filers Weigh On Personal Income Tax Collections

15

0%

2%

4%

6%

8%

10%

12%

14%

Oct Nov Dec Jan2014

Feb Mar Apr May June July Aug Sept Oct

Recent Personal Income Tax Collections% change over year ago, 3 month moving sum

Preliminary


16

Strong Response to 2013 Federal Tax Increase

-30%

-20%

-10%

0%

10%

20%

30%

40%

Schedule E Capital Gains Dividends Business Income Taxable IRAs Total Income

Growth Across Matched Tax Returns: Filers Affected by Measure 66

2012 2013


17

Capital Gains: Ready for Takeoff?

0

5000

10000

15000

20000

25000

30000

0

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,0001

98

0

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

Wilshire 5000 Stock Price Index (Right)

Oregon Capital Gains Realizations (Left)


18

Capital Gains: Ready for Takeoff?

10000

12000

14000

16000

18000

20000

22000

24000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

7,000,000,000

8,000,000,000

9,000,000,000

2011 2012 2013 2014 2015

Wilshire 5000 Stock Price Index (Right)

Oregon Capital Gains Realizations (Left)

75%

6%

50%7%


2.5

3.5

4.5

5.5

6.5

7.5

8.5

9.5

10.5

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Personal Income Tax Collections (December 2014 Forecast)

PIT Collections Excluding Kicker

PIT Collections (September 2014 Forecast)

19

Personal Income Tax Forecast$ billions, 4 quarter moving sum

2013-15

-$18.5

(million)

2015-17

$23.5

2017-19

$159.5

2020-21

$318.3

2021-23

$466.5


Corp Collections Stall, but “Kicker” Payment to Schools Still Predicted

20

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Oct Nov Dec Jan2014

Feb Mar Apr May June July Aug Sep Oct

Corporate Excise Tax Collections% change year ago, 3 month moving sum

Preliminary


Video Lottery: Fall Bump in Sales Unexpectedly Returns in FY2015

21

$10

$11

$12

$13

$14

$15

$16

$17

$18

$19

J A S O N D J F M A M J

Mill

ion

s

Month in Fiscal Year

Video Lottery Sales4 Week Moving Average

2008

2007

2006

2010-14

2015


(Millions)

2013 COS

Forecast

September 2014

Forecast

December 2014

Forecast

Change from

Prior Forecast

Change from

COS Forecast

Structural Revenues

Personal Income Tax $13,558.2 $13,851.4 $13,832.9 -$18.5 $274.7

Corporate Income Tax $1,056.6 $1,046.7 $1,060.4 $13.7 $3.8

All Other Revenues $1,027.9 $1,003.5 $1,019.1 $15.6 -$8.7

Gross GF Revenues $15,642.6 $15,901.6 $15,912.4 $10.8 $269.8

Offsets and Transfers -$120.8 -$72.6 -$73.2 -$0.5 $47.7

Administrative Actions1 -$18.2 -$12.7 -$3.3 $9.3 $14.9

Legislative Actions -$136.9 -$136.7 -$136.7 $0.0 $0.2

Net Available Resources $15,910.1 $16,166.4 $16,174.8 $8.4 $264.7

Confidence Intervals

67% Confidence +/- 3.2% $502.1

95% Confidence +/- 6.3% $1,004.3

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

2013-15 General Fund Forecast Summary

$15.41B to $16.41B

$14.91B to $16.92B

Table R.1

22

December 2014 General Fund Forecast Summary

Positive

Factor

Negative

Factor

Corporate

Excise Tax:

Strong

Collections in

Early Fall

Personal

Income

Taxes:

2013

Extension

Filers

Estate Taxes Court Fees

Interest

Savings

Beginning

Balance

Reconciliation

Video Lottery

Sales


Effective Reserves

23

0%

1%

2%

3%

4%

5%

6%

7%

8%

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

99-01 BN 01-03 BN 03-05 BN 05-07 BN 07-09 BN 09-11 BN 11-13 BN FY14 FY15 15-17 BN 17-19 BN

Oregon’s Budgetary Reserves ($millions)

General Fund Ending Balance Education Stability Fund Rainy Day Fund Percent of General Fund, rhs


2424

Forecast ChangesDifference from September Forecast, $ millions

18.9

67.4

121.2

264.2

378.9

-$150

-$100

-$50

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

2013-15 2015-17 2017-19 2019-21 2021-23

Personal CorporateLottery OtherTotal

OFFICE OF ECONOMIC ANALYSIS25

10-Year Forecast

Table R.2

General Fund Revenue Forecast Summary (Millions of Dollars, Current Law)

Forecast Forecast Forecast Forecast Forecast Forecast

2011-13 % 2013-15 % 2015-17 % 2017-19 % 2019-21 % 2021-23 %

Revenue Source Biennium Chg Biennium Chg Biennium Chg Biennium Chg Biennium Chg Biennium Chg

Personal Income Taxes 12,118.2 15.8% 13,832.9 14.1% 15,636.6 13.0% 17,145.0 9.6% 19,047.7 11.1% 21,134.7 11.0%

Corporate Income Taxes 883.9 6.8% 1,060.4 20.0% 1,080.0 1.8% 1,043.2 -3.4% 1,078.4 3.4% 1,156.4 7.2%

All Others 1,153.9 -5.9% 1,019.1 -11.7% 1,003.4 -1.5% 1,040.3 3.7% 1,118.0 7.5% 1,184.9 6.0%

Gross General Fund 14,156.0 13.1% 15,912.4 12.4% 17,720.0 11.4% 19,228.4 8.5% 21,244.1 10.5% 23,476.1 10.5%

Offsets and Transfers (12.0) (73.2) (104.7) (101.7) (39.6) (42.7)

Net Revenue 14,144.0 13.0% 15,839.2 12.0% 17,615.3 11.2% 19,126.8 8.6% 21,204.4 10.9% 23,433.4 10.5%

Other tax es include General Fund portions of the Eastern Oregon Sev erance Tax , Western Oregon Sev erance Tax and Amusement Dev ice Tax .

Commercial Fish Licenses & Fees and Pari-mutual Receipts are included in Other Rev enues


2626

Biennial Revenue Growth

-12%

-8%

-4%

0%

4%

8%

12%

16%

20%

24%PIT TOTAL


27

For More Information

Standard Contact:

155 Cottage Street NE

Salem, OR 97301

(503) 378-3405

[email protected]

www.oregon.gov/das/oea

Social Media:

www.OregonEconomicAnalysis.com

@OR_EconAnalysis

Oregon Economic and Revenue Forecast, December 2014

Economy & Finance

Transcript of Oregon Economic and Revenue Forecast, December 2014