Oregon Economic and Revenue Forecast, December 2016

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  • OFFICE OF ECONOMIC ANALYSIS

    Economic and Revenue Outlook: December 2016

    November 16th, 2016 Oregon Office of Economic Analysis

    Mark McMullen

    Josh Lehner

  • OFFICE OF ECONOMIC ANALYSIS

    Economic Update and Outlook

    2

  • OFFICE OF ECONOMIC ANALYSIS

    U.S. Economy

    Worrisome Signs RemainPersonal income growth slowingManufacturing weakness

    Solid Footing Heading into 2017

    Election Outcome Too soon to tell

    3

  • OFFICE OF ECONOMIC ANALYSIS

    Oregon Job Growth Slows

    4

  • OFFICE OF ECONOMIC ANALYSIS

    Withholding Slows Too

    5

  • OFFICE OF ECONOMIC ANALYSIS

    Exports On The Mend

    6

  • OFFICE OF ECONOMIC ANALYSIS

    Improvements Across the Board

    7

  • OFFICE OF ECONOMIC ANALYSIS

    Household Incomes Rising(But Around a Stagnant Trend)

    8

  • OFFICE OF ECONOMIC ANALYSIS

    Population Growth Picks Up

    9

  • OFFICE OF ECONOMIC ANALYSIS

    Outlook: Relatively Unchanged

    10

  • OFFICE OF ECONOMIC ANALYSIS

    Revenue Update & Outlook

    11

  • OFFICE OF ECONOMIC ANALYSIS

    The Salad Days Are Over

    12-10%

    -5%

    0%

    5%

    10%

    15%

    20%

    Jan 2013 July Jan 2014 July Jan 2015 July Jan 2016 July

    Kicker Takes a Bite: Personal Income Tax Collections% change over year ago, 3 month moving sum

  • OFFICE OF ECONOMIC ANALYSIS

    September Surprise

    13

    $0.0

    $0.5

    $1.0

    $1.5

    $2.0

    $2.5

    $3.0

    $3.5

    $4.0

    Processed Prior to September Processed in September & October

    Extension Filers Cashed in InvestmentsCapital Gains Reported on Oregon Tax Returns, $ Billions

    Matched Returns for Full-Year Filers

    2014 Tax Year

    2015 Tax Year

  • OFFICE OF ECONOMIC ANALYSIS

    Corporate Taxes: Have We Hit Bottom?

    14

    100

    200

    300

    400

    500

    600

    700

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

    Single Sales Apportionment Factor Enacted

    M67 Minimum Tax & Credit Sunsets Enacted

    Tax Haven Legislation

    M67 Minimum Tax Reforms & Small Business Tax Cut

    Approximate Peak in BETC Credits Taken

    Corporate Excise Taxes, $ millions, 4 QTR Sum

  • OFFICE OF ECONOMIC ANALYSIS

    2015-17 Forecast Evolution

    15

    $17.5

    $18.0

    $18.5

    $19.0

    $19.5

    $20.0

    Dec '10 May '13 May '15 Dec '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

    2017-19 Forecast Evolution

    16

    $19.0

    $19.5

    $20.0

    $20.5

    $21.0

    Mar May Sep Dec Mar Jun Sep Dec Mar May Sep Dec Mar Jun Sep Dec Mar May

    2013 2014 2015 2016 2017

    Bill

    ion

    s

    Forecast Release Date

    General and Lottery Fund Revenues 2017-19

    Source: Oregon Office of Economic Analysis

  • OFFICE OF ECONOMIC ANALYSIS

    Small Business Are Doing Better Than Expected

    17$1

    $2

    $3

    $4

    $5

    $6

    $7

    $8

    $9

    1990 1995 2000 2005 2010 2015 2020

    Schedule E Income (Real Estate, S-Corps, Partnerships, Trusts, etc), $ bil

    September 2013Forecast

    Dec 2013Forecast

    Current Forecast

    $1.5

    $2.0

    $2.5

    $3.0

    $3.5

    $4.0

    $4.5

    1990 1995 2000 2005 2010 2015 2020

    Proprietor's Income, $ bil

    Sept 2013Forecast

    Dec 2013Forecast

    CurrentForecast

  • OFFICE OF ECONOMIC ANALYSIS

    Record Level Estate Taxes

    18

  • OFFICE OF ECONOMIC ANALYSIS

    19

  • OFFICE OF ECONOMIC ANALYSIS

    Smoke Em if You Got Em, Pt. 1

    20

  • OFFICE OF ECONOMIC ANALYSIS

    You Down with OTP?

    21

  • OFFICE OF ECONOMIC ANALYSIS

    Lottery: Casino Impact

    22

    Shaded areas have 25% or more Video Lottery players from Washington.

    Source: Oregon Lottery

  • OFFICE OF ECONOMIC ANALYSIS

    Smoke Em if You Got Em, Pt. 2

    23

  • OFFICE OF ECONOMIC ANALYSIS

    Forecast Changes

    24

  • OFFICE OF ECONOMIC ANALYSIS

    (Millions)

    2015 COS

    Forecast

    September 2016

    Forecast

    December 2016

    Forecast

    Change from

    Prior Forecast

    Change from

    COS Forecast

    Structural Revenues

    Personal Income Tax $15,713.5 $15,713.7 $15,678.4 -$35.3 -$35.1

    Corporate Income Tax $1,100.0 $1,110.8 $1,103.7 -$7.1 $3.7

    All Other Revenues $1,184.6 $1,197.8 $1,225.7 $27.9 $41.1

    Gross GF Revenues $17,998.1 $18,022.3 $18,007.7 -$14.6 $9.7

    Offsets and Transfers -$42.8 -$44.4 -$44.2 $0.3 -$1.4

    Administrative Actions1 -$20.2 -$14.0 -$14.0 $0.0 $6.2

    Legislative Actions -$158.9 -$158.3 -$158.3 $0.0 $0.6

    Net Available Resources $18,309.1 $18,334.3 $18,320.0 -$14.3 $10.9

    Confidence Intervals

    67% Confidence +/- 3.1% $551.1

    95% Confidence +/- 6.1% $1,102.2

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

    2015-17 General Fund Forecast Summary

    $17.46B to $18.56B

    $16.91B to $19.11B

    Table R.1

    25

    December 2016 General Fund Forecast Summary

    Positive

    Factor

    Negative

    Factor

    2015

    Income

    Taxes Paid

    by

    Extension

    Filers

    Slower Job

    Growth

    Expected

    in the Near

    Term

    Estate

    Taxes

    PDX Photo

    Radar

  • OFFICE OF ECONOMIC ANALYSIS

    2626

    Forecast ChangesDifference from September Forecast, $ millions

    -12.5

    -52.3

    6.6

    -37.3-42.4

    -$100

    -$50

    $0

    $50

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

    Personal Corporate Lottery

    Other Total

  • OFFICE OF ECONOMIC ANALYSIS

    2727

    Biennial Revenue Growth

    -15%

    -10%

    -5%

    0%

    5%

    10%

    15%

    20%

    25%

    Personal Income Taxes Total Net Revenue

  • OFFICE OF ECONOMIC ANALYSIS

    28

    Reserves

    Effective Reserves ($ millions)

    Oct

    2016

    End

    2015-17

    ESF $330.1 $383.2

    RDF $373.4 $387.6

    Reserves $703.5 $770.8

    Ending

    Balance $245.4 $245.4

    Total $948.9 $1,016.2

    % of GF 5.3% 5.6%

  • OFFICE OF ECONOMIC ANALYSIS

    29

    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