OFFICE OF ECONOMIC ANALYSIS
Economic and Revenue Outlook:December 2014
November 13th, 2014 Oregon Office of Economic Analysis
Mark McMullen
Josh Lehner
OFFICE OF ECONOMIC ANALYSIS
Economic Outlook
2
OFFICE OF ECONOMIC ANALYSIS
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
OFFICE OF ECONOMIC ANALYSIS
Problems Remain Below the Surface
No Real Progress Real Progress
4
OFFICE OF ECONOMIC ANALYSIS
Signs of a Deeper Labor Market Recovery Emerge in Oregon
5
OFFICE OF ECONOMIC ANALYSIS
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
OFFICE OF ECONOMIC ANALYSIS
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
OFFICE OF ECONOMIC ANALYSIS
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)
OFFICE OF ECONOMIC ANALYSIS
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
OFFICE OF ECONOMIC ANALYSIS
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
OFFICE OF ECONOMIC ANALYSIS
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
OFFICE OF ECONOMIC ANALYSIS
This is Unique: Timber Belt Population
12
OFFICE OF ECONOMIC ANALYSIS
Revenue Outlook
13
OFFICE OF ECONOMIC ANALYSIS
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
-$259 Million
<--2% Kicker Threshold
Expenditures -->
<--COS Forecast
OFFICE OF ECONOMIC ANALYSIS
Extension Filers Weigh On Personal Income Tax Collections
15
0%
2%
4%
6%
8%
10%
12%
14%
Oct Nov Dec Jan2014
Feb Mar Apr May June July Aug Sept Oct
Recent Personal Income Tax Collections% change over year ago, 3 month moving sum
Preliminary
OFFICE OF ECONOMIC ANALYSIS
16
Strong Response to 2013 Federal Tax Increase
-30%
-20%
-10%
0%
10%
20%
30%
40%
Schedule E Capital Gains Dividends Business Income Taxable IRAs Total Income
Growth Across Matched Tax Returns: Filers Affected by Measure 66
2012 2013
OFFICE OF ECONOMIC ANALYSIS
17
Capital Gains: Ready for Takeoff?
0
5000
10000
15000
20000
25000
30000
0
2,000,000,000
4,000,000,000
6,000,000,000
8,000,000,000
10,000,000,000
12,000,000,0001
98
0
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
20
22
Wilshire 5000 Stock Price Index (Right)
Oregon Capital Gains Realizations (Left)
OFFICE OF ECONOMIC ANALYSIS
18
Capital Gains: Ready for Takeoff?
10000
12000
14000
16000
18000
20000
22000
24000
2,000,000,000
3,000,000,000
4,000,000,000
5,000,000,000
6,000,000,000
7,000,000,000
8,000,000,000
9,000,000,000
2011 2012 2013 2014 2015
Wilshire 5000 Stock Price Index (Right)
Oregon Capital Gains Realizations (Left)
75%
6%
50%7%
OFFICE OF ECONOMIC ANALYSIS
2.5
3.5
4.5
5.5
6.5
7.5
8.5
9.5
10.5
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Personal Income Tax Collections (December 2014 Forecast)
PIT Collections Excluding Kicker
PIT Collections (September 2014 Forecast)
19
Personal Income Tax Forecast$ 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
OFFICE OF ECONOMIC ANALYSIS
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
OFFICE OF ECONOMIC ANALYSIS
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
OFFICE OF ECONOMIC ANALYSIS
(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
OFFICE OF ECONOMIC ANALYSIS
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
OFFICE OF ECONOMIC ANALYSIS
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
OFFICE OF ECONOMIC ANALYSIS
2626
Biennial Revenue Growth
-12%
-8%
-4%
0%
4%
8%
12%
16%
20%
24%PIT TOTAL
OFFICE OF ECONOMIC ANALYSIS
27
For More Information
Standard Contact:
155 Cottage Street NE
Salem, OR 97301
(503) 378-3405
www.oregon.gov/das/oea
Social Media:
www.OregonEconomicAnalysis.com
@OR_EconAnalysis