the road ahead

The Road Ahead

Will we circle into a drain?

• Low investments in education and high income tax rates threaten further erosion of personal income levels

• The U.S. and Oregon economies appear poised for a slow, jobless recovery.

• Aging of the Baby Boom generation will increase the age 65+ population by 46% during 2010-2020, putting upward pressure on Medicaid spending.

• High health inflation will continue, which will drive up the costs of Medicaid and public employee compensation.

• Legacy costs of a poorly managed/conceived public employee pension system have come due.

Slow Economic Recovery

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-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

1980

1990

No change

2007State forecast

2001

The number of Oregonians aged 65+

will increase 46% during 2010-2020.

Or about 60 per day.

And, as they retire, they’ll take their

diplomas and experience with them.

Fewer workers to pay for an aging population

2000 2010 2020 2030 20400.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

3.43.2

2.4

2.01.9

Prime Working Age Adults Per Aged Oregonian

Nu

mb

er

of

Wo

rke

r A

ge

d 2

5-5

4 D

ivid

ed

by

th

e P

op

ula

tio

n A

ge

65

an

d O

lde

r

The incoming workforce is less educated

Legacy costs of a poorly designed and managed public pension system have come due

Costs of an Aging Population will Hit Soon

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20180.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

0.3%

1.0%0.9%

1.3%

Medicaid (State Share) and PERS Employment Payments Expressed as a Share of Total Personal

Income, Oregon, 2008-2018

PERS Employer Payments Medicaid (State Share)

Source: ECONorthwest calculations using data from Mercer, Kaiser Family Foundation, and Health Affairs

Decade of Deficits

Reven

ues

(bns.

)Expendit

ure

s (b

ns.

)

With no sales tax and recent income tax increases, Oregon income and capital gains taxes are among the

highest in the nation

Nevada

Washington

South Dakota

Tennessee

California

Maryland

Oregon

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%

Income Taxes Expressed as a Share of Personal Income, Selected

States, 2007

M 66