oregon economic forecast

8/8/2019 Oregon Economic Forecast

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Economic and Revenue Forecast

OREGON PRELIMINARY

ECONOMIC FORECAST

OREGON FINAL ECONOMIC FORECAST

PERSONAL INCOMETAX MODELS

CORPORATE INCOMETAX MODELS

Forecaster JudgementLEGISLATIVE & POLICY CHANGES

FINAL REVENUE ESTIMATE

U.S. EconomicHistory and Forecast(Global Insight, Inc.)

Oregon EconomicHistory

Oregon CorporateIncome Tax History

Oregon PersonalIncome Tax History

Governors Councilof EconomicAdvisors

DAS AdvisoryCommittee

OREGON ECONOMIC MODEL Governors Council of EconomicAdvisors Pre-Meeting

Council of RevenueForecast Advisors

Non-income taxrevenue projections


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Ever Changing Picture for the USEconomy

Office of Economic Analysis

The pace of recovery in output and employment in the U.S. economy looks a little slower now than it

did three months ago, according to 43 forecasters surveyed by the Federal Reserve Bank of

Philadelphia. The forecasters also predict weaker recovery in the labor market. November 15, 2010


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-8-6

-4

-2

0

2

4

6

8

2001 2002 200 2004 2005 2006 2007 2008 2009 2010 2011 2012

Baseline (60%) Pessimistic (25%) Optimistic (15%)

(Percent change, annual rate)

Real GDP Growth inAlternative Scenarios

Copyright 2010 Global Insight, Inc.July Baseline (15%)(20%)


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Bottom Line for US Economy

The recovery-recession is in its second year. Technical recessionin the U.S. ended last summer, with the unemployment rate topingout at 10.1% in the fourth quarter of 2009. The labor market willremain weak with unemployment averaging 9. % in 2010.

Credit markets are slowly returning to pre-Lehman collapse days butrisk premiums are still present. Residential and commercial real

estate still tight.

The housing market will continue to remain fragile. Housing startsmarginally improved in the past year off their historic lows.Butrecent months point to a bumpy road this year. Prices will continueto decline throughout 2010.

Inflation is not a threat today or even next year but the stage is setfor carefully executed exit strategies to avoid inflation in the future.

After an initial surge of economic growth in the fourth quarter 2009and first quarter 2010, the economy is waning.GDP growth wasrevised down for the second quarter and will remain below potentialthrough 2011.

Copyright 2010 Global Insight, Inc. Office of Economic Analysis


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10.5% unemployment rate for October 2010 (Oct US rate is 9.6%) isdown from the highest rate of 11.6% in May and June 2009, butessentially unchanged the past twelve months.

3 th fastest job growth at -0.3% for all states for Sept 2010 over Sept2009.

Total nonfarm employment dropped -0.4% year-over-year for the 3rd

quarter of 2010. S.A. job gains in five of first ten months of 2010. Totalnonfarm up 11,800 since Dec with the private sector up 10,000 (0. 8%).

2.3% personal income growth for 2nd quarter of 2010 over 2nd quarter of

2009. Annualized 2nd quarter 2010 growth at 2.5%.

Oregon exports increased 25.1% in the first nine months of 2010compared to the same period last year and have regained the majorityof their losses from late 2008 and early 2009.

Recent Oregon Economy Facts


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Intel Announcement

The expenditure of $6 to $8 billion dollars (most of which is likely in Oregon) isapproximately 2 percent of the total investment on industrial and otherequipment and manufacturing structures expected to be spent in the U.S. in2010.

Expectation for jobs 6,000 to 8,000 construction jobs in OR and AZ over 2+ years 800 to 1,000 permanent high tech jobs in OR and AZ

Issues: How many construction workers are shifted from other jobs? How many construction workers are hired over 2+ years? (Surely not

5,000 on day one and kept on until the end of the project) How many high tech jobs are shifted from existing positions? Direct, indirect, and induced jobs?


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Leading Indicators3 of 11 Indicators are Positive

Ore I dex f Leadi I dicat rs

(Six-M th A ualized Perce t Cha e, thr u h September 2010)

-30%

-20%

-10%

0%

10%

20%

30%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

-10.0%

-6.7%

-3.3%

0.0%

3.3%

6.7%

10.0%

Leadi

I

dex (Left Axis) Diffusi

I

dex


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Initial Claims(through October 2010)

Initial Unemployment Claims per 1,000 Labor Force (SA)

0

1

2

3

4

5

6

7

8

Jan 87 Jan 89 Jan 91 Jan 93 Jan 95 Jan 97 Jan 99 Jan 01 Jan 03 Jan 05 Jan 07 Jan 09

Oregon

nited tates


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Forecast Changes

Oreg T al N farm Empl yme 000s

1 575

1 625

1 675

1 725

1 775

1 825

1 875

1 925

2006Q1

2006Q3

2007Q1

2007Q3

2008Q1

2008Q3

2009Q1

2009Q3

2010Q1

2010Q3

2011Q1

2011Q3

2012Q1

2012Q3

2013Q1

2013Q3

2014Q1

2014Q3

2015Q1

2015Q3

2016Q1

2016Q3

2017Q1

2017Q3

Mar08 ep 08

ec 08 Mar09Ma 09 ep 09

ec 09 Mar 10Jun 10 Sep 10

Dec 10


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Total Non-farm Employment(Annual Percent Change)

Total onfar loyment( nnual Percenta e hange)

-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent

hange

Oregon U.S.


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COMPARISONOFL

ASTTHREEFORECAS

TS

Jun2010

Sep2010

Dec2010

LINCOMEGROWTH

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

EMPLOYMENTGROWT

H

-7

-6

-5

-4

-3

-2

-101234

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Percent

orec

astCompariso

ns


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Risks to the Forecast

Ups deFinancial markets return more quickly to normal

Quicker, stronger release of pent-up demand

More robust global growth

D w s deHousing downturn continues

Aftershocks from the financial crisis

China bubble? Euro Zone Financials?

O er Cons dera ons Impact of Measures 66 and 67

Health care reform


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Bottom Line for the Oregon Economy

The technical recession in Oregon ended late lastsummer or fall. The jobless recovery has taken hold.

Job losses will continue into the third quarter of 2010,with only mild job growth through 2011.

Housing prices will still decline throughout 2010 butlooking more like a bottom has been reached inhousing permits (even with the July drop following theexpiration of the tax credit).

Housing will not lead during the recovery. Firstsectors likely to come back: profession and businessservices, health care services, computer andelectronic products, retail.


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General Fund RevenueForecast

Forecas track ng s ghtly behind Septemberforecast

Generally, a mixed bag with weak estimated

payments in FY11 Q1

2009-11 up $61.9million relative to Septemberforecast

Reflects withholding guidance changes effective Jan 1,2011

2011-13down $272.7 million


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Recent P TRevenuePerformance

Withholding

Strengthening since the spring, solid Y/Y gains

Total PIT up year-over-year the past twoquarters

Improvements Y/Y in withholding, estimated,refunds

Economic improvement, M66 contributing as well


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Personal Income Tax Forecast

Up $97.7 million in 2009-11

Minor weakness in near term however withholding

guidance and subsequent table changes drive theforecast increase

Decreased by larger amounts for out-years of

forecast, reflecting view of weaker growththrough forecast period, plus refund adjustmentdue to withholding changes


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Corporate Income Tax/Other

GF Revenue Forecast

Corporate income taxes decreased $18.7million in 2009-11 BN

Roughly $7 million above kicker threshold (currentkicker estimate at $23.6M)

Other changes (up $39.9 million):

Estate & Insurance taxes, Interest Earnings lower Tobacco taxes higher

$57M in one-time transfers (Amnesty $31M)


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Corporate Growth

Corporate Income Tax Collections

(Quarterly, Year-over-year percent change)

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

1996

:7

1997

:7

1998

:7

1999

:7

2000

:7

2001

:7

2002

:7

2003

:7

2004

:7

2005

:7

2006

:7

2007

:7

2008

:7

2009

:7


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2009-11 GF Revenue

Per onal Income Tax $11,545.7 $10,345.3 $10,443.0 $97.7 -$1,102.7

Corporate Income Tax $831.6 $873.9 $855.2 -$18.7 $23.6

Other Revenue $1,198.4 $1,088.1 $1,128.0 $39.9 -$70.4

Total GF Resources $13,575.7 $12,307.2 $12,426.2 $119.0 -$1,149.5

Le : Anticipated Admini trative Action $43.7 $15.7 $15.7 $0.0 -$28.0

Plu : Legi lative Action $0.0 $180.0 $123.0 -$57.0 $123.0

Proj. Expenditures $13,298.1 $12,849.0 $12,471.5 -$377.5 -$826.6

Ending Balance $233.8 -$557.5 $61.9 $619.4 -$171.9

General Fund Resources

2009-11 Biennium

General Fund

(Million )

COS

Forecast

Sep 2010

Forecast

Dec 2010

Forecast

Change from

September

Change from

COS 2009


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Budgetary Reserve Outlook

(Millions)

2007-09

Biennium

2009-11

Biennium

2011-13

Biennium

Rainy Day Fund

Beginning Balance $0.0 $112.5 $10.6

Net Deposits

3

$94.3 -$103.4 $61.9Interest $18.3 $1.5 $3.6

Ending Balance1 $112.5 $10.6 $76.1

Education Stability Fund

Beginning Balance $178.9 $0.1 $102.1

Net Deposits -$178.9 $102.0 $193.8

Interest2 $17.2 $1.5 $10.5

Triggered Withdrawals -$17.1 -$1.5 -$10.5

Ending Balance $0.1 $102.1 $296.0

Total Reserves $112.6 $112.7 $372.1

Oregon's Budgetary Reserves

Footnotes:1. Under current law, only 2/3rds of the beginning balance is available for withdrawal. Withdrawal subject to economic and

financial triggers.


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Revenue Issues/Risks

Forecast Complications with New TaxMeasures

Tracking difficult, especially in near-term

Increased volatility

Impact of Federal Changes on taxpayerbehavior


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LotteryRevenueForecast

Baseline near-term forecast held steady

Additional administrative savings of $9 million

relative to September.

Out-years decreased slightly

Lower expectations for consumer spending


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LotteryRevenueForecast

Sep 2010 Dec 2010

( illions) orecas orecas A ount ercent

Beginning Balance $1.4 $1.4 - .0%

Earnings $1,061.6 $1,060.3 (1.2) -0.1%

Administrative Savings $20.4 $29.3 9.0

Other Resources1 $0.8 $0.9 0.1 15.6%

Total Resources $1,084.1 $1,091.9 7.8 0.7%

Allocations 1,076.8 1,070.5 (6.3) -0.6%

Ending Balance $7.3 $21.4 14.2 195.4%

ottery esources(Millionsof ollars)

ange from Sep

2009-11Biennium


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For More Information

Office of Economic Analysis155 Cottage Street NE, U20Salem, OR 97301-3966(503) 378-3405

Email: [email protected]

Website: http://oregon.gov/das/oea

Blog: http://oregoneconomicanalysis.wordpress.com/

Twitter: http://twitter.com/OR_EconAnalysis

oregon economic forecast

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