presented to the academic leadership retreat august 26, 2014
DESCRIPTION
The Economy:As Optimistic as an Economist Can Be, Tax Revenues not so Positive. Presented to the ACADEMIC LEADERSHIP RETREAT August 26, 2014. William F. Fox, Director Center for Business and Economic Research The University of Tennessee, Knoxville. OUTLINE. National Economic Outlook - PowerPoint PPT PresentationTRANSCRIPT
Presented to the ACADEMIC LEADERSHIP RETREAT
August 26, 2014
William F. Fox, DirectorCenter for Business and Economic ResearchThe University of Tennessee, Knoxville
The Economy:As Optimistic as an Economist Can Be, Tax Revenues not so Positive
2
National Economic OutlookTennessee EconomyTennessee’s Fiscal Outlook
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
OUTLINE
88Q2
89Q2
90Q2
91Q2
92Q2
93Q2
94Q2
95Q2
96Q2
97Q2
98Q2
99Q2
00Q2
01Q2
02Q2
03Q2
04Q2
05Q2
06Q2
07Q2
08Q2
09Q2
10Q2
11Q2
12Q2
13Q2
14Q2
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Pe
rce
nt
Ch
an
ge
fro
m P
revio
us
Qu
ar-
ter
SA
AR
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
3
Growth in Quarterly Real Gross Domestic Product (Chained 2009 Dollars)
88Q1 90Q1 92Q1 94Q1 96Q1 98Q1 00Q1 02Q1 04Q1 06Q1 08Q1 10Q1 12Q1 14Q1-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
Pe
rce
nt
Ch
an
ge
fro
m P
revio
us
Qu
ar-
ter
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
4
Growth in Quarterly Real Personal Consumption Expenditures (Chained 2009 Dollars)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013$19,000
$19,500
$20,000
$20,500
REAL ANNUAL AVERAGE WAGES(1982-84=100)
Occupational Employment and Wages
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
10
11
12
13
14
15
16
17
18
Unit S
ale
s (M
illio
ns)
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
6
Unit Sales of New Light Vehicles
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
0
1
2
3
4
5
6
7
8
0.0
0.5
1.0
1.5
2.0
2.5
Existing Home Sales
Housing Starts
Un
its
of
Exis
tin
g H
om
es
(Mill
ion
s) Ho
usin
g S
tarts (M
illion
s)
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
7
Unit Sales of Existing Homes and Housing Starts
8
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
110,000
115,000
120,000
125,000
130,000
135,000
All
Housi
ng U
nit
s (i
n m
illio
ns)
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
All Housing Units, 2000-2013
*
June 2014
William F. Fox, Center for Business and Economic Research,
http://cber.bus.utk.edu9
Total Consumer Debt Balance
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
$0
$2
$4
$6
$8
$10
$12
$14
Other
Student
Mortgage
Tri
llions
of
Dolla
rs
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
Total Business to Consumer (B2C)
Total Business to Business (B2B)
Bil
lio
ns
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
10
Estimated Total E-Commerce Sales
*Sales-taxing states only.
89Q190Q392Q193Q395Q196Q398Q199Q301Q102Q304Q105Q307Q108Q310Q111Q313Q1-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
Perc
ent
Change f
rom
Pre
vious
Quart
er
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
11
Growth in Quarterly Real Business Investment
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15-1600
-1400
-1200
-1000
-800
-600
-400
-200
0
200
400
Fiscal Year
Bill
ion
s o
f d
olla
rs
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
12
Unified Federal Budget Surplus
0
2
4
6
8
10
12
0
2
4
6
8
10
12
Exch
ange
Rat
e
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
13
Real Exports Less Imports
99Q1
99Q2
99Q3
99Q4
00Q1
00Q2
00Q3
00Q4
01Q1
01Q2
01Q3
01Q4
02Q1
02Q2
02Q3
02Q4
03Q1
03Q2
03Q3
03Q4
04Q1
04Q2
04Q3
04Q4
05Q1
05Q2
05Q3
05Q4
06Q1
06Q2
06Q3
06Q4
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12Q3
12Q4
13Q1
13Q2
13Q3
13Q4
14Q1
-900
-800
-700
-600
-500
-400
-300
-200
Export
s -
Import
s, B
illio
ns
of
Chain
ed 2
009 D
ol
-la
rs
19981998
19992000
20002001
20022002
20032004
20042005
20062006
20072008
20082009
20102010
20112012
20122013
2,600,000
2,800,000
3,000,000
3,200,000
3,400,000
3,600,000
3,800,000
1,500,000
1,700,000
1,900,000
2,100,000
2,300,000
2,500,000
2,700,000
2,900,000
U.S. Imports of Crude Oil (Left Axis)U.S. Field Production of Crude Oil (Right Axis)Im
po
rts
(Th
ou
san
ds
of
Ba
rre
ls)
Pro
du
ction
(Th
ou
san
ds o
f Ba
rrels)
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
14
U.S. Crude Oil Imports and Production,1998-2013
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0Federal Funds Rate, % per annumInflation, year over year
Ra
te
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
15
Interest Rates and Inflation
16
Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
TN
U.S.
Per
cent
Cha
nge,
Yea
r A
go (
3 m
onth
mov
ing
aver
age)
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
Tennessee and U.S. Nonfarm Job Growth (3-month moving average, year-over-year)
Jun-04Jun-05
Jun-06Jun-07
Jun-08Jun-09
Jun-10Jun-11
Jun-12Jun-13
Jun-142,450
2,500
2,550
2,600
2,650
2,700
2,750
2,800
2,850
Em
plo
yees
in t
housa
nds
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
17
TN Nonfarm Jobs, Seasonally Adjusted, 2004-2014
18
Jun-
91
Jun-
92
Jun-
93
Jun-
94
Jun-
95
Jun-
96
Jun-
97
Jun-
98
Jun-
99
Jun-
00
Jun-
01
Jun-
02
Jun-
03
Jun-
04
Jun-
05
Jun-
06
Jun-
07
Jun-
08
Jun-
09
Jun-
10
Jun-
11
Jun-
12
Jun-
13
Jun-
14
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
TN
U.S.
Rat
e (P
erce
nt)
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
Tennessee and U.S. Unemployment Rates (Seasonally Adjusted)
Information
Government
Non-Durable Goods
Financial Activities
Other Services
Education & Health Services
Trade, Transportation, & Utilities
Total Private
Durable Goods
Leisure & Hospitality
Mining, Logging, & Construction
Professional & Business Services
-3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Growth Rate
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
19
Tennessee Job Growth by Sector (June 2013 to June 2014)
Jan 2008 to Feb 2010 Feb 2010 to May 2014 Jan 2008 to May 20140
1000
2000
3000
4000
5000
6000
7000
Job Gains
Job Losses
Th
ou
san
ds o
f Jo
bs
WOMEN
WOMEN
WOMEN
MEN
MEN
MEN
NONAG JOB LOSSES AND GAINS
21
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
Change in Total Taxes, July-March, FYTD 2013 to FYTD 2014
Greater than 2.8% --26—High: ND = 18.6%
1.4% to 2.8% --7--
0.0% to 1.4% --10—
U.S. = 2.8%TN = 1.4%
Less than 0.0% --7—Low: AK = -41.7%
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
22
Tennessee Tax Revenues, Total and Share of Personal Income
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2.5
3.0
3.5
4.0
4.5
5.0
5.5
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Tax Revenues as Share of PI
Ta
x R
eve
nu
es a
s Sh
are
of P
I (%)
Tax R
evenu
es
(in m
illio
ns)
-15
-10
-5
0
5
10
15
Pe
rce
nt
Gro
wth
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
23
Growth in Sales Tax Revenue (Adjusted for Tax Increases)3-Month Moving Average, Year Over Year Increase
Apparel & Accessory Stores
General Merchandise
Food Stores
Furniture And Home Furnishings
Grand Total
Eating & Drinking Places
Miscellaneous Retail Stores
Building Materials
Total Services
Auto Dealers & Service Stations
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0
Percent Growth
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
24
Sales Tax Collections by Category of Sales (FY13 to FY14)
25
79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 1230
35
40
45
50
55
60
65
70
Pe
rce
nt
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
Tennessee State Sales Tax Breadth of Base
Source: State Tax Notes, Mikesell..
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2.4%
2.6%
2.8%
3.0%
3.2%
3.4%
Tennessee Sales Tax Collections as a Percent of Personal Income, 1997-2013
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
27
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20146%
7%
8%
9%
10%
11%
12%
13%
14%
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
Corporate Profits as a Percent of GDP
Corporate profits with inventory valuation and capital consumption adjustments.
28
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26-30%
-20%
-10%
0%
10%
20%
30%
40%
2007 Q3 U.S.
1997 Q1 U.S.
2013 Q4 U.S.
2014 Q1 TN
1990 2001 2007
Quarters Since Start of Recession
Cu
mu
lati
ve P
erce
nt
Ch
ang
e S
ince
Sta
rt o
f R
eco
very
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
State Corporate Income Tax Revenue Since the Start of the RecessionFour-Quarter Moving Average, Adjusted for Inflation
29
Normal government cost growth◦ Pension – biannual adjustment◦ BEP◦ Higher Ed◦ Debt Service◦ Health Insurance◦ Salary Increase
TennCare◦ Medicaid expansion◦ Woodwork effect
Total $580 millionWilliam F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
Tennessee Fiscal Pressures
30
Gift tax Inheritance taxLower rate for foodLarger exemption for the Hall Income Tax
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
Tax Cuts
31
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY150
100
200
300
400
500
600
700
800$750
$557
$453
$284$306
$356
$456$491
Mill
ion
of
do
llars
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
Rainy Day Fund by Fiscal Year
32
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY150
50
100
150
200
250
300
350
400
450
500 $474
$434 $442
$261
$111
$307$282 $282
Mill
ion
of
do
llars
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
TennCare Reserve by Fiscal Year
33
2007 2008 2009 2010 2011 2012 2013 2014 2015 200,000,000
300,000,000
400,000,000
500,000,000
600,000,000
700,000,000
800,000,000
900,000,000
1,000,000,000
900,000,000
950,000,000
1,000,000,000
1,050,000,000
1,100,000,000
1,150,000,000
1,200,000,000
1,250,000,000
1,300,000,000
1,350,000,000
1,400,000,000State Tuition/
FeesTotal
Stat
e an
d Tu
ition
/Fee
s A
lloca
tions
, $m
il-
lions
Total Allocations, $m
illions
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
Higher Education Allocation,University of Tennessee
34
2007 2008 2009 2010 2011 2012 2013 2014 2015200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
1,400,000,000
800,000,000
1,000,000,000
1,200,000,000
1,400,000,000
1,600,000,000
1,800,000,000
2,000,000,000
State Tuition/Fees
Total
Stat
e an
d Tu
ition
/Fee
s A
lloca
tions
, $m
il-
lions
Total A
llocatio
ns, $millions
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
Higher Education Allocation,Board of Regents
William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu
35
5 percentage points more likely to graduate high school than matched control students
20 percentage points more likely to enroll at any college
29 percentage points more likely to enroll in a community college
9.5 percentage points less likely to enroll in a four-year institution
Two-thirds of effect on community college enrollment came from students who would not have gone to college
Analysis of Knox Achieves