presented to the academic leadership retreat august 26, 2014

35
Presented to the ACADEMIC LEADERSHIP RETREAT August 26, 2014 William F. Fox, Director Center for Business and Economic Research The University of Tennessee, Knoxville The Economy:As Optimistic as an Economist Can Be, Tax Revenues not so Positive

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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 Presentation

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Page 1: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 2: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

2

National Economic OutlookTennessee EconomyTennessee’s Fiscal Outlook

William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

OUTLINE

Page 3: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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)

Page 4: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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)

Page 5: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 6: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 7: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 8: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

*

Page 9: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 10: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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.

Page 11: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 12: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 13: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 14: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 15: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

-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

Page 16: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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)

Page 17: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 18: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 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)

Page 19: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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)

Page 20: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 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

Page 21: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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%

Page 22: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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)

Page 23: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

-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

Page 24: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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)

Page 25: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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..

Page 26: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 27: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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.

Page 28: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 29: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 30: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 31: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 32: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 33: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 34: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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

Page 35: Presented to the  ACADEMIC LEADERSHIP RETREAT August 26, 2014

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