Oregon Economic and Revenue Forecast, June 2014

OFFICE OF ECONOMIC ANALYSIS

Economic and Revenue Outlook:June 2014

May 28th, 2014 Oregon Office of Economic Analysis

Mark McMullen

Josh Lehner


Economic Overview

2


3

Strong Job Growth Recently

2011 2012 2013 2014 2015 20160.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Oregon Employment Growth6 Month Annualized Growth

Employment 2013 COS Housing Boom RatesForecast Actual

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Housing and Related Industries Growth

2014q1, Y/Y % Change


4

Acceleration Outside of Portland

Jan-84 Jan-88 Jan-92 Jan-96 Jan-00 Jan-04 Jan-08 Jan-12-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%Oregon Employment Growth

Portland All Other


5

4 of 5 Counties Adding Jobs

1 4 7 100%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Oregon Counties Adding JobsShare of Total, Year-over-Year Gains, 2000-2014q1


6

Then and Now, Pt 1

Peak 1 Yr 2 Yr 3 Yr 4 Yr 5 yr 6 yr 7 Yr 8 Yr-12%

-10%

-8%

-6%

-4%

-2%

0%

Oregon Employment Loss by Recession

Perc

ent J

ob L

oss

'73 '01 '80

'07

'48'53

'69'60 '90


7

Then and Now, Pt 2

1978 ...

1979 ...

1980 ...

1981 ...

1982 ...

1983 ...

1984 ...

1985 ...

1986 ...

1987 ...

1988 ...

1989 ...0%

5%

10%

15%

20%

25%Severe Recessions in Oregon

Early 80s U-6

Early 80s U-3

Great Recession U-3

Great Recession U-6

Peak 5 Year 10 Year 15 Year-25%

-20%

-15%

-10%

-5%

0%

Oregon Manufacturing Em-ployment

and Severe Recessions

Early 80s

Great Recession


Net Migration Rates (Smoothed percentage changes)

0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 840%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

IN Male IN Female

OUT Male OUT Female

Age

Office of Economic Analysis


Oregon: Gain/Loss of Aggregate Gross Income due to Migration, 2005-2006 (in million $; IRS migration data)

Total Domestic: +764.0 Foreign +$4.0

+$692.7

-$138.3

- $15.3

Northeast Region+$54.9

South Region+$66.5

Midwest Region+$96.6

West Region(excluding CA, ID, WA)

+$6.9


Oregon: Gain/Loss of Aggregate Gross Income due to Migration, 2010-2011 (in million $; IRS migration data)

Total Domestic: +271.0 Foreign -$5.2

+$206.4

-$87.5

- $6.8

Northeast Region+$53.9

South Region+$19.9

Midwest Region+$79.9

West Region(excluding CA, ID, WA)

+$5.1


11

Oregon’s Brain Gain

Less

than HS

Graduated HS

Some College

Associa

te's Degree

Graduated College

Masters,

Prof o

r PhD

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Estimated Odds Ratios: Relative Probability of Moving Compared to Someone Without a Degree

In Migrants

Out Migrants

Logit Model Based on 2010-2012 ACS Data


12

Where Young People Come to Retire?

Logit Model Based on 2010-2012 ACS Data

Employed Unemployed Not In Labor Force0.6

0.8

1.0

1.2

1.4

1.6

1.8

Estimated Odds Ratios: Relative Probability of Moving Compared to Employed Adults

In MigrantsOut Migrants


Revenue Outlook

13


Dec '10

Mar '11

May 11

Sep '11

Dec '11

Mar '12

Jun '12

Sep '12

Dec '12

Mar 13

May 13

Sep '13

Dec '13

Mar '14

Jun '14

Sep '14

$15,800,000,000.0

$16,000,000,000.0

$16,200,000,000.0

$16,400,000,000.0

$16,600,000,000.0

$16,800,000,000.0

$17,000,000,000.0

$17,200,000,000.0

$17,400,000,000.0

$17,600,000,000.0

General and Lottery Fund Revenues2013-15 BN

Forecast Close of Session & Special Session

Forecast Evolution: Improved Economic Outlook Leads to More Expected Revenue

14


Fewer Payments Come In…

15

January February March April May June$0

$100,000,000

$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

Year-End Tax Payments Run Out of Steam in Late AprilCumulative Personal Income Tax Payments

2010 2011 2012 2013 2014

Forecast


…and Fewer Go Out

16

January February March April May June

-$1,000,000,000

-$900,000,000

-$800,000,000

-$700,000,000

-$600,000,000

-$500,000,000

-$400,000,000

-$300,000,000

-$200,000,000

-$100,000,000

$0

Refund Checks Were Small this YearPersonal Income Tax Refunds, Cumulative

2012 2013 2014

Forecast


Corp Collections Spring to Life

17

Jul Aug Sep Oct Nov Dec Jan 2013

Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan 2014

Feb Mar Apr May-40%

-20%

0%

20%

40%

60%

80%

Corporate Excise Tax Collections% change over year ago, 3 month moving sum

Preliminary


Matched 2013 Tax Returns% Change Relative to 2012

18

Dividends

Taxable IR

As

Capital G

ains

Business

Wages

Sched E

Oregon Taxable In

come

Oregon Tax After C

redits-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Affected by M66 in 2013 and/or 2012 (2.2% of filers, 23% of tax burden)

Total

Not Affected by M66


19

The Tricky Part

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

8.4%

0.2%

11.9%15.2%

-36.6%

5.3%11.2%

30.8%

49.4%

-1.0%

24.6%

-45.4%

-2.8%

17.9%

3.3%

25.1%

-6.8%

28.3%

Growth in Year-End Personal Income Tax Payments, April-June Quarter, %


Capital Gains: Ready for Takeoff?

20

19801982

19841986

19881990

19921994

19961998

20002002

20042006

20082010

20122014

20162018

20202022

0

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,000

0

5000

10000

15000

20000

25000

30000Wilshire 5000 Stock Price Index (Right)Oregon Capital Gains Realizations (Left)


21

Volatility: Risk vs Return

• Major Tax Instrument (FY12)

• WA Retail Sales: 45% of GF• OR Personal Income: 85%

• Volatile but growth advantage builds over time

• How do you value stability vs return?Washington Retail

SalesOregon Personal

Income

0%

2%

4%

6%

8%

10%

12%

14%

Revenue GrowthFY85 - FY13

5.6%7.5%


22

Aging Revenues

Under25

years

25-34years

35-44years

45-54years

55-64years

65-74years

75 yearsand older

$

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

Income and Spending by Age2012 Consumer Expenditure Survey, All Consumer

Units

Income Expenditures Taxable Income General Sales Tax Base

Health care

Reading

Cash Contributions

Miscellaneous

Personal care

Housing

Food

TOTAL

Entertainment

Transportation

Alcoholic beverages

Apparel and services

Tobacco & supplies

Insurance & pensions

Education

-80% -60% -40% -20% 0% 20%

Expenditure Chage for 65+ Households Relative to 55-64 Year Old Households


23

Border Tax Differential


(Millions)2013 COS Forecast

March 2014 Forecast

June 2014 Forecast

Change from Prior Forecast

Change from COS Forecast

Structural RevenuesPersonal Income Tax $13,558.2 $13,771.6 $13,816.7 $45.0 $258.5

Corporate Income Tax $1,056.6 $1,005.9 $1,007.6 $1.7 -$49.0

All Other Revenues $1,027.9 $1,004.4 $990.7 -$13.6 -$37.1

Gross GF Revenues $15,642.6 $15,781.9 $15,815.0 $33.1 $172.4

Offsets and Transfers -$120.8 -$67.3 -$72.7 -$5.4 $48.1

Administrative Actions1 -$18.2 -$12.7 -$12.7 $0.0 $5.6

Legislative Actions -$136.9 -$136.9 -$136.9 $0.0 $0.0

Net Available Resources $15,910.1 $16,027.0 $16,079.5 $52.5 $169.4

Confidence Intervals67% Confidence +/- 5.1% $802.995% Confidence +/- 10.2% $1,605.8

1 Reflects cost of cashflow management actions, ex clusiv e of internal borrow ing.

2013-15 General Fund Forecast Summary

$15.01B to $16.62B$14.21B to $17.42B

Table R.1

24

June 2014 General Fund Forecast Summary

Positive Factor

Negative Factor

More Jobs = More

Personal Income

Taxes

February Session

Appropriations ($125 mil)

BI2011-13 General Fund

Reversions ($24.8 mil)

Estate Taxes

2013 Income Tax Refunds

2013 Income Tax Final

Payments

Gain Share


2525

Forecast ChangesDifference from March forecast, $ millions

54.5

135.8

88.7 88.899.7

-$50

-$25

$0

$25

$50

$75

$100

$125

$150

$175

2013-15 2015-17 2017-19 2019-21 2021-23

Personal CorporateLottery OtherTotal


26

10-Year ForecastTable 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% 13,816.7 14.0% 15,627.4 13.1% 17,055.8 9.1% 18,810.5 10.3% 20,717.3 10.1%

Corporate Income Taxes 883.9 6.8% 1,007.6 14.0% 1,046.6 3.9% 1,012.3 -3.3% 1,041.5 2.9% 1,114.3 7.0%

All Others 1,164.9 -5.0% 990.7 -14.9% 967.9 -2.3% 1,027.8 6.2% 1,104.7 7.5% 1,170.5 6.0%

Gross General Fund 14,167.0 13.1% 15,815.0 11.6% 17,641.9 11.6% 19,095.9 8.2% 20,956.7 9.7% 23,002.2 9.8%

Offsets and Transfers (12.0) (72.7) (95.9) (83.8) (39.0) (42.1)

Net Revenue 14,155.0 13.0% 15,742.3 11.2% 17,546.0 11.5% 19,012.1 8.4% 20,917.6 10.0% 22,960.0 9.8%

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


2727

Biennial Revenue Growth

-12%

-8%

-4%

0%

4%

8%

12%

16%

20%

24%PIT TOTAL


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For More Information

Standard Contact:155 Cottage Street NESalem, OR 97301(503) [email protected]/das/oea

Social Media: www.OregonEconomicAnalysis.com @OR_EconAnalysis

Oregon Economic and Revenue Forecast, June 2014

Economy & Finance

Transcript of Oregon Economic and Revenue Forecast, June 2014