Oregon Economic and Revenue Forecast, May 2015

OFFICE OF ECONOMIC ANALYSIS

Economic and Revenue Outlook:May 2015

May 14th, 2015 Oregon Office of Economic Analysis

Mark McMullen

Josh Lehner


Recent Performance

2


Oregon Today: News Is Still Good

3


Traditional Advantage Regained

4

-8%

-6%

-4%

-2%

0%

2%

4%

6%

1985 1995 2005 2015

Total Nonfarm EmploymentYear-over-Year Percent Change, 3 Month Average

Oregon

U.S.

Source: BLS, Oregon Employment Department, Oregon Office of Economic Analysis


Sentiment Improving

5


Engine Trouble?

6

60

70

80

90

100

110

120

Jan-00 Jan-05 Jan-10 Jan-15

Manufacturing SlowdownValues Indexed to Dec '07 = 100

Source: Census, Federal Reserve, Oregon Office of Economic Analysis

Industrial Production

Manufacturers' New Orders forNondefense CapitalGoods ex Aircraft


Localized Engine Trouble?

7

50

100

150

200

250


Initial U.I. ClaimsSeasonally Adjusted, Index 2000 = 100

N. Dakota+ Texas

All Other States

Weekly claims data converted to monthly, then seasonally adjusted. Data through April 2015.Source: U.S. Dept of Labor, Oregon Office of Economic Analysis


Consumer: MIA or Waiting?

8

-$100

-$50

$0

$50

$100

$150

$200

$250

DisposableIncome

EnergyExpenditures

Savings Health Care Housing Food &Accom.

Finance &Insurance

Other

Household Budget Where the Money Goes

The Oil MathChange In Household Finances 2014q3 to Jan-Feb '15, $billions

Source: BEA, Oregon Office of Economic Analysis

+$329 billion (SAAR)

37% of Total

19% 10% 8% 6% 21%


Dissecting Job Gains

9


Not Back to Full Employment, Yet

10

-2%

0%

2%

4%

6%

8%

10%

2005 2010 2015 2020

Oregon's Total Employment GapFTE Relative to Full Employment

Unemployment Gap Participation Gap Undemployment Gap

Source: BLS, CBO, Census, Dartmouth, IMF, OED, Oregon Office of Economic Analysis

Forecast -->

2007q11.1%

2009q38.7%

2015q14.4%


Wage Gains Are Back!

11


Update on the Quality of Jobs

12


Regional Growth Improving

13

Multnomah

Washington

Salem MSA

Lane

Clackamas

Jackson

Deschutes

Linn

Benton

Douglas

Yamhill

Umatilla

Josephine

Coos

Klamath

Lincoln

Clatsop

Malheur

Hood River

Columbia Union

Wasco

Tillamook

Jefferson

Curry

Crook

Baker

Morrow

Wallowa

Grant

Lake

Harney

Sherman

Gilliam

Wheeler

0%

20%

40%

60%

80%

100%

-20% -15% -10% -5% 0%

Shar

e o

f Lo

st J

ob

s R

egai

ned

by

Feb

20

15

Great Recession Job Losses

Oregon Employment by County

All Regained2 in 3 or MoreAbout Half 1 in 3 Regained1 in 5 or Less


Risks

14


Bubble Watch: One of These Things Is Not Like the Others

15


Drought Concerns

• Loss of crops and income

• Increased costs for irrigation & feed

• Suppliers impacted

• Wildfire, hydro

• 2014 California ImpactUC-Davis Study

• 2.2% revenue loss• 3.8% ag employment loss• Losses concentrated more

in grains, feed and other crops (not fruits/nuts) and cattle/calves not dairies

16

Source: droughtmonitor.unl.edu


Regional Economies Can Suffer

-10%

-5%

0%

5%


Oregon and the "Tech" RecessionEmployment, Seasonally-Adjusted 3 Month Average

Source: Oregon Employment Department, Oregon Office of Economic Analysis

Portland

Rest of State

Klamath


“Dollar Isn’t Strong. Everyone Else is Weak.”

18


Economic Outlook

19


Near-term Strong, Long-term Subdued

20

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Jan-60 Jan-70 Jan-80 Jan-90 Jan-00 Jan-10 Jan-20

Oregon Nonfarm Employment GrowthYear-over-Year Percent Change

Expansion Average

Forecast -->


Revenue Outlook

21


Big April but No Surprise

22

$0.0

$0.1

$0.2

$0.3

$0.4

$0.5

$0.6

$0.7

$0.8

$0.9

$1.0

$1.1

January February March April May June

Bill

ion

sBig Year-End Tax Payments, As Expected

Oregon Cumulative Personal Income Tax Payments

Forecast

2010

20112012

20132014

2015

March 1+3.5%

April 15+14.5%

April 1+11.8%

May 1+20.9%

May 13+21.3%


2013-15 Forecast Evolution

23

$14.2

$14.3

$14.4

$14.5

$14.6

$14.7

$14.8

$14.9

$15.0

$15.1

Dec '10 May '15

Bill

ion

s

Forecast Release

2013-15 BN Personal Kicker

<--2% Kicker Threshold

Special Session$87 million

<--COS Forecast

$182.2 million


2015-17 Decomposing Changes

24

2015-17 ResourcesChange Relative to Mar ’15 Forecast

Beginning BalanceKickerKicker OffsetsGF Forecast ChangesLottery Changes

Net Change

+$156 million-$121 million

+21 million+$364 million

+$43 million

+$463 million

Kicker Totals (Est.)2013-15 -$450m2015-17 -$23m2017-19 -$3m

Total -$473m


What Is Your Cut?

25

* Based on 2013 actual tax returns** Based on 2013 actual tax returns, PIT kicker amount ($473 million) and theOregon Office of Economic Analysis’ forecast for tax liability

Income Group

Adjusted Gross Income*

Rough Estimate of Kicker Size**

Bottom 20% < $10,200 $11

Second 20% $10,200 - $23,800 $63

Middle 20% $23,800 - $43,800 $146

Fourth 20% $43,800 - $79,900 $274

Next 15% $79,900 - $157,100 $546

Next 4% $157,100 - $336,400 $1,249

Top 1% > $336,400 $5,373

Average $53,900 $284

Median $30-35,000 $144


Personal Income Tax Collections

26

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Personal Income Tax Collections, % change year ago, 12 month sum


27

Capital Gains: Upside Risk?

0

5000

10000

15000

20000

25000

30000

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

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

20

22

20

24

Wilshire 5000 Stock Price Index (Right)

Oregon Capital Gains Realizations (Left)


2.5

3.5

4.5

5.5

6.5

7.5

8.5

9.5

10.5

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Personal Income Tax Collections (May 2015 Forecast)

PIT Collections Excluding Kicker (May 2015 Forecast)

PIT Collections (March 2015 Forecast)

28

Personal Income Tax Forecast$ billions, 4 quarter moving sum

2013-15

$129.9

(million)

2015-17

$268.8

2017-19

$239.6

2020-21

$237.2

2021-23

$199.3


Corp Collections: Wait and See

29

100

200

300

400

500

600

700

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

May 2015 Forecast

March 2015 Forecast

Single Sales Apportionment Factor Enacted

M67 Minimum Tax & Credit Sunsets Enacted

Tax Haven Legislation

M67 Minimum Tax Reforms & Small Business Tax Cut

Approximate Peak in BETC Credits Taken

Corporate Excise Taxes, $ millions, 4 QTR Sum


Lottery and the New Machines

30

0%

5%

10%

15%

20%

25%

30%

35%

40%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%


Oregon Video Lottery Sales

<-- Year-over-YearPercent Change

New Terminals,Share of Total -->


3131

Forecast ChangesDifference from March Forecast, $ millions

164.2

304.7334.1 340.4

317.5

-$150

-$100

-$50

$0

$50

$100

$150

$200

$250

$300

$350

$400

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

Personal Corporate

Lottery Other

Total

OFFICE OF ECONOMIC ANALYSIS32

10-Year ForecastTable R.2

General Fund Revenue Forecast Summary (Millions of Dollars, Current Law)

Forecast Forecast Forecast Forecast Forecast Forecast

2013-15 % 2015-17 % 2017-19 % 2019-21 % 2021-23 % 2023-25 %

Revenue Source Biennium Chg Biennium Chg Biennium Chg Biennium Chg Biennium Chg Biennium Chg

Personal Income Taxes 14,044.2 15.9% 15,749.7 12.1% 17,593.0 11.7% 19,466.0 10.6% 21,380.8 9.8% 23,473.2 9.8%

Corporate Income Taxes 1,097.6 24.2% 1,080.7 -1.5% 1,057.1 -2.2% 1,106.4 4.7% 1,198.8 8.4% 1,265.2 5.5%

All Others 1,019.4 -12.4% 1,021.6 0.2% 1,054.1 3.2% 1,129.8 7.2% 1,189.3 5.3% 1,242.2 4.4%

Gross General Fund 16,161.1 14.1% 17,852.1 10.5% 19,704.3 10.4% 21,702.2 10.1% 23,768.9 9.5% 25,980.5 9.3%

Offsets and Transfers (74.3) (96.3) (98.0) (41.9) (45.9) (47.2)

Net Revenue 16,086.8 13.7% 17,755.8 10.4% 19,606.3 10.4% 21,660.3 10.5% 23,723.0 9.5% 25,933.3 9.3%


3333

Biennial Revenue Growth

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Personal Income Taxes Total General Fund


34

For More Information

Standard Contact:

155 Cottage Street NE

Salem, OR 97301

(503) 378-3405

[email protected]

www.oregon.gov/das/oea

Social Media:

www.OregonEconomicAnalysis.com

@OR_EconAnalysis

Oregon Economic and Revenue Forecast, May 2015

Economy & Finance

Transcript of Oregon Economic and Revenue Forecast, May 2015