Public Policy Analysis ECON 439/539 May 16, 2007

Public Policy AnalysisECON 439/539

May 16, 2007

George Naughton

Department of Administrative Services

Budget and Management Division

(503) 378-5460

2

Highlights of Oregon Economy

• Oregon’s economy continues to show improvement and is well positioned for growth in 2007 and beyond

• Employment picture in Oregon has been strong since 2003

• Oregon’s basic strengths– Diverse economy with substantial international presence– Relatively lower energy costs – A high quality of life– Well-educated workforce– Affordable housing– Business cost advantages– Pacific Rim orientation

• Oregon’s economic growth is on track due to the following factors– Strong population growth due mainly to in-migration– National rebound in corporate spending– Increased trade and exports

3

Population Growth

Oregon’s strong economy has continued to add to the State’s population growth and such growth is projected to continue well into the future

Projected

4

Decennial Population Growth (in percent): 1990 – 2000

CLATSOP

WASHINGTON

MULTNOMAH

COLUMBIA

DOUGLAS

LANE

LINCOLN

POLK

YAMHILL

TILLAMOOK

MARION

COOS

DESCHUTES

MALHEURHARNEYLAKEKLAMATHJACKSONJOSEPHINE

CURRY

HOOD RIVER

BENTON LINN

JEFFERSON

CROOK

WALLOWAUMATILLAMORROW

GILLIAM

WASCO

SHERMAN

WHEELER

GRANT

BAKER

UNION

> 20 %

Source: U.S. Census Bureau, 1990 and 2000 Censuses

CLACKAMAS

Office of Economic Analysis

Population Change

10 – 20 % Less than 10 %

Oregon: 20.4%

5

Non-Farm Employment Growth(Annual Percentage Change)

-2%

-1%

0%

1%

2%

3%

4%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Oregon U.S.

Long-Term Employment Trends

Oregon’s overall employment trends have mirrored the U.S. with slightly more job loss during the recession but stronger recent and projected growth

Source: Office of Economic Analysis

• The Oregon economy follows the path of the national economy• Job growth turned positive in July 2003 and is positive for almost all sectors of the

economy• Oregon’s employment growth will continue to be fueled by strong exports, population

growth and business investment

Projected

6

Robust Job Growth

All sectors have added jobs since the employment trough of June 2003

Job Gains by Industry Group Since June 2003

0 5 10 15 20 25 30 35 40

Natural Resources and Mining

Financial Activities

Leisure and Hospitality

Government

Manufacturing

Educational and Health Services

Professional and Business Services

Construction

Trade, Transportation, and Utilities

Thousands

Total Job Growth through August 2006: 151,100

7

Oregon Exports

Oregon enjoys a wide range of trading partners

Market Share of Oregon Exports to Major Trading Partners2nd Quarter of 2006

5.54%

5.78%

6.62%

7.76%

8.11%

18.03%

2.03%

3.57%

2.33%

2.36%

3.00%

8.74%

8.84%

1.57%

1.71%

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00%

Hong Kong

Italy

United Kingdom

Australia

Germany

Singapore

Costa Rica

Mexico

Taiwan

Phillipines

Malaysia

Japan

China

Korea, Republic of

Canada

Source: MISER, 2006 (Note: Smaller trading partners totaling 14.10% are not listed)

North/Central America

Europe

Asia/Australia

8

Budget Process Overview

Agency Request

Governor’s Recommended

Budget

Legislatively Adopted

The budget process has four major cycles:

Budget Execution

9

Continuous Development

Co

nst

ant

Constant

Constant

Co

nstan

t

10

• Legislatively Approved Budget organized by agency and program.

• Base Budget adjustments:

– Salary and benefit increases

• Essential packages:

– Phase-ins/phase-outs/one-time expenditures

– Inflation increases

– Mandated caseload adjustments for some programs.

Modified Zero-Based Budget

11

• Policy packages:

– Other Funds and Federal Funds expenditure reductions required by declining revenues.

– Adjustments due to emergency legislative action.

– Policy and program changes:

• New or expanded programs.

• Increased funding for existing programs.

• Funding to support legislative concepts.

• New capital construction and information technology projects.

• Debt service on new projects.

Modified Zero-Based Budget (cont)

12

Budget FrameworkPrinciples that Transcend the Decision-Maker

• Must Balance within available resources

• Start with mandatory items.

• Implement core missions:– Focus on the essentials.– Emphasize programs with widely-distributed benefits.

• Target investment where it will provide the most impact in the long run:– Focus on prevention.

• Reduce overhead costs.

• Plan for the Future

13

General Fund Forecast Comparison Fiscal Years, in Millions

14

Lottery Resources Available to the State


Note: Resources do not include Video Lottery proceeds dedicated to the Counties. Beginning balance is included. 2003-09 debt service figures do not reflect any Education Endowment Fund or reserve earnings designated for debt service on education bonds .

$ 0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

85-87 87-89 89-91 91-93 93-95 95-97 97-99 99-01 01-03 03-05 05-07Proj.

07-09Proj.

Resources Av ailable

for Allocation

Parks (15%) & Other

Dedicated Programs

Education Endow ment

Fund (15-18%)

Debt Serv ice

15

2007-09 Governor’s BudgetTotal Funds

Budgeted Resources Total: $49,222 Million

Lottery Funds2%

Federal Funds19%

Other Funds51%

General Fund28%

ExpendituresTotal: $49,222 Million

Other Education5%

Higher Education10%

Public Safety/Judicial8%All Other

39%

Human Services26%

State School Fund12%

16

2007-09 Governor’s BudgetGeneral Fund and Lottery Funds

* Includes beginning balance & carry forward

Resources Total: $15,099 Million

Insurance1%

Personal Income Tax74%

All Other4%

Cigarette/Tobacco Taxes

1% Corporate Income Tax4%

GF Beginning Balance9%

Lottery*7%

ExpendituresTotal: $14,929 Million

Other Education7%

Higher Education6%

Public Safety/Judicial16%

All Other7%

Human Services23%


17

General Fund and Lottery FundsBudget Trends

2007-09 Governor's Budget Expenditures


Other Education

7%All Other

7%

Public Safety/Judicial

16%

Human Services

23%

Higher Education

6%

1989-91 Legislatively Approved Expenditures


Other Education

9%

All Other18%

Public Safety/Judicial

13%

Human Services

23%

Higher Education

11%

Overall Expenditure General Fund and Lottery TrendsGeneral Fund & Lottery Funds Budgets

Over Past Three Biennia

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2003-05 2005-07 2007-09 GRB

State School Fund Higher EducationOther Education Human ServicesPublic Safety/Judicial All Other

$11,053 million

$12,478 million

$14,929 million

18

Expenditures by CategoryGeneral Fund and Lottery Funds

Special Payments69%

Services and Supplies

8%Capital Outlay0%

Personal Services20%

Debt Service3%

2007-09Total: $14,929 million

19

What has caused the General Fund expenditure growth since 1989?

• Primary– Population– Initiatives– Policy decisions

• Secondary– Inflation– Lawsuits

20

State and Local Resources for K-12 School Funding

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0 Local

State

Bil

lio

ns

of

Do

lla

rs

21

Inflation-Adjusted K-12 School Funding Allocation per ADMw

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

1990- 91

1991- 92

1992- 93

1993- 94

1994- 95

1995- 96

1996- 97

1997- 98

1998- 99

1999- 00

2000- 01

2001- 02

2002- 03

2003- 04

2004- 05

2005- 06

2006- 07

2007- 08

2008- 09

Year

Actual

Inflation-Adjusted (1990-91 Dollars)

22

Community College Support FundPer Student

$2,010

$2,264 $2,284

$1,876

$2,262

$2,398

$2,701

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

1995-97 1997-99 1999-01 2001-03 * 2003-05 2005-07 LAB 2007-09 GRB

General Fund per Student FTE

* 2001-03 LAB after 5th Special Session w/o $56 million that was shifted to the first quarter of 2003-05

23

Oregon University System Education & General ServicesGeneral Fund and Other Funds Per Student

$3,824

$4,977

$4,348

$4,689

$5,110

$4,903

$4,482

$5,131

$3,803

$5,988

$3,912

$7,116

$4,478

$7,859

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

1995-97 1997-99 1999-01 2001-03 2003-05 2005-07Legislatively

Approved

2007-09Governor's

Recommended

General Fund Per Student FTE Other Funds Per Student FTE

24

0

1000

2000

3000

4000

5000

6000

Ja

n-9

5

Ju

l-9

5

Ja

n-9

6

Ju

l-9

6

Ja

n-9

7

Ju

l-9

7

Ja

n-9

8

Ju

l-9

8

Ja

n-9

9

Ju

l-9

9

Ja

n-0

0

Ju

l-0

0

Ja

n-0

1

Ju

l-0

1

Ja

n-0

2

Ju

l-0

2

Ja

n-0

3

Ju

l-0

3

Ja

n-0

4

Ju

l-0

4

Ja

n-0

5

Ju

l-0

5

Ja

n-0

6

Ju

l-0

6

Ja

n-0

7

Ju

l-0

7

Ja

n-0

8

Ju

l-0

8

Ja

n-0

9

Ju

l-0

9

Ja

n-1

0

Ju

l-1

0

Ja

n-1

1

Ju

l-1

1

Ja

n-1

2

Ju

l-1

2

Ja

n-1

3

Ju

l-1

3

Ad

dit

ion

al I

nm

ate

s

Existing Inmates

New Inmates

Historical October 2003 Forecast

Office of Economic Analysis, October 2003

Estimated Impact of Measure 11 on Oregon's Prison System

25

Department of State Police2007-09 Governor’s Recommended Budget

Sworn Patrol Positions

665

547 540 547 537 512 517427 440 450

542461

329 332

470

0

100

200

300

400

500

600

700

79-81 81-83 83-85 85-87 87-89 89-91 91-93 93-95 95-97 97-99 99-01 01-03 03-05 05-07 07-09GRB

26

Poverty Rate, 1999

CLATSOP

WASHINGTON

MULTNOMAH

COLUMBIA

DOUGLAS

LANE

LINCOLN

POLK

YAMHILL

TILLAMOOK

MARION

COOS

DESCHUTES

MALHEURHARNEYLAKEKLAMATH

JACKSON

JOSEPHINE

CURRY

HOOD RIVER

BENTON LINN

JEFFERSON

CROOK

WALLOWAUMATILLA

MORROWGILLIAM

WASCO

SHERMAN

WHEELER

GRANT

BAKER

UNION

> 15 %

Source: U.S. Census Bureau, Census 2000

CLACKAMAS


% of personsunder poverty

10 – 15 % Less than 10 %

Oregon: 11.6%

27

Estimated Poverty Rate, 2004

CLATSOP

WASHINGTON

MULTNOMAH

COLUMBIA

DOUGLAS

LANE

LINCOLN

POLK

YAMHILL

TILLAMOOK

MARION

COOS

DESCHUTES

MALHEURHARNEYLAKEKLAMATH

JACKSON

JOSEPHINE

CURRY

HOOD RIVER

BENTON LINN

JEFFERSON

CROOK

WALLOWAUMATILLA

MORROWGILLIAM

WASCO

SHERMAN

WHEELER

GRANT

BAKER

UNION

> 15 %

Source: U.S. Census Bureau, Data Integration Division, Small Area Estimates Branch

CLACKAMAS


% of personsunder poverty

10 – 15 % Less than 10 %

Oregon: 12.9%

28

2007-09 General Fund Revenue ForecastIncluding Impact of Kicker Calculation

(December 2006 Forecast)

2007-09 General Fund Resources

($ Millions)

Beginning Balance $1,363.9

Structural Revenues

Personal Income Tax $12,274.8

Corporate Income Tax 839.0

All Other Revenues 861.2

Gross General Fund Revenues $13,975.0

Person Kicker Refunds (1,097.5)

Corporate Kicker Credit (275.1)

Net General Fund Revenues $12,602.4

Proposed Governor Changes $19.3

Net Available Resources $13,985.6

29

2007-09 General Fund Budget Projections(December 2006 Forecast)

Revenues

Beginning Balance $1,363.9

Projected Net General Fund Revenues – Current Law 12,602.4

Proposed Governor Changes 19.3

Total Resources $13,985.6

Expenditures – Governor’s Budget

Cost of Continuing Existing Programs $13,001.9

Program Enhancements / Policy Packages / Employee

Compensation Changes

808.8

General Purpose Emergency Fund 30.0

Total Expenditures $13,840.7

Ending Balance $144.9

30

2007-09 Governor’s Recommended BudgetBudget Reserves

Projected Reserves

($ Millions)

2005-07 2007-09

Ending Balance/Emergency Fund $ -* $ 175

Education Stability Fund 232 452

Rainy Day Fund (Corporate Kicker) - 275

TOTAL $ 232 $902

* Reflect Ending Balance after distribution of $1.3 billion kickers.

31

Budget FrameworkPrinciples that Transcend the Decision-Maker

• Must Balance within available resources

• Start with mandatory items.

• Implement core missions:– Focus on the essentials.– Emphasize programs with widely-distributed benefits.

• Target investment where it will provide the most impact in the long run:– Focus on prevention.

• Reduce overhead costs.

• Plan for the Future

Public Policy Analysis ECON 439/539 May 16, 2007

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Transcript of Public Policy Analysis ECON 439/539 May 16, 2007