oregon economic and revenue forecast, march 2017

March 2017 Economic & Revenue Outlook

February 22nd, 2017 Oregon Office of Economic Analysis

Mark McMullen

Josh Lehner

Economic Update and Outlook

Oregon Office of

Economic Analysis3

Good News: Better Manufacturing Data

Oregon Office of

Economic Analysis4

The Slowdown Is Here

Oregon Office of

Economic Analysis5

Truly Statewide Growth

Oregon Office of

Economic Analysis6

•Fiscal PolicyGeneral Impact Larger OR ImpactTaxes Trade WarsInfrastructure ACADeregulation Federal LandsImmigration

•Monetary Policy•Rising Interest Rates

Risk: Federal Policy

Oregon Office of

Economic Analysis7

Risk: International Migration

Oregon Office of

Economic Analysis8

Risk: Global Supply Chains

Oregon Office of

Economic Analysis9

Risk: Medicaid Expansion

Oregon Office of

Economic Analysis10

Risk: Federal Lands

Oregon Office of

Economic Analysis11

Economic Outlook

Revenue Update and Outlook

Oregon Office of

Economic Analysis13

Personal Income Taxes Remain Healthy

2

3

4

5

6

7

8

9

10

11

12

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Personal Income Taxes Shrug Off the Kicker

Personal Income Taxes, $ billions, 4 QTR Sum

May 2015 Forecast

March 2017 Forecast

Forecast ->

Oregon Office of

Economic Analysis14

Corporate Taxes Improve in Recent Months

100

200

300

400

500

600

700

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Corporate Taxes Are Expected to Stabilize

Corporate Excise Taxes, $ millions, 4 QTR Sum

May 2015 Forecast

March 2017 Forecast

Forecast ->

Oregon Office of

Economic Analysis15

IT System Replacement Is Going Well, Why Do You Ask?

Oregon Office of

Economic Analysis16

Final 2015 Tax Return Data

16

-15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Dividends

Interest

Pensions

Total Income

Wages

Tax After Credits

IRAs

Social Security

Business

Cap Gains

Schedule E

Matched Returns, Full Year Filers, % change

2015 2014 2013

Oregon Office of

Economic Analysis17

Tea Leaves: Looking Forward to April

17

Oregon Office of

Economic Analysis18

Estate Tax Issues, Again

Oregon Office of

Economic Analysis19

Follow-Up on Vice Taxes

Marijuana

Unit 2016q1 Avg Price Name Brand Generic Name Brand Generic

Unit Price $8.76 / gram $6.55 / pack $4.40 / pack $6.85 / can $5.35 / can

Taxes $1.49 - $1.75 $2.33 $2.33 $1.87 $1.87

Federal $0.00 $1.01 $1.01 $0.09 $0.09

State $1.49 $1.32 $1.32 $1.78 $1.78

Local $0 - $0.26 $0 $0 $0 $0

Effective Tax Rate 17-20% 56% 115% 38% 54%

Marijuana (25%)

Total $60.1

General Fund $0

Moist SnuffCigarettes

Oregon Effective Vice Tax Rates, A Stylized Example

State Revenues, CY 2016 (millions)

$31.9

$59.2

$34.8

$208.9

Other Tobacco ProductsCigarettes

Forecast Changes

Oregon Office of

Economic Analysis21

General Fund Forecast Summary

(Millions)

2015 COS

Forecast

December 2016

Forecast

March 2017

Forecast

Change from

Prior Forecast

Change from

COS Forecast

Structural Revenues

Personal Income Tax $15,713.5 $15,678.4 $15,709.8 $31.4 -$3.6

Corporate Income Tax $1,100.0 $1,103.7 $1,136.2 $32.5 $36.2

All Other Revenues $1,184.6 $1,225.7 $1,264.6 $39.0 $80.0

Gross GF Revenues $17,998.1 $18,007.7 $18,110.6 $102.9 $112.5

Offsets and Transfers -$42.8 -$44.2 -$44.4 -$0.2 -$1.6

Administrative Actions1 -$20.2 -$14.0 -$14.0 $0.0 $6.2

Legislative Actions -$158.9 -$158.3 -$158.3 $0.0 $0.6

Net Available Resources $18,309.1 $18,320.0 $18,422.7 $102.7 $113.6

Confidence Intervals

67% Confidence +/- 1.6% $290.1

95% Confidence +/- 3.2% $580.3

2015-17 General Fund Forecast Summary

$17.82B to $18.40B

$17.53B to $18.69B

Table R.1

Positive Factor

Negative Factor

Personal Income Taxes

Court Fines,Fees & Assessments

Corporate Excise Taxes

VideoLottery

Estate Taxes

Liquor

Oregon Office of

Economic Analysis22

Forecast ChangesDifference from December Forecast, $ millions

2222

102.6 92.6117.5

97.8

266.4

-$50

$0

$50

$100

$150

$200

$250

$300

2015-17 2017-19 2019-21 2021-23 2023-25

Personal Corporate Lottery Other Total

Oregon Office of

Economic Analysis23

Biennial Revenue Growth

2323

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Personal Income Taxes Total Net Revenue

Oregon Office of

Economic Analysis24

Reserves

Effective Reserves ($ millions)

Jan

2017

End

2015-17

ESF $356.7 $383.2

RDF $374.4 $388.1

Reserves $731.1 $771.2

Ending

Balance $348.1 $348.1

Total $1,079.2 $1,119.3

% of GF 6.0% 6.2%

0%

2%

4%

6%

8%

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

99-01BN

01-03BN

03-05BN

05-07BN

07-09BN

09-11BN

11-13BN

13-15BN

15-17BN

17-19BN

Oregon Budgetary Reserves (billions)Gen. Fund Ending Balance Educ. Stability Fund Rainy Day Fund

Forecast -->

Percent ofGeneral Fund -->

Source: Oregon Office of Economic Analysis

Oregon Office of

Economic Analysis25

Contact

mark.mcmullen@oregon.gov

(503) 378-3455

josh.lehner@oregon.gov

(503) 378-4052

www.OregonEconomicAnalysis.com

@OR_EconAnalysis