oregon economic and revenue forecast, september 2017

September 2017 Economic & Revenue

Outlook

August 23rd, 2017 Oregon Office of Economic Analysis

Mark McMullen

Josh Lehner

Economic Update and Outlook

Oregon Office of

Economic Analysis3

Economy Still Expanding

Oregon Office of

Economic Analysis4

Oregon Office of

Economic Analysis5

Recessionary Buffer

Demand For Public

Services

Delayed Funding

LossesIncreased Caseloads for Need-Based

Healthcare and Income

Maintenance Programs (e.g.

Medicaid, SNAP, TANF and UI)

Use of Budget Reserves, Fund

Sweeps and other Revenue

Enhancements at State and Local

Level

Increased Enrollment at Public

Colleges & Universities

Increased Federal Funds via

Automatic Stabilizers and Stimulus

SpendingVery Large Cyclical Declines in Key

Private Rural Industries

(Manufacturing, Construction & Ag)

Property Taxes Are Often Divorced

From the Business Cycle

(Fundamentals and M50)

Income Tax Declines Lag Job Losses

Time Lag For Infrastructure and

Other Large Capital Projects

Shift to the Public Sector During Recessions

Oregon Office of

Economic Analysis6

Issue: Income Revisions

Oregon Office of

Economic Analysis7

Issue: Tight Labor Market

Oregon Office of

Economic Analysis8

Participation is Rising

Oregon Office of

Economic Analysis9

How Much More?

Oregon Office of

Economic Analysis10

Oregon Office of

Economic Analysis11

How Much More? Pt 2

Oregon Office of

Economic Analysis12

Outlook: Continued Gains

Revenue Update and Outlook

Oregon Office of

Economic Analysis14

Big End to the Tax Year…

(Millions of dollars)

Actual

Revenues

Latest

Forecast

Percent

Difference

Prior

Year

Percent

Change

Withholding $1,769.4 $1,699.4 4.1% $1,634.7 8.2%

Dollar difference $69.9 $134.6

Estimated Payments $450.2 $422.9 6.5% $423.8 6.2%

Dollar difference $27.4 $26.4

Final Payments $919.2 $899.0 2.2% $813.1 13.0%

Dollar difference $20.2 $106.1

Refunds -$454.9 -$454.3 0.1% -$562.6 -19.1%

Dollar difference -$0.5 $107.7

Total Personal Income Tax $2,683.9 $2,566.9 4.6% $2,309.1 16.2%

Dollar difference $117.0 $374.8

(Millions of dollars)

Actual

Revenues

Latest

Forecast

Percent

Difference

Prior

Year

Percent

Change

Advanced Payments $195.4 $206.2 -5.2% $202.8 -3.6%

Dollar difference -$10.7 -$7.4

Final Payments $81.8 $73.2 11.7% $70.4 16.2%

Dollar difference $8.6 $11.4

Refunds -$57.7 -$79.7 -27.5% -$81.5 -29.1%

Dollar difference $21.9 $23.7

Total Corporate Income Tax $219.5 $199.7 9.9% $191.8 14.4%

Dollar difference $19.8 $27.7

Corporate Income Tax Forecast Comparison

Table B.8 Track Record for the May 2017 Forecast(Quarter ending June 30, 2017)

Forecast Comparison Year/Year Change

Year/Year Change

Personal Income Tax

Oregon Office of

Economic Analysis15

…Pushes Us Over the Kicker Threshold

Oregon Office of

Economic Analysis16

No Longer a Check in the Mail

Oregon Office of

Economic Analysis17

What Is Your Cut?

* Based on 2015 actual tax returns ** Based on 2015 actual tax returns, PIT kicker amount ($464 million) and the Oregon Office of Economic Analysis’ forecast for tax liability

Income Group

Adjusted Gross Income*

Rough Estimate of Kicker Size**

Bottom 20% < $10,700 $5

Second 20% $10,700 - $25,300 $35

Middle 20% $25,300 - $46,400 $98

Fourth 20% $46,400 - $85,500 $205

Next 15% $85,500 - $172,500 $441

Next 4% $172,500 - $389,400 $1,090

Top 1% > $389,400 $4,902

Average $59,700 $227

Median $30,000-$35,000 $89

Oregon Office of

Economic Analysis18

Wonky Detour

Oregon Office of

Economic Analysis19

Slowdown Pt 1

Oregon Office of

Economic Analysis20

Slowdown Pt 2

Oregon Office of

Economic Analysis21

Stable Outlook for BI2017-19

Oregon Office of

Economic Analysis22

(Millions)

2017 COS

Forecast

May 2017

Forecast

September 2017

Forecast

Change from

Prior Forecast

Change from

COS Forecast

Structural Revenues

Personal Income Tax $17,147.4 $17,146.9 $17,121.5 -$25.3 -$25.8

Corporate Income Tax $1,077.0 $1,071.5 $1,045.4 -$26.0 -$31.5

All Other Revenues $1,327.6 $1,198.4 $1,325.1 $126.6 -$2.5

Gross GF Revenues $19,551.9 $19,416.8 $19,492.1 $75.2 -$59.9

Offsets and Transfers -$75.5 -$75.5 -$71.8 $3.7 $3.7

Administrative Actions1 -$21.5 -$21.5 -$21.5 $0.0 $0.0

Legislative Actions -$180.1 -$180.7 -$180.1 $0.6 $0.0

Net Available Resources $20,055.7 $19,863.1 $20,094.3 $231.3 $38.6

Confidence Intervals

67% Confidence +/- 8.7% $1,695.8

95% Confidence +/- 17.4% $3,391.6

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

2017-19 General Fund Forecast Summary

$17.80B to $21.19B

$16.10B to $22.88B

Table R.1

General Fund Forecast Summary

Positive Factor

Negative Factor

Ending Balances

Personal Income Taxes

LegislativeChanges

Corporate Excise Taxes

Lottery Insurance Taxes

Interest Earnings

Oregon Office of

Economic Analysis23

Estate Taxes

Oregon Office of

Economic Analysis24

Lottery: Small Casino Impact

Since May ‘17 Forecast ($ millions)

+ $64.5 Video Lottery+ $32.4 Admin Actions+ $4.0 Traditional Lot.+ $4.0 Reversions

+$105.0 AvailableResources

Relative to Close ofSession ForecastEnding Balance +$46m

Oregon Office of

Economic Analysis25

Marijuana: No Real Changes

SB 1057Net -$7.8 million in resources

EclipseAugust sales bump (+10%)

Ending Balance +$1.2 million relative to COS

Oregon Office of

Economic Analysis26

Forecast ChangesDifference from May Forecast, $ millions

2626

51.5

-25.3

-38.4 -48.8

-82.6

94.8

183.9

-22.5-26.9

-57.1

35.0

-26.0-47.3 -47.3 -47.3

0.0

105.0

44.7 49.9

53.3

-$100

-$50

$0

$50

$100

$150

$200

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

Personal

Corporate

Lottery

Other

Total

Oregon Office of

Economic Analysis27

Biennial Revenue Growth

2727

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Personal Income Taxes Total Net Revenue

Oregon Office of

Economic Analysis28

Reserves

Effective Reserves ($ millions)

Aug

2017

End

2017-19

ESF $384.2 $602.0

RDF $393.1 $635.0

Reserves $777.3 $1,237.0

Ending

Balance $235.5 $235.5

Total $1,012.9 $1,472.5

% of GF 5.2% 7.6%

0%

2%

4%

6%

8%

10%

12%

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

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 Analysis29

Contact

mark.mcmullen@oregon.gov

(503) 378-3455

joshua.lehner@oregon.gov

(503) 378-4052

www.OregonEconomicAnalysis.com

@OR_EconAnalysis