oregon economic forecast
TRANSCRIPT
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Economic and Revenue Forecast
OREGON PRELIMINARY
ECONOMIC FORECAST
OREGON FINAL ECONOMIC FORECAST
PERSONAL INCOMETAX MODELS
CORPORATE INCOMETAX MODELS
Forecaster JudgementLEGISLATIVE & POLICY CHANGES
FINAL REVENUE ESTIMATE
U.S. EconomicHistory and Forecast(Global Insight, Inc.)
Oregon EconomicHistory
Oregon CorporateIncome Tax History
Oregon PersonalIncome Tax History
Governors Councilof EconomicAdvisors
DAS AdvisoryCommittee
OREGON ECONOMIC MODEL Governors Council of EconomicAdvisors Pre-Meeting
Council of RevenueForecast Advisors
Non-income taxrevenue projections
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Ever Changing Picture for the USEconomy
Office of Economic Analysis
The pace of recovery in output and employment in the U.S. economy looks a little slower now than it
did three months ago, according to 43 forecasters surveyed by the Federal Reserve Bank of
Philadelphia. The forecasters also predict weaker recovery in the labor market. November 15, 2010
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-8-6
-4
-2
0
2
4
6
8
2001 2002 200 2004 2005 2006 2007 2008 2009 2010 2011 2012
Baseline (60%) Pessimistic (25%) Optimistic (15%)
(Percent change, annual rate)
Real GDP Growth inAlternative Scenarios
Copyright 2010 Global Insight, Inc.July Baseline (15%)(20%)
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Bottom Line for US Economy
The recovery-recession is in its second year. Technical recessionin the U.S. ended last summer, with the unemployment rate topingout at 10.1% in the fourth quarter of 2009. The labor market willremain weak with unemployment averaging 9. % in 2010.
Credit markets are slowly returning to pre-Lehman collapse days butrisk premiums are still present. Residential and commercial real
estate still tight.
The housing market will continue to remain fragile. Housing startsmarginally improved in the past year off their historic lows.Butrecent months point to a bumpy road this year. Prices will continueto decline throughout 2010.
Inflation is not a threat today or even next year but the stage is setfor carefully executed exit strategies to avoid inflation in the future.
After an initial surge of economic growth in the fourth quarter 2009and first quarter 2010, the economy is waning.GDP growth wasrevised down for the second quarter and will remain below potentialthrough 2011.
Copyright 2010 Global Insight, Inc. Office of Economic Analysis
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10.5% unemployment rate for October 2010 (Oct US rate is 9.6%) isdown from the highest rate of 11.6% in May and June 2009, butessentially unchanged the past twelve months.
3 th fastest job growth at -0.3% for all states for Sept 2010 over Sept2009.
Total nonfarm employment dropped -0.4% year-over-year for the 3rd
quarter of 2010. S.A. job gains in five of first ten months of 2010. Totalnonfarm up 11,800 since Dec with the private sector up 10,000 (0. 8%).
2.3% personal income growth for 2nd quarter of 2010 over 2nd quarter of
2009. Annualized 2nd quarter 2010 growth at 2.5%.
Oregon exports increased 25.1% in the first nine months of 2010compared to the same period last year and have regained the majorityof their losses from late 2008 and early 2009.
Recent Oregon Economy Facts
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Intel Announcement
The expenditure of $6 to $8 billion dollars (most of which is likely in Oregon) isapproximately 2 percent of the total investment on industrial and otherequipment and manufacturing structures expected to be spent in the U.S. in2010.
Expectation for jobs 6,000 to 8,000 construction jobs in OR and AZ over 2+ years 800 to 1,000 permanent high tech jobs in OR and AZ
Issues: How many construction workers are shifted from other jobs? How many construction workers are hired over 2+ years? (Surely not
5,000 on day one and kept on until the end of the project) How many high tech jobs are shifted from existing positions? Direct, indirect, and induced jobs?
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Leading Indicators3 of 11 Indicators are Positive
Ore I dex f Leadi I dicat rs
(Six-M th A ualized Perce t Cha e, thr u h September 2010)
-30%
-20%
-10%
0%
10%
20%
30%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-10.0%
-6.7%
-3.3%
0.0%
3.3%
6.7%
10.0%
Leadi
I
dex (Left Axis) Diffusi
I
dex
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Initial Claims(through October 2010)
Initial Unemployment Claims per 1,000 Labor Force (SA)
0
1
2
3
4
5
6
7
8
Jan 87 Jan 89 Jan 91 Jan 93 Jan 95 Jan 97 Jan 99 Jan 01 Jan 03 Jan 05 Jan 07 Jan 09
Oregon
nited tates
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Forecast Changes
Oreg T al N farm Empl yme 000s
1 575
1 625
1 675
1 725
1 775
1 825
1 875
1 925
2006Q1
2006Q3
2007Q1
2007Q3
2008Q1
2008Q3
2009Q1
2009Q3
2010Q1
2010Q3
2011Q1
2011Q3
2012Q1
2012Q3
2013Q1
2013Q3
2014Q1
2014Q3
2015Q1
2015Q3
2016Q1
2016Q3
2017Q1
2017Q3
Mar08 ep 08
ec 08 Mar09Ma 09 ep 09
ec 09 Mar 10Jun 10 Sep 10
Dec 10
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Total Non-farm Employment(Annual Percent Change)
Total onfar loyment( nnual Percenta e hange)
-7.0
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Percent
hange
Oregon U.S.
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COMPARISONOFL
ASTTHREEFORECAS
TS
Jun2010
Sep2010
Dec2010
LINCOMEGROWTH
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
EMPLOYMENTGROWT
H
-7
-6
-5
-4
-3
-2
-101234
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Percent
orec
astCompariso
ns
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Risks to the Forecast
Ups deFinancial markets return more quickly to normal
Quicker, stronger release of pent-up demand
More robust global growth
D w s deHousing downturn continues
Aftershocks from the financial crisis
China bubble? Euro Zone Financials?
O er Cons dera ons Impact of Measures 66 and 67
Health care reform
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Bottom Line for the Oregon Economy
The technical recession in Oregon ended late lastsummer or fall. The jobless recovery has taken hold.
Job losses will continue into the third quarter of 2010,with only mild job growth through 2011.
Housing prices will still decline throughout 2010 butlooking more like a bottom has been reached inhousing permits (even with the July drop following theexpiration of the tax credit).
Housing will not lead during the recovery. Firstsectors likely to come back: profession and businessservices, health care services, computer andelectronic products, retail.
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General Fund RevenueForecast
Forecas track ng s ghtly behind Septemberforecast
Generally, a mixed bag with weak estimated
payments in FY11 Q1
2009-11 up $61.9million relative to Septemberforecast
Reflects withholding guidance changes effective Jan 1,2011
2011-13down $272.7 million
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Recent P TRevenuePerformance
Withholding
Strengthening since the spring, solid Y/Y gains
Total PIT up year-over-year the past twoquarters
Improvements Y/Y in withholding, estimated,refunds
Economic improvement, M66 contributing as well
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Personal Income Tax Forecast
Up $97.7 million in 2009-11
Minor weakness in near term however withholding
guidance and subsequent table changes drive theforecast increase
Decreased by larger amounts for out-years of
forecast, reflecting view of weaker growththrough forecast period, plus refund adjustmentdue to withholding changes
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Corporate Income Tax/Other
GF Revenue Forecast
Corporate income taxes decreased $18.7million in 2009-11 BN
Roughly $7 million above kicker threshold (currentkicker estimate at $23.6M)
Other changes (up $39.9 million):
Estate & Insurance taxes, Interest Earnings lower Tobacco taxes higher
$57M in one-time transfers (Amnesty $31M)
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Corporate Growth
Corporate Income Tax Collections
(Quarterly, Year-over-year percent change)
-100%
-50%
0%
50%
100%
150%
200%
250%
300%
1996
:7
1997
:7
1998
:7
1999
:7
2000
:7
2001
:7
2002
:7
2003
:7
2004
:7
2005
:7
2006
:7
2007
:7
2008
:7
2009
:7
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2009-11 GF Revenue
Per onal Income Tax $11,545.7 $10,345.3 $10,443.0 $97.7 -$1,102.7
Corporate Income Tax $831.6 $873.9 $855.2 -$18.7 $23.6
Other Revenue $1,198.4 $1,088.1 $1,128.0 $39.9 -$70.4
Total GF Resources $13,575.7 $12,307.2 $12,426.2 $119.0 -$1,149.5
Le : Anticipated Admini trative Action $43.7 $15.7 $15.7 $0.0 -$28.0
Plu : Legi lative Action $0.0 $180.0 $123.0 -$57.0 $123.0
Proj. Expenditures $13,298.1 $12,849.0 $12,471.5 -$377.5 -$826.6
Ending Balance $233.8 -$557.5 $61.9 $619.4 -$171.9
General Fund Resources
2009-11 Biennium
General Fund
(Million )
COS
Forecast
Sep 2010
Forecast
Dec 2010
Forecast
Change from
September
Change from
COS 2009
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Budgetary Reserve Outlook
(Millions)
2007-09
Biennium
2009-11
Biennium
2011-13
Biennium
Rainy Day Fund
Beginning Balance $0.0 $112.5 $10.6
Net Deposits
3
$94.3 -$103.4 $61.9Interest $18.3 $1.5 $3.6
Ending Balance1 $112.5 $10.6 $76.1
Education Stability Fund
Beginning Balance $178.9 $0.1 $102.1
Net Deposits -$178.9 $102.0 $193.8
Interest2 $17.2 $1.5 $10.5
Triggered Withdrawals -$17.1 -$1.5 -$10.5
Ending Balance $0.1 $102.1 $296.0
Total Reserves $112.6 $112.7 $372.1
Oregon's Budgetary Reserves
Footnotes:1. Under current law, only 2/3rds of the beginning balance is available for withdrawal. Withdrawal subject to economic and
financial triggers.
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Revenue Issues/Risks
Forecast Complications with New TaxMeasures
Tracking difficult, especially in near-term
Increased volatility
Impact of Federal Changes on taxpayerbehavior
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LotteryRevenueForecast
Baseline near-term forecast held steady
Additional administrative savings of $9 million
relative to September.
Out-years decreased slightly
Lower expectations for consumer spending
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LotteryRevenueForecast
Sep 2010 Dec 2010
( illions) orecas orecas A ount ercent
Beginning Balance $1.4 $1.4 - .0%
Earnings $1,061.6 $1,060.3 (1.2) -0.1%
Administrative Savings $20.4 $29.3 9.0
Other Resources1 $0.8 $0.9 0.1 15.6%
Total Resources $1,084.1 $1,091.9 7.8 0.7%
Allocations 1,076.8 1,070.5 (6.3) -0.6%
Ending Balance $7.3 $21.4 14.2 195.4%
ottery esources(Millionsof ollars)
ange from Sep
2009-11Biennium
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For More Information
Office of Economic Analysis155 Cottage Street NE, U20Salem, OR 97301-3966(503) 378-3405
Email: [email protected]
Website: http://oregon.gov/das/oea
Blog: http://oregoneconomicanalysis.wordpress.com/
Twitter: http://twitter.com/OR_EconAnalysis