Oregon

May 2013 Economic & Revenue

Outlook
May 16, 2013

Mark McMullen & Josh Lehner

Office of Economic Analysis

Oregon
U.S. Economy

Businesses Are Still

Profitable
Corporate Profits After Taxes, % share of GDP
11%
10%
9%
8%

7%
6%
5%
4%
3%
2%
1959Q3

1964Q3

1969Q3

1974Q3

1979Q3

1984Q3

1989Q3

1994Q3

1999Q3

2004Q3

2009Q3

and Still Sitting on Cash

Trillions

Nonfinancial Corporate Businesses, Real Liquid Assets

$1.8
$1.6
$1.4
$1.2
$1.0
$0.8
$0.6
$0.4
$0.2
$0.0
1960Q1

1970Q1

1980Q1

1990Q1

2000Q1

2010Q1

Households Gaining Wealth

Household Assets ($ Billions)
$90,000
$80,000
$70,000
$60,000
$50,000
All Other
$40,000

Real Estate

$30,000
$20,000
$10,000

$0
1970

1975

1980

1985

1990

1995

2000

2005

2010

 And Lowering Liabilities

Household Liabilities ($ Billions)
$16,000
$14,000
$12,000
$10,000
Mortgage

$8,000

All Other
$6,000
$4,000
$2,000

$0
1970

1975

1980

1985

1990

1995

2000

2005

2010

Oregon
Oregon: Recent Performance

Slow and Steady: Oregons

Coincident Indicators

Long-Term Unemployment
Remains Elevated

Labor Force Participation: Will

Workers Return?
70.0

Oregon Labor Force Participation Rate [Seasonally Adjusted]

69.0

68.0

67.0

66.0

Jan 2005
65.0

64.0

63.0

Source: Oregon Employment Department

62.0

Jan 2011

Oregon
Industries

Drags on Economic Growth

Are Easing
Annual Percent Changes in Oregon

Oregon Housing Starts

Oregon State and Local Government Employment (Right)

40

30

20

10

-10

-1

-20

-2

-30

-3

-40

-4

-50

-5
2000

2005

2010

2015

12

Oregon
Oregon: Regional Trends

Recovery Spreading to Rural

Areas
Regional Employment Growth
Share of Overall Gains
100%
95%
90%
85%

South Coast
SE Oregon

80%

Gorge
North Coast

75%

NE Oregon
C Oregon

70%

S Oregon
Valley

65%

Portland MSA

60%
55%
50%
Jan-11

Jul-11

Jan-12

Jul-12
14

Household Debt Across

Oregon
Debt to Income Ratio
Auto, Credit Card, Mortgage Only
2007
0

Debt to Income Ratio

Auto, Credit Card, Mortgage Only
1.2
Oregon

U.S.

1.0

0.8

0.6

0.4

0.2

0.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

0.5

2011
1

1.5

Deschutes
Crook
Hood River
Jefferson
Jackson
Washington
Josephine
US
Yamhill
Oregon
Clackamas
Benton
Lane
Polk
Marion
Klamath
Multnomah
Umatilla
Malheur
Baker
Linn
Douglas
Wasco
Columbia
Curry
Coos
Clatsop
Tillamook
Lincoln
Union
15

Demographics Weigh on Rural

Areas (Share of Population by Age)
Oregon
Total

Southern
Coast

16

Oregon
Outlook & Risks

Bottom Line: Still Some Acceleration

Oregon Private Sector Employment
1,550,000

1,500,000

1,450,000

1,400,000

1,350,000

1,300,000

1,250,000

1,200,000
2000Q1

2003Q1

2006Q1

2009Q1

2012Q1

2015Q1

18

Stable Outlook, Yet Shifting Risks

3.00

100
Upside Risks, Share of Total

2013 GDP Growth (Left)

2.75

75

2.50

50

2.25

25

2.00

0
Oct-11

Jan-12

Apr-12

Jul-12

Source: Wall Street Journal Economic Forecasting Survey

Oct-12

Jan-13

Apr-13

Oregon
Revenue Outlook

Those Who Cannot

Remember the Past..
Job Losses
Begin

Forecast Date
(Around 5
years later)

PIT
Growth
Forecast

Actual
Growth
(Net of
Kicker)

Dec 1979

May 1985

-2.2%

10.9%

$221

Aug 1990

May 1995

9.9%

16.6%

$432

Dec 2000

May 2005

12.6%

22.6%

$1,071

Dec 2007

May 2013

11.4%

???

???

BI1985-87 includes a personal income tax rate cut

PIT Kicker
($ mil)

Healthy Growth in Personal

Income Taxes
Recent Personal Income Tax Collections
% change over year ago, 3 month moving sum
15%

10%

5%

0%

-5%
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
2012
2013
22

Boom in Investment Income

(Income Growth 2011-2012: Early Matched Tax Returns)
Income Growth 2011-2012: Early Matching Tax Returns
-40%

-20%

0%

20%

40%

60%

80%

18%

Total Income

4%
7%
3%

Wages

34%

Dividends, Interest & Rent

13%

Impacted by M66
17%

Retirement

74%

Capital Gains

33%

17%

Business Income
Unemployment

All Other

6%

7%

10%
-21%

PIT Collections Over the Home

Stretch
Personal Income Tax Revenues Received May 15-June 30
($millions)
1,300
1,200
1,100
1,000
900
800
700
600
500

400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F Kicker
24

Personal Income Tax Kicker

Would Be a Misnomer
2011-13 General Fund Revenues
Share of General Fund

Forecast Changes from COS

120%
100%

+$237m
87%

80%
60%
40%
20%
6%

Other forecast changes

include:

+$20m

7%

Court Fees +$51m

One-time Transfers +$131m
Liquor +$41m

0%
-20%

-$41m

-40%
PIT

Corp

Other

PIT

Corp

Other
25

Corporate Taxes: Growth

Stopped in April
Corporate Excise Tax Collections
% change over year ago, 3 month moving sum
80%

60%

40%

20%

0%

-20%

-40%
Jul

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
2012

Jul

Aug Sep Oct Nov Dec Jan Feb Mar Apr

2013
26

Corporate Tax Kicker Is in the

Baseline--but Is not a Sure Thing
Corporate Tax Revenues Received May 15-June 30 ($millions)
100

$20.3

million

90
80
70
60
50
40
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F Kicker
27

Forecast Changes
Difference from March forecast, $ millions
$200

Personal
$150

Corporate

Lottery

Other

Total

155.4

128.7

$100

69.9
42.6

$50

36.5

$0
-$50
-$100

2011-13

2013-15

2015-17

2017-19

2019-21
28

May 2013 Forecast Summary

2011-13 BN
Mar ' 13
Forecast
Taxes
Personal Income Taxes
Corporate Income Taxes
Other Taxes (Estate, Insurance, Tobacco)

May ' 13
Forecast

12,044.9
898.3
443.3

12,152.7
914.6
441.6

Fines and Fees

279.6

285.5

All Other (Liquor, Interest, Misc, One-Time)

456.2

Offsets & Transfers

(12.0)

Net General Fund Revenues

14,110.3

Change

126.8
9.7
0.9

5.9

258.8

270.9

12.1

454.1

(2.1)

261.7

273.3

11.6

(12.0)

0.0

(101.5)

(120.8)

(19.3)

0.0
(4.4)

126.3

14,232.1

126.3

Projected Expenditures

13,723.8

13,734.9

11.2

382.1

497.2

115.1

1,079.7

1,082.1

2.4

15,185.5

15,314.2

128.7

Total Available Resources (GF + Lottery)

0.0
0.0

15,343.8

15,485.7

141.8

382.1
(18.2)
(137.2)
15,570.4

497.2
(18.2)
(137.3)
15,827.3

115.1
0.0
(0.1)
256.8

1,045.0

1,059.6

14.6

16,615.4

16,886.9

271.5
156.4

Excluding beginning balance:

Total Available Resources (GF + Lottery)

Change

13,579.5
1,036.6
446.3

14,105.9

Lottery Available Resources

May ' 13
Forecast

13,452.7
1,026.8
445.4

14,236.5

107.8
16.3
(1.7)

Plus Beginning Balance

Less Anticipated Administrative Actions*
Legislatively Adopted Actions
Available Resources

Estimated Ending Balance

0.0
(4.4)

2013-15 BN
Mar ' 13
Forecast

2015-17 BN

2017-19 BN

2019-21 BN

74.1

44.8

36.4
29

Saving the Best for Last

Forecast Evolution, Dec 2010 to May 2013

Billions

Combined General Fund and Lottery Fund Revenues (2011-13 BN)

$15.4
$15.3

Close of Session and Feb 2012 Rebalance

Forecast

$15.2
$15.1

$15.0
$14.9
$14.8
$14.7
$14.6
$14.5
Dec '10
Forecast

Mar '11
Forecast

May '11
Forecast

Sep '11
Forecast

Dec '11
Forecast

Mar '12
Forecast

Jun '12
Forecast

Sep '12
Forecast

Dec '12
Forecast

Mar '13
Forecast

May '13
Forecast

30

10-Year Forecast
Table R.2
General Fund Revenue Forecast Summary (Millions of Dollars, Current Law)
Forecast
Revenue Source
Personal Income Taxes
Corporate Income Taxes
All Others

2009-11

Biennium

Chg

10,467.2

2011-13

Forecast
%

Biennium Chg

3.7% 12,152.7

10.5%

1,226.6

29.8%

1,181.2

-3.7%

12,521.4

Biennium

Chg

2015-17

2017-19

1,036.6

13.8% 15,606.5

(12.0)

(120.8)

-2.2% 14,236.5

13.7% 15,485.7

2019-21

Forecast
%

1,004.0 -3.1%

9.6% 18,497.0

Biennium Chg

10.2% 20,411.8

10.4%

3.2%

1,096.7

9.1%

1,201.7

7.7%

1,277.2

6.3%

8.7% 20,703.7

9.7% 22,785.7

10.1%

(82.2)

(44.7)

(47.3)

8.8% 17,247.9 11.4% 18,797.4

9.0% 20,659.0

9.9% 22,738.3

1,047.5

5.8%

974.0 -3.0%

2021-23

1,005.0

990.5 -16.1%

6.8% 14,248.5

Forecast

Biennium Chg Biennium Chg Biennium Chg

13.3%

914.6

Offsets and Transfers

2013-15

Forecast

11.7% 15,312.8 12.8% 16,789.4

20.9%

12,521.4

Forecast

16.1% 13,579.5

827.6

Gross General Fund

Net Revenue

Forecast

1,116.2

9.5% 17,364.2 11.3% 18,879.6

(116.3)

6.6%

10.1%

Other tax es include General Fund portions of the Eastern Oregon Sev erance Tax , Western Oregon Sev erance Tax and Amusement Dev ice Tax .
Commercial Fish Licenses & Fees and Pari-mutual Receipts are included in Other Rev enues

31

Biennial Revenue Growth

24%
20%

PIT

TOTAL

16%
12%
8%
4%
0%
-4%
-8%
-12%

32

For More Information

Standard Contact:
155 Cottage Street NE
Salem, OR 97301
(503) 378-3405
oea.info@state.or.us
www.oregon.gov/das/oea
Social Media:
oregoneconomicanalysis.wordpress.com
@OR_EconAnalysis

33