September 2018

Economic & Revenue

Outlook
August 29th, 2018 Oregon Office of Economic Analysis
Mark McMullen
Josh Lehner
Economic Outlook
 The 20/20 Discussion
•Near-term risks to the upside
•Medium-term term outlook murky
•Demographics
•Fiscal and monetary policy restrictive
beginning in 2020
•Risk of other issues like trade, oil shocks,
housing affordability, climate change and
natural disasters impacting growth
•Recession preparation
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 The 20/20 Discussion

Drags on 2020 Job Growth:

• Long-term demographics
• End of federal spending bill
• 2018/19 interest rate hikes
feed through
• No more federal tax cuts
• Minimum wage increase
• Census 2020 workers

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 Issue: Trade Fisticuffs

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 Risk: The Fed Tries to
Thread the Needle

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 Recent Performance:
All Regions Growing

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 Outlook: All Industries
Growing
Oregon Employment Growth
thousands of jobs

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These numbers are adjusted for the reclassification of home health care workers out of Government and into Health Care
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beginning in 2018.
Revenue Update and
Outlook
 Strong Wage Gains

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 Slowing Down

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 2017-19 Forecast Summary
Table R.1
2017-19 General Fund Forecast Summary
2017 COS June 2018 September 2018 Change from Change from
(Millions) Forecast Forecast Forecast Prior Forecast COS Forecast

Structural Revenues
Personal Income Tax $17,147.4 $17,694.8 $17,772.4 $77.5 $625.0
Corporate Income Tax $1,077.0 $1,273.7 $1,284.8 $11.1 $207.8
All Other Revenues $1,327.6 $1,335.4 $1,388.5 $53.2 $61.0
Gross GF Revenues $19,551.9 $20,303.9 $20,445.7 $141.8 $893.8

Offsets and Transfers -$75.5 -$69.5 -$71.1 -$1.6 $4.4

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

Legislative Actions -$180.1 -$179.4 -$179.4 $0.0 $0.7
Net Available Resources $20,055.7 $21,033.8 $21,174.1 $140.3 $1,118.4
Confidence Intervals
67% Confidence +/- 3.6% $742.4 $19.70B to $21.19B
95% Confidence +/- 7.3% $1,484.8 $18.96B to $21.93B
1 Reflects cost of cashflow management actions, exclusive of internal borrowing.

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 Asset Markets Continue to Rise,
but a Few Large Estates Drive Taxes

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 Kickers Over Time

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 Timing of Potential Kicker

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 What Is Your Cut?
Income Adjusted Gross Rough Estimate
Group Income* of Kicker Size**
Bottom 20% < $11,200 $13
Second 20% $11,200 - $26,300 $75
Middle 20% $26,300 - $47,800 $169
Fourth 20% $47,800 - $87,400 $311
Next 15% $87,400 - $177,300 $633
Next 4% $177,300 - $401,200 $1,484
Top 1% > $401,200 $6,787
Average $61,600 $336
Median $35,000-$36,000 $164
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* Based on 2016 actual tax returns ** Based on 2016 actual tax returns, PIT kicker amount ($686 million) 16
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and the Oregon Office of Economic Analysis’ forecast for tax liability in 2018
 Forecast Changes
Difference from June Forecast, $ millions
$200
168.3
$150 Personal Corporate Lottery Other Total

$100 77.5 79.1

65.4 49.7
53.2 43.6 43.9
$50 37.2
26.5 21.8
9.6 11.6 12.3
0.8
$0
11.1
-$50 -41.8
-53.5 -46.6

-$100
-107.5
-$150
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 Biennial Revenue Growth
25%

20%

15%

10%

5%

0%

-5%

-10%
Personal Income Taxes Total Net Revenue
-15%

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 Reserves Continue to Grow
Oregon Budgetary Reserves (billions)
Educ. Stability Fund Rainy Day Fund Gen. Fund Ending Balance Effective Reserves ($ millions)
$3.0 14% Jul End
Forecast -->
$2.5 12% 2018 2017-19
10% ESF $502.3 $614.2
$2.0
Percent of 8%
$1.5 RDF $581.4 $595.7
General Fund --> 6%
$1.0
Reserves $1,083.7 $1,209.9
4%
$0.5
Ending
2%
Balance $1,248.4 $1,248.4
$0.0 0%
Total $2,332.1 $2,458.3
% of GF 11.4% 12.0%
Source: Oregon Office of Economic Analysis

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 Contact
mark.mcmullen@oregon.gov
(503) 378-3455

joshua.lehner@oregon.gov
(503) 378-4052

www.OregonEconomicAnalysis.com
@OR_EconAnalysis
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