December 2017 Economic & Revenue Outlook

Transcription

1 December 2017 Economic & Revenue Outlook November 29 th, 2017 Mark McMullen Josh Lehner

2 Economic Update

3 Economy Still Expanding 3

4 Reaching All Corners 4

5 Every County Added Population in

6 Risks

7 Few Warning Signs Individual Indicators Improving Slowing Not Improving UO Index Capital Good Orders Consumer Sentiment Housing Permits Initial Claims Manufacturing Hrs Weight Distance Tax Interest Rate Spread Employment Services OILI Air Freight Consumer Sentiment Housing Permits Initial Claims Manufacturing PMI New Incorporations Oregon Dollar Index Semiconductor Bill. Withholding Help Wanted Ads Industrial Production 7

8 Population Forecast Changes 8

9 Wildfires: A Preliminary Economic Assessment Solid data lags the real world Channels of Potential Wildfire Impact: Short-Term Small Business Cash Flow Direct Employment Transportation Disruptions Long-Term Lost Timberland or Recreational Areas Borrowing Costs Business or Population Growth 9

10 Investors Are Not Scared Off Yet 10

11 Back to the Future Yellowstone Mt. Saint Helens Eruption turned into tourist attraction Concern that footloose industries not reliant upon local natural resources would not invest moving forward. Their corporate decisions tied to quality of life, clean environment, and abundant recreational activities 11

12 Federal Tax Reform Sources: Office of, IRS, Oregon Department of Revenue 12

13 Federal Tax Reform 13

14 Revenue Update and Outlook

15 Revenues Still Growing 15

16 Stable Outlook for BI

17 General Fund Forecast Summary Table R General Fund Forecast Summary (Millions) 2017 COS Forecast September 2017 Forecast December 2017 Forecast Change from Prior Forecast Change from COS Forecast Structural Revenues Personal Income Tax $17,147.4 $17,121.5 $17, $3.0 -$28.9 Corporate Income Tax $1,077.0 $1,045.4 $1,078.0 $32.5 $1.0 All Other Revenues $1,327.6 $1,325.1 $1,334.3 $9.2 $6.8 Gross GF Revenues $19,551.9 $19,492.1 $19,530.8 $38.8 -$21.1 Offsets and Transfers -$75.5 -$71.8 -$73.9 -$2.1 $1.5 Administrative Actions 1 -$21.5 -$21.5 -$21.5 $0.0 $0.0 Legislative Actions -$ $ $180.1 $0.0 $0.0 Net Available Resources $20,055.7 $20,094.3 $20,130.9 $36.6 $75.2 Positive Factor Corporate Excise Taxes Estate Taxes Lottery Negative Factor Personal Income Taxes Confidence Intervals 67% Confidence +/- 7.1% $1, % Confidence +/- 14.1% $2,763.1 $18.15B to $20.91B $16.77B to $22.29B 1 Reflects cost of cashflow management actions, exclusive of internal borrowing. 17

18 Forecast Changes Difference from September Forecast, $ millions $200 $150 $100 $50 $0 -$ Personal Corporate Lottery Other Total

19 Biennial Revenue Growth 25% 20% 15% 10% 5% 0% -5% -10% -15% Personal Income Taxes Total Net Revenue

20 Reserves 20

21 Retirements Hit Close to Home 21

22 How s Your Earned Kicker Average? State Economist Statistics Sweet Spot / EKA / Median Error / Recessions Chang Sohn 0 /.500 / 9.1% / 1 Ann Hanus 0 /.833 / 6.0% / 1 Paul Warner 1 /.700 / 2.1% / 0 Tom Potiowsky 0 /.375 / 10.1% / 1 Dae Baek 0 /.000 / 9.8% / 1 Mark McMullen 1 /.667 / 3.2% / 0 OEA History 2 /.583 / 5.1% / 4 Sweet Spot: Biennial General Fund Forecast lands 0-2% above COS EKA: Earned Kicker Average (share of COS resulting in kicker, PIT and CORP) Median Error: Median absolute biennial General Fund forecast error Source: 22

23 Paul s Sweet Spot Forecast May 1991 The key factor fueling growth in the state continues to be an influx of new residents. Oregon s relatively strong performance is expected to continue despite the sharp decline in the timber industry. The geographic distribution of the timber industry means that many portions of the state will continue to feel the impact of the recession much more severely than the statewide average. 23

24 Nobody Is Perfect June 1990: A key development in April was the release of the proposed Conservation Strategy for the Protection of the Spotted Owl.The current forecast assumes that total timber harvest will decline by 15% between 1989 and December 1998: Rising commodity prices. The slump in agriculture and natural resource prices is expected to be turning around by This will spur higher income and job growth for Oregon s large agriculture and natural resource sectors. December 1998: Recovery in the semiconductor industry. Excess capacity in the semiconductor industry should begin to ease by A resumption in OR s high tech manufacturing sector is expected to follow. Announced long-term investment plans by major companies are expected to be carried out during the 2000 to 2005 period. New investment from suppliers to the industry is also expected. 24

25 Tom s Ideal Forecast vs His Best Forecast 25

26 Contact (503) (503)