Oregon. December 2013 Economic & Revenue Outlook. Mark McMullen & Josh Lehner Office of Economic Analysis. November 21, 2013

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1 Oregon December 2013 Economic & Revenue Outlook November 21, 2013 Mark McMullen & Josh Lehner Office of Economic Analysis

2 Oregon Economic Outlook

Manufacturing 1.70 42 1.65 40 1.60 38 1.55 36 1.

Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 $82,000 Real Wages and Salaries

3 All Signs Point To Expansion 1.75 Total Nonfarm Employment (SA, millions) 44 Avg Hours Worked - Manufacturing Jan-05 Jan-07 Jan-09 Jan-11 Jan Unemployment Rate (SA) 34 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 $82,000 Real Wages and Salaries (SAAR) 12 $80, $78,000 $76,000 $74,000 $72,000 0 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 $70, Q1 2007Q1 2009Q1 2011Q1 2013Q1 3

4 Oregon Growth Improving Due to Improvement in More Regions Oregon Employment Gains QCEW, Year-over-Year All Counties Portland MSA Ex Portland MSA Sum of Counties Private Sector Picking Up Year-over-Year Growth Rates -1% 0% 1% 2% 3% 4% 5% 6% 40,000 30,000 20,000 10,000 North Coast South Coast PDX Valley S Oregon Gorge Mar '13 Jun '13 0 Jan-11 Jan-12 Jan-13 C Oregon SC/SE Oregon NE Oregon 4

5 Hardest Hit Areas Begin to Recover Private Sector Employment Seasonally Adjusted, 3 Month Moving Average Bend Employment Growth Year-over-Year, 3 MMA, QCEW 0% 30% Housing Government Other Private -5% Oregon 20% 10% -10% Medford 0% -10% -15% Bend -20% -30% -20% May-07 May-09 May-11 May-13-40% Jan-07 Jan-09 Jan-11 Jan-13 5

6 Anecdotal Evidence: Not a lot of Bad News Out There 40 Around the State Reduction and Layoff Chatter Announcements in ATS, 3-month Moving Avg, Seasonally Adjusted Source: Oregon Employment Dept 6

7 9 Good News Still Outweighs the Bad Around the State Good News/Bad News* Ratio 14% Good News/Bad News Ratio Good News/Bad news ratio 2 Nonfarm Private employment growth Source: Oregon Employment Dept *Good news=sum of expanding firms, rehires and new firms. Bad news=sum of reductions, layoffs and closures. 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% -14% Nonfarm Private Employment Growth, Y/Y, 3MMA 7

8 Yet U.S. Economic Forecasters Express Little Optimism No Recession Yet No Upside Oct '11 - Oct ' Still Looking Good(ish) Oct '11 - Oct '13 80 Upside Risks, Share of Total Recession Risk 3.5 Upside Risks, Share of Total 2013 GDP (Left) 2014 GDP (Left) Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Source: Wall Street Journal Economic Forecasting Survey 1.5 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Source: Wall Street Journal Economic Forecasting Survey 0 8

9 Source of Stronger Growth? 4% Job Growth Across America Year-over-Year Growth Rates Metro Nonmetro 1,200 1,000 Job Gains Annual Rate, Thousands % 2% Private Sector Growth Picking Up Y/Y, 3MMA, QCEW U.S. Hardest Hit Housing Metros 2% 800 0% 0% 600-2% -2% 400-4% -6% -4% 200-8% -6% Northeast Midwest South West -10% Jan-07 Jan-09 Jan-11 Jan-13 9

10 Quality of Jobs and Workforce 40% Educated Workers Being Hired First Share of New Hires in Oregon with at Least Some College 28% Part-Time Work Share of Total Employment, 12 MMA, CPS 35% 24% 30% Retail Oregon Art/Ent/Rec 20% 25% Acc/Food All Industries U.S. 20% 16% 15% % Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 10

11 Outlook Remains Stable 1,800,000 Oregon Total Nonfarm Employment 1,750,000 1,700,000 1,650,000 Mar '12 Jun '12 Sep '12 Dec '12 Mar '13 May '13 Sep '13 Dec '13 1,600,000 1,550, Q1 2002Q1 2004Q1 2006Q1 2008Q1 2010Q1 2012Q1 2014Q1 11

12 Oregon Revenue Outlook

13 Stable Outlook for Forecast Evolution, Dec 2010 to Dec 2013 Billions $17.5 $17.0 Combined General Fund and Lottery Fund Resources ( BN) Law Changes During Session Baseline Forecast $16.5 $16.0 $15.5 $15.0 Dec '10 Mar '11 May '11 Sep '11 Dec '11 Mar '12 Jun '12 Sep '12 Dec '12 Mar '13 May '13 Sep '13 Dec '13 13

14 16% PIT Collections Hold Up Through Extension Filing Season Recent Personal Income Tax Collections % change over year ago, 3 month moving sum 14% 12% 10% 8% 6% 4% 2% 0% Jul Aug Sep Oct Nov Dec Jan 2013 Feb Mar Apr May June July Aug Sept Oct Nov* * Preliminary 14

15 Corporate Taxes: No Growth 80% Corporate Excise Tax Collections % change over year ago, 3 month moving sum 60% 40% 20% 0% -20% -40% Jul Aug Sep Oct Nov Dec Jan 2013 Feb Mar Apr May June July Aug Sep Oct Nov* * Preliminary 15

16 Estate Taxes Die Off Millions $45 $40 Quarterly Estate Tax Collections $35 $30 $25 $20 $15 $10 $5 $0 1999Q1 2001Q1 2003Q1 2005Q1 2007Q1 2009Q1 2011Q1 2013Q1

17 OR Taxable Income Extension Filers Confirm Boom in Investment Income Social Sec Unemployment Affected by Measure 66 All Other Matched Returns Sched E Pensions IRAs Cap Gains Business Interest Matched 2012 Income Tax Returns Dividends Wages -35% -25% -15% -5% 5% 15% 25% 35% 45% 55% 65% 75%

18 Hangover Expected on 2013 Tax Returns Wilshire 5000 Stock Index Realized Capital Gains ($ billions, left) ,000 20,000 15,000 10,000 5,000 0

19 Table R.1 (Millions) December 2013 Forecast Summary General Fund Forecast Summary 2013 COS Forecast September 2013 Forecast December 2013 Forecast Change from Prior Forecast Change from COS Forecast Structural Revenues Personal Income Tax $13,558.2 $13,603.5 $13,716.1 $112.6 $157.9 Corporate Income Tax $1,056.6 $1,012.0 $1,030.5 $18.5 -$26.1 All Other Revenues $1,027.9 $1,032.7 $1, $16.4 -$11.6 Gross GF Revenues $15,642.6 $15,648.2 $15,762.8 $114.6 $120.2 Offsets and Transfers -$ $ $67.5 $32.7 $53.3 Event $ Change Beginning Balance Special Session Corporate & Cigarette Tax Reform -$10.9m +$82.0m Administrative Actions 1 -$18.2 -$13.6 -$13.6 $0.0 $4.7 Legislative Actions -$ $ $136.9 $0.0 $0.0 Net Available Resources $15,910.1 $15,870.4 $16,006.9 $136.4 $96.7 Confidence Intervals 67% Confidence +/- 7.5% $1, % Confidence +/- 15.0% $2, Reflects cost of cashflow management actions, ex clusiv e of internal borrow ing. $14.58B to $16.95B $13.40B to $18.13B Special Session Personal Tax Reform Forecast Changes +$86.0m -$20.6m 19

20 Forecast Changes Difference from September forecast, $ millions $240 $210 $180 Personal Corporate Lottery Other Total $150 $ $90 $60 $30 $0 -$

21 10-Year Forecast Table R.2 General Fund Revenue Forecast Summary (Millions of Dollars, Current Law) Forecast Forecast Forecast Forecast Forecast Forecast % % % % % % Revenue Source Biennium Chg Biennium Chg Biennium Chg Biennium Chg Biennium Chg Biennium Chg Personal Income Taxes 12, % 13, % 15, % 16, % 18, % 20, % Corporate Income Taxes % 1, % 1, % 1, % 1, % 1, % All Others 1, % 1, % 1, % 1, % 1, % 1, % Gross General Fund 14, % 15, % 17, % 19, % 20, % 22, % Offsets and Transfers (12.0) (67.5) (85.6) (94.5) (57.0) (61.0) Net Revenue 14, % 15, % 17, % 18, % 20, % 22, % 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 21

22 Per Capita Income by Source for Persons below Poverty Level Income, (Income calculated for all persons at or below poverty level income.) $8,000 Wage/Salary Self-Employment Interest, Dividend, Rental Social Security Retirement Supplementary Soc. Sec. Public Assistance (Cash) All Other $7,000 $6,000 Public Assist. All Other Retirement Average income $5,000 $4,000 $3,000 Self-Employment SSI Soc. Security $2,000 Wage & Salary $1,000 Interest, Div., Rental $ Source: American Community Survey, U.S. Census Bureau Age Office of Economic Analysis 22

23 Per Capita Income by Source for ALL Persons, $50,000 Wage/Salary Self-Employment Interest, Dividend, Rental Social Security Retirement Supplementary Soc. Sec. Public Assistance (Cash) All Other $45,000 $40,000 $35,000 Self-Employment All Other Average income $30,000 $25,000 $20,000 Retirement $15,000 $10,000 $5,000 Wage & Salary Soc. Security Interest, Div., Rental $ Source: American Community Survey, U.S. Census Bureau Age Office of Economic Analysis 23

24 Biennial Revenue Growth 24% 20% 16% 12% 8% 4% 0% -4% -8% -12% PIT TOTAL 24

25 For More Information Standard Contact: 155 Cottage Street NE Salem, OR (503) Social Media: 25

Economic and Revenue Outlook: June 2014

Economic and Revenue Outlook: June 2014 May 28 th, 2014 Oregon Office of Economic Analysis Mark McMullen Josh Lehner Economic Overview 2 Strong Job Growth Recently 3.5% Oregon Employment Growth 6 Month