Five-Year Forecast. Greg Grootendorst, Chief Economist, Hampton Roads Planning District Commission

Size: px

Start display at page:

Download "Five-Year Forecast. Greg Grootendorst, Chief Economist, Hampton Roads Planning District Commission"

Angelica Jordan
5 years ago
Views:

1 Five-Year Forecast Greg Grootendorst, Chief Economist, Hampton Roads Planning District Commission Farrell Hanzaker, Chief Financial Officer, Virginia Beach Schools David Bradley, Director of Budget and Management Services

2 Hampton Roads Economic Briefing Presented to the Virginia Beach City Council Greg Grootendorst Chief Economist, HRPDC November 20, 2018

3 Billions of Dollars (2009) U.S. Gross Domestic Product 19,000 18,500 18,000 17,500 Prerecession High: $15.8 Trillion Current Value: $18.7 Trillion 17,000 16,500 16,000 Recession Low: $15.1 Trillion 15,500 15,000 14,500 GDP is up 23.8 % from the recession low 14,000 Source: Bureau of Economic Analysis and HRPDC

4 Thousands of Employees U.S. Non-Farm Civilian Employment 155, , , , , , , , ,000 Prerecession High: 138,432,000 Recession Low: 129,733,000 Current Value: 149,750,000 Payroll employment has grown steadily at an annualized rate of 1.7 % since the recession low. Source: Bureau of Labor Statistics and HRPDC

5 Unemployment Rate U.S. Unemployment Rate 12% 10% Prerecession Low: 4.4% Recession High: 10.0% 8% 6% Current Value: 3.7% 4% 2% 0% The unemployment rate has been reduced by over half since the height of the recession and is now well below re-recession levels. Source: Bureau of Labor Statistics and HRPDC

6 Index Value S&P 500 Stock Market Index 3,500 3,000 Prerecession High: 1,549.4 Current Value: 2, ,500 2,000 Recession Low: ,500 1, The S&P stock market index is 270% from the pre-recession low, and up 76% from the pre-recession high 0 Source: Yahoo Finance and HRPDC

7 Percent Job Loss Relative to Peak Employment Decline and Recovery 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% U.S. Virginia Hampton Roads Months Since Peak Employment Source: Bureau of Labor Statistics and HRPDC

8 Billions of 2009 Dollars Hampton Roads Gross Product $90 $85 $80 $83.6B -2.1% $81.8B $75 $70 $65 $60 $55 Non- Zero Axis $50 Source: Bureau of Economic Analysis, and HRPDC

9 Annualized Change in Gross Product ( ) Annualized Growth in Gross Product (Inflation-Adjusted) 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% -1% Hampton Roads: 0.8% Metropolitan Areas with Population between 1 and 4 Million Source: Bureau of Economic Analysis, and HRPDC

Seasonally Adjusted Payrolls, Thousands Nonfarm Civilian Employment (Jobs) 800 790 780 770 760 750 740 730 720 710

10 Seasonally Adjusted Payrolls, Thousands Nonfarm Civilian Employment (Jobs) in Hampton Roads 781,600 Jul, ,800 Feb, ,400 Sep, 2018 Source: Bureau of Labor Statistics and HRPDC

Finance & Insurance State Government Administrative & Support Retail Trade Manufacturing Real Estate & Leasing

11 Hampton Roads Employment Change August 08 August 18 Healthcare & Social Federal Government Scientific & Technical Leisure & Hospitality Other Services Management Education Services Transportation & Utilities Finance & Insurance State Government Administrative & Support Retail Trade Manufacturing Real Estate & Leasing Wholesale Trade Information Construction Local Government Change in Employment Source: Bureau of Labor Statistics and HRPDC

Hampton Roads Employment Change August 17 August 18 Scientific & Technical Manufacturing Administrative & Support Leisure & Hospitality Management Retail Trade Transportation & Utilities Other

12 Hampton Roads Employment Change August 17 August 18 Scientific & Technical Manufacturing Administrative & Support Leisure & Hospitality Management Retail Trade Transportation & Utilities Other Services Construction State Government Wholesale Trade Finance & Insurance Information Federal Government Real Estate & Leasing Education Services Local Government Healthcare & Social Change in Employment Source: Bureau of Labor Statistics and HRPDC

13 Unemployment Rate Unemployment Rates Seasonally Adjusted 12% 10% U.S. Hampton Roads Virginia 8% 6% 4% 2% 0% Source: Bureau of Labor Statistics and HRPDC

14 Ratio of Hampton Roads PCI to U.S. & Virginia Relative Per Capita Income 110% 105% 100% 95% 90% 85% 80% 75% Share of US PCI Share of Virginia PCI 105% 92% 96% Source: Bureau of Economic Analysis, and HRPDC

15 Income in 2017 Dollars Median Family Incomes $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Hampton Roads U.S. Source: U.S. Census Bureau and HRPDC

16 Billions of Real Dollars (2017 $'s) Annualized Real Defense Outlays (U.S. Quarterly Data, Seasonally Adjusted) $1,000 $900 $800 $700 $600 Korean Vietnam War 80's Cold War Buildup War on Terror $500 $400 $300 $200 $100 $0 Source: Bureau of Economic Analysis and HRPDC

Hampton Roads Military Personnel Military

160,000 140,000 120,000 Hampton Roads U.S.

60,000 40,000 20,000 0 2,500,000 2,000,000

17 Hampton Roads Military Personnel Military Personnel in HR and the U.S. 160, , ,000 Hampton Roads U.S. 4,000,000 3,500,000 3,000, ,000 80,000 60,000 40,000 20, ,500,000 2,000,000 1,500,000 1,000, ,000 0 U.S. Military Personnel Source: Bureau of Economic Analysis and HRPDC

18 Millions of 2016 Dollars (5-Year Moving Average) Defense Contracts in Hampton Roads (Inflation-Adjusted) $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Fiscal Year Source: USAspending.gov and HRPDC

19 Millions of Short Tons General Cargo in Hampton Roads Containers: Ships: Share: Exports Imports 0 Source: Port of Virginia and HRPDC

20 Billions of 2017 Dollars Tourism Expenditures in HR $6.0 $5.0 (Inflation-Adjusted) 13.2% $4.0 $3.0 $2.0 $1.0 Hotel Revenue: Down 2.9% in 10 Years Employment: Up 6.6% in 10 years $0.0 Source: Virginia Tourism Corporation and HRPDC

Billions of Dollars of Sales (Seasonally Adjusted) Hampton Roads Retail Sales $2.2 $2.0 $1.8-12.7% +11.8% +28.0% $1.6 $1.4 $1.

21 Billions of Dollars of Sales (Seasonally Adjusted) Hampton Roads Retail Sales $2.2 $2.0 $ % +11.8% +28.0% $1.6 $1.4 $1.2 Annualized growth rate of 1.2% since 2006 Inflation adjusted annualized growth rate of -1.1% since 2006 Source: Virginia Department of Taxation and HRPDC

22 Year-over-Year Growth in HPI 30% 25% 20% 15% 10% 5% 0% -5% -10% Home Price Indexes Hampton Roads Virginia U.S. Source: Fair Housing Finance Agency and HRPDC

23 Housing Opportunity Index (% of Homes Sold Affordable to a Median Income Family) NAHB/Wells Fargo Hampton Roads Housing Opportunity Index Source: National Association of Homebuilders and HRPDC

Population Hampton Roads Population 2,000,000 1,800,000 2017 --

600,000 400,000 200,000 0 1960 -- 927,854 1.8% 0.9% 1.8% 0.8% 0.6% 0.

24 Population Hampton Roads Population 2,000,000 1,800, ,729,326 1,600,000 1,400,000 1,200,000 1,000, , , , , , % 0.9% 1.8% 0.8% 0.6% 0.5% 1.8% Source: Weldon Cooper Center for Public Service and HRPDC

Age Categories Hampton Roads Population Histogram 85 years

69 years 60 to 64 years 55 to 59 years 50 to 54 years 45 to

29 years 20 to 24 years 15 to 19 years 10 to 14 years 5 to 9

25 Age Categories Hampton Roads Population Histogram 85 years and over 80 to 84 years 75 to 79 years 70 to 74 years 65 to 69 years 60 to 64 years 55 to 59 years 50 to 54 years 45 to 49 years 40 to 44 years 35 to 39 years 30 to 34 years 25 to 29 years 20 to 24 years 15 to 19 years 10 to 14 years 5 to 9 years Under 5 years (Greatest) Silent Boomers 1.8% 0.9% 1.8% 0.8% 0.6% Females 0.5% Next.. 1.8% Gen X Millen Males 100,000 50, , ,000 Population Source: U.S. Census Bureau and HRPDC

2000 2001 2002 2003 2004 2005 2006 2007 2008 2008* 2009* 2010* 2011* 2012* 2013* 2014* 2015* 2016* 2017* 2018* 4 Year Graduation Rate Graduation Rates 100% 90% 80% 70% 60% 50% 40% 30% 20%

26 * 2009* 2010* 2011* 2012* 2013* 2014* 2015* 2016* 2017* 2018* 4 Year Graduation Rate Graduation Rates 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Hampton Roads Virginia Graduation Rate Virginia Graduation Rate- Cohort * Dates are Graduation Rates Calculated Using the Cohort Method Source: Virginia Department of Education and HRPDC

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2017 Dollars Per Pupil Per Pupil School Spending (Inflation-Adjusted)

27 Dollars Per Pupil Per Pupil School Spending (Inflation-Adjusted) $14,000 $12,000 $10,000 Hampton Roads Virginia Forecast $8,000 $6,000 $4,000 $2,000 $0 Source: Virginia Department of Education, Bureau of Economic Analysis and HRPDC

28 Education Hampton Roads U.S. Average Highschool Equivalence 91.5% 88.0% College Attainment 32.1% 32.0% Graduate or Professional Degree 12.3% 12.3% Source: U.S. Census Bureau and HRPDC

29 Government Finances 160% 140% 120% 100% 80% 60% 40% 20% 0% Source: Auditor of Public Accounts and HRPDC

30 Quality of Life in Hampton Roads Hampton Roads vs. United States Violent Crime Poverty Rate Ozone Levels 86% 87% 89% Source: Auditor of Public Accounts and HRPDC

31 2017 American Community Survey Data for Hampton Roads HR Rank in the Comparable Metro Areas 8.3 % 45.9% 18.3% % of Labor Force in the Armed Forces % Who Worked Outside County of Residence % of Population that Moved in the Past Year Highest Value Lowest Value $32, % Per Capita Income % of People Who Have a Bachelor's Degree Median Age Gini Coefficient (Measure of Income Equality)

32 Virginia Beach Population Histogram 85 years and over 80 to 84 years 75 to 79 years 70 to 74 years 65 to 69 years 60 to 64 years 55 to 59 years 50 to 54 years 45 to 49 years 40 to 44 years 35 to 39 years 30 to 34 years 25 to 29 years 20 to 24 years 15 to 19 years 10 to 14 years 5 to 9 years Under 5 years Female Male 30,000 20,000 10, ,000 20,000 30,000 Source: U.S. Census Bureau and HRPDC

33 Virginia Beach Population Growth 500, , , , , , , , ,000 50, , ,628 Source: Weldon Cooper Center and HRPDC

34 Year Annualized Growth Rate Population Growth Rates 7.0% 6.0% 5.0% 4.0% 3.0% Hampton Roads Virginia United States Virginia Beach 2.0% 1.0% 0.0% Source: Weldon Cooper Center, U.S. Census Bureau, and HRPDC

35 Industry Employment in VB Undisclosed Accommodation and Food Retail Trade Health Care & Social Ast. Educational Services Professional, Scientific & Tech Administrative & Support Construction Finance and Insurance Public Administration Other Services Manufacturing Arts, Entertainment & Rec Real Estate & Rental & Leasing Wholesale Trade Information Management of Companies Transportation & Warehousing Agriculture, Forestry & Fishing Source: Bureau of Labor Statistics and HRPDC

36 10 Year Change in VB Employment Agriculture, Forestry & Fishing Health Care & Social Ast. Accommodation and Food Arts, Entertainment & Rec Public Administration Professional, Scientific & Tech Management of Companies Other Services Educational Services Finance and Insurance Manufacturing Retail Trade Transportation & Warehousing Administrative & Support Information Real Estate & Rental & Leasing Construction Wholesale Trade -40% -20% 0% 20% 40% 60% 80% Source: Bureau of Labor Statistics and HRPDC

37 How Does Virginia Beach Compare? Unemployment Rate Not in Labor Force 10 - Year Employment Growth 10 - Year Population Growth Median Household Income Owner-Occupied Housing Rate Average Family Size Median Age Virginia Beach 2.8% 30.1% 2.7% 5.6% $ 72,586 65% Hampton Roads 3.2% 32.9% 0.6% 5.8% $ 60,059 61% Virginia 3.0% 33.8% 4.8% 9.0% $ 66,149 66% United States 3.7% 36.5% 6.3% 8.1% $ 55,322 64%

38 Millions of Jobs U.S. Civilian Employment Years 10 Years 9.5 Years 0 Recessions Source: National Bureau of Economic Research, Bureau of Labor Statistics and HRPDC

39 Annualized Percent Change Forecast of U.S. Gross Domestic Product 8% 6% 4% 2% 0% -2% -4% -6% -8% Consensus Forecast Source: Blue Chip Economic Indicators and HRPDC

40 Billions of Inflation-Adjusted Dollars (2012) Federal Budget Deficits $400 $200 $0 -$200 -$400 -$600 -$800 -$1,000 -$1,200 -$1,400 -$1,600 -$1,800 On-Budget Deficit Total Deficit Forecast Source: Congressional Budget Office and HRPDC

41 Sources: HRPDC, HRTPO, and the U.S. Census Bureau

42 Sources: HRPDC, HRTPO, and the U.S. Census Bureau

43 Schools Operating Budget

44 VBCPS Key Budget Assumptions Revenue Highlights Local, State and Federal Revenue This forecast reflects increases in revenue at the state and local levels and continues to reverse the impact of significant cuts VBCPS has sustained since 2008 Other Revenue Sources State Shared Sales Tax +2.5% +2.75% +2.75% +3.0% +3.0% Other State Revenue +2.5% +2.75% +2.75% +3.0% +3.0% Local Revenue (RSF) * +1.06% +2.24% +2.27% +2.25% +2.25% Federal Revenue Anticipate reducing the reliance on reversion funding by $1 million each year of the forecast period

45 Expenditure Highlights Personnel Services and Fringe Benefits Salary increase of 3.0% for FY and 2.0% for each of the forecast years from FY to FY Health insurance rates are projected to rise by 3% each year from FY to FY Funding to continue the expansion of full-day kindergarten will be allocated each forecast year from FY to FY Non-Personnel Expenses All non-personnel budget line items impacted by inflation are expected to increase by approximately 2.5% each year of the forecast period Capital outlay expenditures are expected to increase by approximately $450,000 to purchase five additional replacement school buses each year from FY to FY

46 The following list highlights examples of factors that place considerable pressure on the School Operating budget. Programmatic Priorities - expansion of existing programs or adding new programs (e.g. expansion of preschool and full-day kindergarten) Technology - replace broken and aging whiteboards with standalone interactive displays Employee Compensation - competitive pay increases, primarily associated with increasing allowances for advanced degrees, reclassifying teacher assistants and moving selected positions to the Teacher Pay Scale Employee Benefits - rising costs associated with health care State and Federal Mandates - new financial transparency provision in the Every Student Succeeds Act of 2015 (ESSA)

47 Lagging State Funding - state budget allocates nine percent less on K-12 instruction than it did in 2005 School Safety need resources targeted to help fund VBCPS security enhancements and address recommendations from the Blue Ribbon Panel on School Safety and Security Structurally Flawed Operating budget strategy - FY 2018/19 marks the ninth consecutive year VBCPS is relying on one-time reversion funds for ongoing expenses ($6.8 million) Enrollment and demographics - slow decline in student enrollment projected to continue

48 Projected Deficits Utilizing the revenue and expenditure assumptions from the previous slide, VBCPS is projecting the following deficits over the forecast period. 940,000, ,000, ,000, ,000, ,000, ,000,000 ( 9,817,279 ) ( 10,217,160 ) ( 10,563,310 ) ( 9,913,185 ) ( 7,039,690 ) 12,000,000 10,000,000 8,000,000 6,000, ,000, ,000,000 4,000, ,000,000 2,000, ,000, ,000,000 - FY Adopted FY Forecast FY Forecast FY Forecast FY Forecast FY Forecast - Revenue Expenditures Baseline Deficit

49 VBCPS Forecasted Revenue FY Adopted FY Forecast FY Forecast FY Forecast FY Forecast FY Forecast Revenue Sharing Formula 442,120, ,791, ,785, ,174, ,671, ,438,456 Schools Use of Sandbridge TIF 409, , From the Use of Money and Property 477, , , , , ,000 Charges for Services 2,816,638 2,816,638 2,816,638 2,816,638 2,816,638 2,816,638 Miscellaneous Revenue 224, , , , , ,703 State Shared Sales Tax 75,344,490 77,228,102 79,351,875 81,534,052 83,980,073 86,499,475 Other State Revenue 272,725, ,276, ,149, ,238, ,305, ,644,689 Federal Revenue 12,200,000 12,200,000 12,200,000 12,200,000 12,200,000 12,200,000 School Reversion/Fund Balance 6,800,000 5,800,000 4,800,000 3,800,000 2,800,000 1,800, ,117, ,223, ,805, ,465, ,475, ,100, VBCPS Forecasted Expenditures FY Adopted FY Forecast FY Forecast FY Forecast FY Forecast FY Forecast Personnel Services 471,393, ,534, ,850, ,391, ,164, ,567,614 Fringe Benefits FICA 35,882,382 37,143,422 38,009,044 38,891,978 39,792,571 40,588,422 VRS 71,058,250 76,131,876 77,906,118 79,715,845 81,561,767 83,193,002 Health Insurance 60,655,983 62,475,662 64,349,932 66,280,430 68,268,843 70,316,909 Life Insurance 5,820,627 6,360,507 6,508,738 6,659,933 6,814,153 6,950,436 All Other Fringe Benefits 3,299,581 3,299,581 3,299,581 3,299,581 3,299,581 3,299,581 Contractual Services 50,138,408 51,391,868 52,676,665 53,993,582 55,343,421 56,727,007 Other Charges 54,852,900 56,224,223 57,629,828 59,070,574 60,547,338 62,061,022 Capital Outlay 5,402,082 5,852,082 6,302,082 6,752,082 7,202,082 6,085,421 Land, Structures and Improvement 222, , , , , ,577 PAYGO 500,000 Debt Service 41,951,320 45,356,997 45,153,910 45,569,058 45,921,986 47,807,686 Transfers to Other Funds Athletics Fund 4,524,774 4,524,774 4,524,774 4,524,774 4,524,774 4,524,774 Categorical Grants Fund 3,612,280 3,612,280 3,612,280 3,612,280 3,612,280 3,612,280 Green Run Collegiate Fund 3,803,031 3,910,143 3,976,468 4,044,186 4,113,327 4,183, ,117, ,040, ,022, ,028, ,389, ,140,651

50 General Fund Revenues

51 Millions Real Estate $700 $650 $600 $577 $550 $500 $450 $400 $350 $300 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 Budget Actual Projection

52 Millions Personal Property $200 $190 $180 $174 $170 $160 $150 $140 $130 $120 $110 $100 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 Budget Actual Projection

53 Millions Consumer Driven Revenues $80 $70 $74 $60 General Sales $57 $50 $40 $30 BPOL Restaurant $50 $20 $10 Hotel $9 $- FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 Budget Actual Projection

54 Millions Telecommunications $35 $30 $25 $22 $20 $15 $10 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 Budget Actual Projection

55 Millions State Revenue $140 $130 $120 $110 $111 $100 $90 $80 $70 $60 $50 $40 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 Budget Actual Projection

56 Millions Federal $30 $28 $26 $24 $22 $23 $20 $18 $16 $14 $12 $10 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 Budget Actual Projection

57 3% salary increase in FY 20; 2% for following years 2.5% inflation each year 1% rate increase in VRS every 2 years beginning in FY 21 3% annual increase in healthcare costs City CIP and Operating Budget commitments Debt based on current debt schedules and projected issuances

58 Budgeting for Attrition Virginia Beach has historically budgeted for full salaries and used savings from attrition (fund balance) in following years of the CIP In FY 19: $2.3 million in attrition savings to offset the elimination of cigarette and automobile license tax $3 million in attrition savings for horizontal and vertical compression Key issues to consider: Impact on future CIP Flexibility during economic downturn Safeguard AAA bond rating

59 Billions General Fund Expenses and Revenue Five Year Forecast $1.34 $1.31 $1.28 $1.25 $1.22 $1.19 $1.306 $1.274 $1.16 $1.13 $1.10 $1.152 $9.2M $17.4M $19.2M $28.5M $32.3M FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Revenues Expenditures

60 Median Household Income $90,000 $85,000 $80,000 $75,000 $72,586 $70,000 $65,000 $60,000 $61,399 $55,000 $50,000 $45, Median Household Income Adjusted to 2007 Dollars

61 Millions Operating Budget Adjusted for Inflation $2,100 $2,000 $1,900 $1,915 $1,800 $1,700 $1,600 $1,611 $1,628 $1,623 $1,500 $1,400 $1, Fiscal Year Budget Inflation Adjusted (Constant Dollars)

62 City Operating Budget vs Median Household Income 20% 18.10% 15% 16.80% 10% 5% 0% -5% Operating Budget Growth Median Household Income Growth

63 Relative Measures of Tax Burden Relative Measures of Tax Burden Locality Per Capita Expenditures as a % of Per Capita Income Virginia Beach 6.32% Chesapeake 7.21% Hampton 9.36% Newport News 9.39% Norfolk 8.84% Portsmouth 9.44% Suffolk 7.39%

64 Future Recession?

65 Regional economy improving but still lagging behind other MSAs Budget process will address deficits Future decisions Decision on compensation increases Budgeting for attrition Possible recession on the horizon? Enterprise Fund discussion forthcoming (March)

66 Questions?

Old Dominion University 2016 Regional Economic Forecast. Strome College of Business

Old Dominion University 2016 Regional Economic Forecast January 27, 2016 Professor Vinod Agarwal Director, Economic Forecasting Project Strome College of Business www.odu.edu/forecasting 1 Presentation