OregonMarch 2014 Economic & Revenue
OutlookMark McMullen & Josh Lehner
Office of Economic AnalysisFebruary 12, 2014
OregonEconomic Outlook
Economic Outlook Changes
3
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan2.45
2.50
2.55
2.60
2.65
2.70
2.75
2.80
2.85Blue Chip Consensus: 2014 Real GDP Growth
2013 2014
Businesses Profitable and Reaching Capacity
4
Motor Vehicle & Parts (3361-3)Fabricated Metal (332)
Machinery (333)Aerospace (3364-9)
Oil & Gas Extraction (211)Plastics & Rubber (326)
Primary Metal (331)Electrical Equip (335)
Food (311-2)Chemical (325)
Petroleum & Coal (324)Computer & Electronic (334)
Furniture (337)Paper (322)
Mining ex Oil & Gas (212)Printing (323)
Wood Products (321)Apparel (315-6)Textiles (313-4)
Nonmetallic Mineral (327)
-15 -10 -5 0 5 10 15
Capacity Constrained IndustriesCurrent Capacity Utilization Rate Rela-tive to Historic Rates When Capacity
Begins to Increase
-10% -5% 0% 5% 10% 15% 20%-15%
-10%
-5%
0%
5%
10%
15%
Oil & Gas
Other Mining
Food
Textiles
ApparelWood Products
Paper
Printing
Petrol/Coal
Chemical
Plastic/Rub
Nonmetallic Min
Primary Metal
Fab Metal
Machinery
Comp & Elec
Elec Equip
Motor Vehicle
Aerospace
Furniture
Constrained Industries Adding to Capacity
Capacity Change from 2011q4 to 2013q4
2013
q4 U
tiliza
tion
Rate
Rel
ative
to H
istor
ic Le
vels
whe
n Ca
pacit
y be
gins
to
Rise
How Worried Should We Be?
5
1 9 17 25 33 41 49 57 65 73 81 89 97105
1130
5
10
15
20
25
0
2
4
6
8
10
12
14
Oregon's Unemployment Rate(s)
U-6 (rhs) U-3 (lhs)
19701973
19761979
19821985
19881991
19941997
20002003
20062009
201254%
56%
58%
60%
62%
64%
66%
68%
70%
Labor Force Participation Rate16 years and older
U.S. Oregon
Labor Supply Response Expected
6
Jan-78 Jan-85 Jan-92 Jan-99 Jan-06 Jan-13-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Oregon's Labor Market6 MMA, Year-over-Year Growth
Labor Force Total Nonfarm Jan-78 Jan-85 Jan-92 Jan-99 Jan-06 Jan-13-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Labor Force Growth on the Way?Oregon Job Growth Minus Labor Force Growth
Job Growth in Oregon
7
2011 2012 2013 2014 2015 2016-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Oregon EmploymentYear-over-Year Job Gains
Private PublicGrowth Rate (rhs)
Forecast -->Columbia Gorge
Portland MSA
Northeast Oregon
Oregon
North Coast
Willamette Valley
Southeast Oregon
Southern
Central Oregon
South Coast
-20% -15% -10% -5% 0% 5%
Employment by Region Over the Great Recession
Dec '13 Relative to Peak Recession Losses
Bend and Medford slow some, but the party has reached Salem
8
Jan-80 Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10-10%
-5%
0%
5%
10%
15%Salem Private Sector Employment Growth
Private Current Rate
May-07 May-09 May-11 May-13-20%
-15%
-10%
-5%
0%
Private Sector EmploymentSeasonally Adjusted, 3 Month Moving
Average
Oregon
Medford
Bend
Housing Outlook
Short Run Stall Long Run Outlook
9
Jan-10 Jan-11 Jan-12 Jan-13-10%
-5%
0%
5%
10%
15%
20%
25%
30%
2%
3%
4%
5%
6%
Interest Rates Slow Housing's Rebound
Mortgage Rate -->30 Yr Fixed
<-- Housing Metros Permit Growth Differential
20052006
20072008
20092010
20112012
20132014
20152016
0.0
0.5
1.0
1.5
2.0
2.5
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Housing Starts Forecast
U.S. (millions, rhs) Oregon (lhs)
Outlook Remains Stable
10
2000Q1
2000Q4
2001Q3
2002Q2
2003Q1
2003Q4
2004Q3
2005Q2
2006Q1
2006Q4
2007Q3
2008Q2
2009Q1
2009Q4
2010Q3
2011Q2
2012Q1
2012Q4
2013Q3
2014Q2
2015Q1
2015Q41,550,000
1,600,000
1,650,000
1,700,000
1,750,000
1,800,000
Oregon Total Nonfarm Employment
Mar '12Sep '12Dec '13Mar '14
OregonRevenue Outlook
Forecast Evolution: Improved Economic Outlook Offset by Weak Recent Tax Collections
12
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
Mar '14
Jun '14
Sep '14
$15,800,000,000.0
$16,000,000,000.0
$16,200,000,000.0
$16,400,000,000.0
$16,600,000,000.0
$16,800,000,000.0
$17,000,000,000.0
$17,200,000,000.0
$17,400,000,000.0
$17,600,000,000.0
General and Lottery Fund Revenues2013-15 BN
Forecast Close of Session & Special Session
Jul Aug Sep Oct Nov Dec Jan 2013
Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan 2014
0%
2%
4%
6%
8%
10%
12%
14%
16%
Recent Personal Income Tax Collections% change over year ago, 3 month moving sum
13
PIT Collections Stall Heading into the Peak Tax Filing Season
* PreliminaryNote: Jan 2014 would be even weaker if not for IRS processing delay
14
Corporate Taxes: How Far Will They Fall?
Jul Aug Sep Oct Nov Dec Jan 2013
Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan 2014
-40%
-20%
0%
20%
40%
60%
80%
Corporate Excise Tax Collections% change over year ago, 3 month moving sum
Preliminary
Performance of Revenue Instruments Has Varied
15
Sec of State Fees
State Court Fees
Other Tobacco
Liquor
GF Total
Personal Income
DCBS Excess Security
Corporate
Traditional Lottery
Insurance
Video Lottery
Estate
Cigarette
Criminal Fine Account
Interest
-100% -50% 0% 50% 100% 150%
Oregon Revenue and the Great Recession
FY 14 Relative to Peak Recession Losses
OregonPersonal Income Tax Issues
Final Matched Returns for 2012
Cap Gains
Dividends
Tax to Pay
Sched E
Oregon taxable income
Pensions
Social Security
IRAs
Business
Unemployment
Wages
Interest
-40% -20% 0% 20% 40% 60% 80%
Affected by M66All Other
Hangover Expected on 2013 Tax Returns
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 220
1
2
3
4
5
6
7
8
9
10
0
5,000
10,000
15,000
20,000
25,000
Wilshire 5000 Stock Index
Realized Capital Gains ($ billions, left)
Nov Forecast
Tax Year
Dec-Jan Estimated Payments
Nonwage Income*
Q2 Final PIT Payments
2008 -28.4% -35.1% -45.4%2009 -15.2% -21.4% -2.8%2010 11.5% 11.0% 17.9%2011 5.6% 0.6% 3.3%2012 28.8% 35.6% 25.1%2013 0.1% -5.7% 8.4%
Are Low Estimated Income Tax Payments a Sign of Things to Come?
• Nonwage income includes interest, dividends, business (Sched C), capital gains, and S Corp/Rental (Sched E)• 2013 estimated PIT payments through January 29
OregonMarch 2014 Revenue Forecast Details
21
March 2014 General Fund Forecast Summary
Positive Factor
Negative Factor
Personal Income Taxes
(More Jobs)
Corporate Income
Taxes
HB3601/M67 Rainy Day
Transfer Estimate
(FY2017+)
Estate Taxes
Cigarette Taxes
Court Fees
Video Lottery
(Millions)2013 COS Forecast
December 2013 Forecast
March 2014 Forecast
Change from Prior Forecast
Change from COS Forecast
Structural RevenuesPersonal Income Tax $13,558.2 $13,716.1 $13,771.6 $55.5 $213.4
Corporate Income Tax $1,056.6 $1,030.5 $1,005.9 -$24.6 -$50.7
All Other Revenues $1,027.9 $1,016.3 $1,004.4 -$11.9 -$23.5
Gross GF Revenues $15,642.6 $15,762.8 $15,781.9 $19.0 $139.3
Offsets and Transfers -$120.8 -$67.5 -$67.3 $0.2 $53.5
Administrative Actions1 -$18.2 -$13.6 -$12.7 $0.9 $5.6
Legislative Actions -$136.9 -$136.9 -$136.9 $0.0 $0.0
Net Available Resources $15,910.1 $16,006.9 $16,027.0 $20.1 $116.9
Confidence Intervals67% Confidence +/- 6.6% $1,034.995% Confidence +/- 13.1% $2,069.9
1 Reflects cost of cashflow management actions, ex clusiv e of internal borrow ing.
2013-15 General Fund Forecast Summary
$14.75B to $16.82B$13.71B to $17.85B
Table R.1
2222
Forecast ChangesDifference from September forecast, $ millions
14.8
28.6
-27.1
-6.8
9.3
-$40
-$20
$0
$20
$40
$60
$80
2013-15 2015-17 2017-19 2019-21 2021-23
Personal Corporate Lottery
Other Total
23
10-Year Forecast
Table R.2
General Fund Revenue Forecast Summary (Millions of Dollars, Current Law)
Forecast Forecast Forecast Forecast Forecast Forecast
2011-13 % 2013-15 % 2015-17 % 2017-19 % 2019-21 % 2021-23 %
Revenue Source Biennium Chg Biennium Chg Biennium Chg Biennium Chg Biennium Chg Biennium Chg
Personal Income Taxes 12,118.2 15.8% 13,771.6 13.6% 15,464.4 12.3% 16,931.4 9.5% 18,681.3 10.3% 20,561.1 10.1%
Corporate Income Taxes 883.9 6.8% 1,005.9 13.8% 1,049.3 4.3% 1,026.9 -2.1% 1,066.8 3.9% 1,154.8 8.2%
All Others 1,164.9 -5.0% 1,004.4 -13.8% 983.1 -2.1% 1,045.7 6.4% 1,123.4 7.4% 1,189.2 5.9%
Gross General Fund 14,167.0 13.1% 15,781.9 11.4% 17,496.8 10.9% 19,004.0 8.6% 20,871.5 9.8% 22,905.1 9.7%
Offsets and Transfers (12.0) (67.3) (85.1) (79.1) (41.1) (43.1)
Net Revenue 14,155.0 13.0% 15,714.6 11.0% 17,411.7 10.8% 18,924.9 8.7% 20,830.4 10.1% 22,862.0 9.8%
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
2424
Biennial Revenue Growth
-12%
-8%
-4%
0%
4%
8%
12%
16%
20%
24%PIT TOTAL
25
For More Information
Standard Contact:
155 Cottage Street NE
Salem, OR 97301
(503) 378-3405
www.oregon.gov/das/oea
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