Economic and Revenue Outlook: March 2016

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1 Economic and Revenue Outlook: March 2016 February 10 th, 2016 Oregon Office of Economic Analysis Mark McMullen Josh Lehner

2 Recent Performance 2

3 U.S. Economy Still in Expansion 3

4 Best Leading Indicator 4

5 Industrial Production is Weak Date # Neg. Nov May Dec Feb Apr Jul Dec

6 Oregon: Not Immune to Global Issues 6

7 Oregon s Labor Market 7

8 Traditional Advantage Regained 8

9 Most Regions Full Throttle 9

10 Translates into Stronger Income Gains Wage Gains Broad Based, Not Due to Composition Effects 10

11 Participation: Mostly Structural 11

12 Businesses Casting Wider Net 12

13 Economic Outlook 13

14 Revenue Trends 14

15 Personal Income Tax Collections Remain Healthy 15

16 Corporate Taxes Turn Down $700,000 Net Corporate Taxes ($ Mil, 12 month sum) $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $

17 Herein Lies the Problem Stock Prices and Oregon Taxable Capital Gains March 2016 Wilshire 5000 Stock Price Forecast (Right) Dec 2015 Wilshire 5000 Stock Price Forecast (Right) March 2016 Cap Gains Forecast ($ bil) Dec 2015 Cap Gains Forecast ($ bil) 30,000 25,000 20,000 15, , ,

18 Here Comes April Tax Year Dec-Jan Estimated Payments ($ mil) % change Non-Labor Income* (% change) Q2 Final PIT Payments (% change) % -35.4% -45.4% % -22.2% -2.8% % 10.9% 17.9% % 0.9% 3.3% % 36.0% 25.1% % -5.2% -7.0% % 23.4% 15.9% % 12.2% 8.5% Forecast 18

19 Jackpot! 14,000,000 PB_SALES Oregon Weekly Powerball Sales 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,

20 Surprising Cigarette Sales 20

21 Revenue Outlook 21

22 Billions Forecast Evolution General and Lottery Fund Resources Evolution by Forecast Release Date Forecast Including Tax Law Changes at Close of Session $19.8 $19.6 $19.4 $19.2 $19.0 $18.8 $18.6 $18.4 $18.2 $18.0 $17.8 $17.6 Dec '10 May 13 Mar '16 22

23 March 2016 General Fund Forecast Summary Table R General Fund Forecast Summary (Millions) 2015 COS Forecast December 2015 Forecast March 2016 Forecast Change from Prior Forecast Change from COS Forecast Structural Revenues Personal Income Tax $15,713.5 $15,712.4 $15, $20.3 -$21.4 Corporate Income Tax $1,100.0 $1,134.7 $1, $0.4 $34.3 All Other Revenues $1,184.6 $1,182.0 $1, $2.1 -$4.7 Gross GF Revenues $17,998.1 $18,029.1 $18, $22.8 $8.3 Offsets and Transfers -$42.8 -$43.0 -$43.2 -$0.2 -$0.4 Administrative Actions 1 -$20.2 -$20.2 -$14.0 $6.2 $6.2 Legislative Actions -$ $ $158.3 $0.6 $0.6 Net Available Resources $18,309.1 $18,283.6 $18,319.6 $36.0 $10.5 Positive Factor Lottery Sales Estate Taxes Criminal Fines Spending Adjustments Negative Factor Personal Income Taxes Liquor Court Fees Confidence Intervals 67% Confidence +/- 6.4% $1, % Confidence +/- 12.7% $2, Reflects cost of cashflow management actions, ex clusiv e of internal borrow ing. $16.86B to $19.15B $15.72B to $20.30B Full Impact: $36.0 Net Increase Less $16.0 Additional Spending Plus $24.8 Lottery Funds 23

24 Forecast Changes Difference from December Forecast, $ millions $100 $50 Personal Corporate Lottery Other Total 27.6 $0 -$ $100 -$150 -$

25 Reserves Gen. Fund Ending Balance Educ. Stability Fund Rainy Day Fund $1.6 Forecast --> 8% $1.4 $1.2 $1.0 $0.8 $0.6 $0.4 $0.2 $0.0 Oregon Budgetary Reserves (billions) Percent of General Fund --> BN BN BN BN BN Source: Oregon Office of Economic Analysis BN BN BN BN BN 6% 4% 2% 0% Effective Reserves ($ millions) Feb 2016 End ESF $257.5 $375.5 RDF $212.4 $386.5 Reserves $469.9 $762.1 Ending Balance $319.0 $319.0 Total $788.9 $1,081.0 % of GF 4.4% 6.0% 25

26 Biennial Revenue Growth 25% 20% 15% 10% 5% 0% -5% -10% -15% Personal Income Taxes Total General Fund 26 26

27 For More Information Standard Contact: 155 Cottage Street NE Salem, OR (503) Social Media: 27

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