Presentation to the Oregon Legislature on the latest economic and revenue outlook for the State of Oregon. Overview of the U.S. and Oregon economic landscape. Tax revenue tracking and outlook for personal income taxes, corporate income taxes, Lottery sales and recreational marijuana sales.

1. December 2017
Economic & Revenue
Outlook
November 29th, 2017 Oregon Office of Economic Analysis
Mark McMullen
Josh Lehner

2. Economic Update

3. Oregon Office of
Economic Analysis
3
Economy Still Expanding…

4. Oregon Office of
Economic Analysis
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…Reaching All Corners

5. Oregon Office of
Economic Analysis
5
Every County Added
Population in 2017

6. Risks

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

8. Oregon Office of
Economic Analysis
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Population Forecast
Changes

9. Oregon Office of
Economic Analysis
9
•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
Wildfires: A Preliminary
Economic Assessment

10. Oregon Office of
Economic Analysis
10
Investors Are Not Scared
Off Yet

11. Oregon Office of
Economic Analysis
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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
Back to the Future

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

13. Oregon Office of
Economic Analysis
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Federal Tax Reform

14. Revenue Update and
Outlook

15. Oregon Office of
Economic Analysis
15
Revenues Still Growing

16. Oregon Office of
Economic Analysis
16
Stable Outlook for BI2017-19

17. Oregon Office of
Economic Analysis
17
General Fund Forecast Summary
Positive
Factor
Negative
Factor
Corporate
Excise Taxes
Personal
Income
Taxes
Estate Taxes
Lottery
(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 $17,118.5 -$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 Actions1
-$21.5 -$21.5 -$21.5 $0.0 $0.0
Legislative Actions -$180.1 -$180.1 -$180.1 $0.0 $0.0
Net Available Resources $20,055.7 $20,094.3 $20,130.9 $36.6 $75.2
Confidence Intervals
67% Confidence +/- 7.1% $1,381.5
95% Confidence +/- 14.1% $2,763.1
1 Reflects cost of cashflow management actions, exclusive of internal borrowing.
2017-19 General Fund Forecast Summary
$18.15B to $20.91B
$16.77B to $22.29B
Table R.1

18. Oregon Office of
Economic Analysis
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Forecast Changes
Difference from September Forecast, $ millions
18
18
-3.0
96.5
28.0
4.7
32.5
57.7
75.8
115.1
10.8
4.6 6.9 7.4
47.4
160.6
108.3
123.7
-$50
$0
$50
$100
$150
$200
2017-19 2019-21 2021-23 2023-25
Personal Corporate Lottery Other Total

19. Oregon Office of
Economic Analysis
19
Biennial Revenue Growth
19
19
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Personal Income Taxes Total Net Revenue

20. Oregon Office of
Economic Analysis
20
Reserves

21. Oregon Office of
Economic Analysis
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Retirements Hit Close to
Home

22. Oregon Office of
Economic Analysis
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How’s Your Earned Kicker
Average?
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
OEAHistory 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: Oregon Office of Economic Analysis
State Economist Statistics

23. Oregon Office of
Economic Analysis
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•“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.”
Paul’s Sweet Spot Forecast
May 1991

24. Oregon Office of
Economic Analysis
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Nobody Is Perfect
December 1998: “Recovery in the
semiconductor industry. Excess
capacity in the semiconductor industry
should begin to ease by 1999. 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.”
December 1998: “Rising commodity
prices. The slump in agriculture and
natural resource prices is expected to
be turning around by 2000. This will
spur higher income and job growth for
Oregon’s large agriculture and natural
resource sectors.”
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 1993.”

25. Oregon Office of
Economic Analysis
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Tom’s “Ideal Forecast” vs
His Best Forecast

26. Oregon Office of
Economic Analysis
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Contact
mark.mcmullen@oregon.gov
(503) 378-3455
joshua.lehner@oregon.gov
(503) 378-4052
www.OregonEconomicAnalysis.com
@OR_EconAnalysis