Oregon Economic and Revenue Forecast, June 2014. Presented to the House and Senate Revenue Committees May 28, 2014.

1. OFFICE OF ECONOMIC
ANALYSIS
Economic and Revenue Outlook:
June 2014
May 28th, 2014 Oregon Office of Economic Analysis
Mark McMullen
Josh Lehner

2. OFFICE OF ECONOMIC
ANALYSIS
Economic Overview
2

3. OFFICE OF ECONOMIC
ANALYSIS
Strong Job Growth Recently
3
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
2011 2012 2013 2014 2015 2016
Oregon Employment Growth
6 Month Annualized Growth
Employment 2013 COS Housing Boom Rates
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Forecast Actual
Housing and Related
Industries Growth
2014q1, Y/Y % Change

4. OFFICE OF ECONOMIC
ANALYSIS
Acceleration Outside of Portland
4
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
Jan-84 Jan-88 Jan-92 Jan-96 Jan-00 Jan-04 Jan-08 Jan-12
Oregon Employment Growth
Portland All Other

5. OFFICE OF ECONOMIC
ANALYSIS
4 of 5 Counties Adding Jobs
5
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2002 2004 2006 2008 2010 2012 2014
Oregon Counties Adding Jobs
Share of Total, Year-over-Year Gains, 2000-2014q1

6. OFFICE OF ECONOMIC
ANALYSIS
Then and Now, Pt 1
6
-12%
-10%
-8%
-6%
-4%
-2%
0%
Peak 1 Yr 2 Yr 3 Yr 4 Yr 5 yr 6 yr 7 Yr 8 Yr
PercentJobLoss
Oregon Employment Loss by Recession
'73
'01 '80
'07
'48
'53
'69
'60 '90

7. OFFICE OF ECONOMIC
ANALYSIS
Then and Now, Pt 2
7
0%
5%
10%
15%
20%
25%
1978 /
2005
1980 /
2007
1982 /
2009
1984 /
2011
1986 /
2013
1988 /
2015
Severe Recessions in Oregon
Early 80s U-6
Early 80s U-3
Great Recession U-3
Great Recession U-6
-25%
-20%
-15%
-10%
-5%
0%
Peak 5 Year 10 Year 15 Year
Oregon Manufacturing Employment
and Severe Recessions
Early 80s
Great Recession

8. OFFICE OF ECONOMIC
ANALYSIS
Net Migration Rates
(Smoothed percentage changes)
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85Age
IN Male IN Female
OUT Male OUT Female
Office of Economic Analysis

9. OFFICE OF ECONOMIC
ANALYSIS
Oregon: Gain/Loss of Aggregate Gross Income due to Migration, 2005-2006
(in million $; IRS migration data)
Total Domestic: +764.0 Foreign +$4.0
+$692.7
-$138.3
- $15.3
Northeast Region
+$54.9
South Region
+$66.5
Midwest Region
+$96.6
West Region
(excluding CA, ID, WA)
+$6.9

10. OFFICE OF ECONOMIC
ANALYSIS
Oregon: Gain/Loss of Aggregate Gross Income due to Migration, 2010-2011
(in million $; IRS migration data)
Total Domestic: +271.0 Foreign -$5.2
+$206.4
-$87.5
- $6.8
Northeast Region
+$53.9
South Region
+$19.9
Midwest Region
+$79.9
West Region
(excluding CA, ID, WA)
+$5.1

11. OFFICE OF ECONOMIC
ANALYSIS
Oregon’s Brain Gain
11
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Less than HS Graduated HS Some College Associate's
Degree
Graduated
College
Masters, Prof or
PhD
Estimated Odds Ratios: Relative Probability of Moving Compared to
Someone Without a Degree
In Migrants
Out Migrants
Logit Model Based on 2010-2012 ACS Data

12. OFFICE OF ECONOMIC
ANALYSIS
Where Young People Come to
Retire?
12
Logit Model Based on 2010-2012 ACS Data
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Employed Unemployed Not In Labor Force
Estimated Odds Ratios: Relative Probability of Moving
Compared to Employed Adults
In Migrants
Out Migrants

13. OFFICE OF ECONOMIC
ANALYSIS
Revenue Outlook
13

14. OFFICE OF ECONOMIC
ANALYSIS
$15.8
$16.0
$16.2
$16.4
$16.6
$16.8
$17.0
$17.2
$17.4
$17.6
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
Billions
General and Lottery Fund Revenues
2013-15 BN
Forecast Close of Session & Special Session
Forecast Evolution: Improved Economic
Outlook Leads to More Expected Revenue
14

15. OFFICE OF ECONOMIC
ANALYSIS
Fewer Payments Come In…
15
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
January February March April May June
Millions
Year-End Tax Payments Run Out of Steam in Late April
Cumulative Personal Income Tax Payments
2010 2011 2012 2013 2014
Forecast

16. OFFICE OF ECONOMIC
ANALYSIS
…and Fewer Go Out
16
-$1,000
-$900
-$800
-$700
-$600
-$500
-$400
-$300
-$200
-$100
$0
January February March April May June
Millions
Refund Checks Were Small this Year
Personal Income Tax Refunds, Cumulative
2012 2013 2014
Forecast

17. OFFICE OF ECONOMIC
ANALYSIS
Corp Collections Spring to Life
17
-40%
-20%
0%
20%
40%
60%
80%
Jul Aug Sep Oct Nov Dec Jan
2013
Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan
2014
Feb Mar Apr May
Corporate Excise Tax Collections
% change over year ago, 3 month moving sum
Preliminary

18. OFFICE OF ECONOMIC
ANALYSIS
Matched 2013 Tax Returns
% Change Relative to 2012
18
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Dividends Taxable IRAs Capital Gains Business Wages Sched E Oregon
Taxable
Income
Oregon Tax
After Credits
Affected by M66 in 2013 and/or 2012
(2.2% of filers, 23% of tax burden)
Total
Not Affected by M66

19. OFFICE OF ECONOMIC
ANALYSIS
19
The Tricky Part
8.4%
0.2%
11.9%
15.2%
-36.6%
5.3%
11.2%
30.8%
49.4%
-1.0%
24.6%
-45.4%
-2.8%
17.9%
3.3%
25.1%
-6.8%
28.3%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Growth in Year-End Personal Income Tax Payments, April-June Quarter, %

20. OFFICE OF ECONOMIC
ANALYSIS
Capital Gains: Ready for Takeoff?
20
0
5000
10000
15000
20000
25000
30000
0
2,000,000,000
4,000,000,000
6,000,000,000
8,000,000,000
10,000,000,000
12,000,000,000 1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Wilshire 5000 Stock Price Index (Right)
Oregon Capital Gains Realizations (Left)

21. OFFICE OF ECONOMIC
ANALYSIS
Volatility: Risk vs Return
• Major Tax Instrument
(FY12)
• WA Retail Sales: 45% of GF
• OR Personal Income: 85%
• Volatile but growth
advantage builds over
time
• How do you value stability
vs return?
21
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Washington Retail
Sales
Oregon Personal
Income
Revenue Growth
FY85 - FY13
5.6%
7.5%

22. OFFICE OF ECONOMIC
ANALYSIS
Aging Revenues
22
$
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
Under
25
years
25-34
years
35-44
years
45-54
years
55-64
years
65-74
years
75 years
and older
Income and Spending by Age
2012 Consumer Expenditure Survey, All Consumer Units
Income Expenditures Taxable Income General Sales Tax Base
-80% -60% -40% -20% 0% 20%
Health care
Reading
Cash Contributions
Miscellaneous
Personal care
Housing
Food
TOTAL
Entertainment
Transportation
Alcoholic beverages
Apparel and services
Tobacco & supplies
Insurance & pensions
Education
Expenditure Chage for 65+ Households
Relative to 55-64 Year Old Households

23. OFFICE OF ECONOMIC
ANALYSIS
Border Tax Differential
23

24. OFFICE OF ECONOMIC
ANALYSIS
(Millions)
2013 COS
Forecast
March 2014
Forecast
June 2014
Forecast
Change from
Prior Forecast
Change from
COS Forecast
Structural Revenues
Personal Income Tax $13,558.2 $13,771.6 $13,816.7 $45.0 $258.5
Corporate Income Tax $1,056.6 $1,005.9 $1,007.6 $1.7 -$49.0
All Other Revenues $1,027.9 $1,004.4 $990.7 -$13.6 -$37.1
Gross GF Revenues $15,642.6 $15,781.9 $15,815.0 $33.1 $172.4
Offsets and Transfers -$120.8 -$67.3 -$72.7 -$5.4 $48.1
Administrative Actions1
-$18.2 -$12.7 -$12.7 $0.0 $5.6
Legislative Actions -$136.9 -$136.9 -$136.9 $0.0 $0.0
Net Available Resources $15,910.1 $16,027.0 $16,079.5 $52.5 $169.4
Confidence Intervals
67% Confidence +/- 5.1% $802.9
95% Confidence +/- 10.2% $1,605.8
1 Reflects cost of cashflow management actions, exclusive of internal borrowing.
2013-15 General Fund Forecast Summary
$15.01B to $16.62B
$14.21B to $17.42B
Table R.1
24
June 2014 General Fund
Forecast Summary
Positive
Factor
Negative
Factor
More Jobs =
More
Personal
Income
Taxes
February
Session
Appropriations
($125 mil)
BI2011-13
General Fund
Reversions
($24.8 mil)
Estate Taxes
2013 Income
Tax Refunds
2013 Income
Tax Final
Payments
Gain Share

25. OFFICE OF ECONOMIC
ANALYSIS
2525
Forecast Changes
Difference from March forecast, $ millions
54.5
135.8
88.7 88.8
99.7
-$50
-$25
$0
$25
$50
$75
$100
$125
$150
$175
2013-15 2015-17 2017-19 2019-21 2021-23
Personal Corporate
Lottery Other
Total

26. OFFICE OF ECONOMIC
ANALYSIS
26
10-Year Forecast
Table R.2
General FundRevenue 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% 13,816.7 14.0% 15,627.4 13.1% 17,055.8 9.1% 18,810.5 10.3% 20,717.3 10.1%
Corporate Income Taxes 883.9 6.8% 1,007.6 14.0% 1,046.6 3.9% 1,012.3 -3.3% 1,041.5 2.9% 1,114.3 7.0%
All Others 1,164.9 -5.0% 990.7 -14.9% 967.9 -2.3% 1,027.8 6.2% 1,104.7 7.5% 1,170.5 6.0%
Gross General Fund 14,167.0 13.1% 15,815.0 11.6% 17,641.9 11.6% 19,095.9 8.2% 20,956.7 9.7% 23,002.2 9.8%
Offsets and Transfers (12.0) (72.7) (95.9) (83.8) (39.0) (42.1)
Net Revenue 14,155.0 13.0% 15,742.3 11.2% 17,546.0 11.5% 19,012.1 8.4% 20,917.6 10.0% 22,960.0 9.8%
Other taxes include General Fund portions of the Eastern Oregon Severance Tax, Western Oregon Severance Tax and Amusement Device Tax.
Commercial Fish Licenses & Fees and Pari-mutual Receipts are included in Other Revenues

27. OFFICE OF ECONOMIC
ANALYSIS
2727
Biennial Revenue Growth
-12%
-8%
-4%
0%
4%
8%
12%
16%
20%
24%
PIT TOTAL

28. OFFICE OF ECONOMIC
ANALYSIS
28
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