The document is an economic and revenue outlook report from Oregon. It provides an overview of Oregon's economic outlook, noting improvements in the Blue Chip consensus forecast for 2014 GDP growth. It discusses industries adding capacity as businesses become profitable and reach capacity constraints. The report examines Oregon's unemployment rates and declining labor force participation. It forecasts expected labor supply response and growth in jobs outpacing growth in the labor force. The report also provides details on Oregon's revenue outlook, personal income tax issues, and a 10-year revenue forecast summary.

1. Oregon
March 2014 Economic & Revenue
Outlook
February 12, 2014
Mark McMullen & Josh Lehner
Office of Economic Analysis

2. Oregon
Economic Outlook

3. Economic Outlook Changes
Blue Chip Consensus: 2014 Real GDP Growth
2.85
2.80
2.75
2.70
2.65
2.60
2.55
2.50
2.45
Jan
2013
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
2014
3

4. Businesses Profitable and
Reaching Capacity
Constrained Industries Adding to Capacity
Capacity Constrained Industries
Current Capacity Utilization Rate Relative to Historic
Rates When Capacity Begins to Increase
2013q4 Utilization Rate Relative to Historic Levels when Capacity begins
to Rise
15%
Motor Vehicle
-15
Oil & Gas
Food
0%
15
Aerospace (3364-9)
Plastics & Rubber (326)
Plastic/Rub
Primary Metal (331)
Chemical
Comp & Elec
Electrical Equip (335)
Petrol/Coal
Food (311-2)
Paper
Chemical (325)
Petroleum & Coal (324)
Printing
-5%
10
Oil & Gas Extraction (211)
Elec Equip
Furniture
5
Machinery (333)
Aerospace
Primary Metal
0
Fabricated Metal (332)
Machinery
5%
-5
Motor Vehicle & Parts (3361-3)
Fab Metal
10%
-10
Computer & Electronic (334)
Other Mining
Furniture (337)
Apparel
Wood Products
Paper (322)
-10%
Mining ex Oil & Gas (212)
Textiles
Printing (323)
Wood Products (321)
Nonmetallic Min
Apparel (315-6)
-15%
-10%
-5%
0%
5%
10%
15%
20%
Textiles (313-4)
Nonmetallic Mineral (327)
Capacity Change from 2011q4 to 2013q4
4

5. How Worried Should We Be?
Oregon's Unemployment Rate(s)
Labor Force Participation Rate
16 years and older
14
25
12
70%
68%
20
10
66%
15
8
62%
6
10
4
5
2
60%
58%
56%
0
Jan-04
64%
0
Jan-06
Jan-08
U-3 (lhs)
Jan-10
Jan-12
U-6 (rhs)
54%
1970
1980
1990
U.S.
2000
2010
Oregon
5

6. Labor Supply Response Expected
Oregon's Labor Market
6 MMA, Year-over-Year Growth
Labor Force Growth on the Way?
Oregon Job Growth Minus Labor Force Growth
10%
6%
8%
4%
6%
2%
4%
2%
0%
0%
-2%
-2%
-4%
-4%
-6%
-6%
-8%
-8%
Jan-78
Jan-85
Jan-92
Labor Force
Jan-99
Jan-06
Total Nonfarm
Jan-13
-10%
Jan-78
Jan-85
Jan-92
Jan-99
Jan-06
Jan-13
6

7. Job Growth in Oregon
Employment by Region Over the Great
Recession
Oregon Employment
-20%
Year-over-Year Job Gains
50,000
-15%
-10%
-5%
0%
5%
3.5%
Columbia Gorge
40,000
3.0%
Portland MSA
30,000
2.5%
Northeast Oregon
20,000
2.0%
10,000
1.5%
Forecast -->
Oregon
North Coast
Willamette Valley
0
1.0%
-10,000
0.5%
Southern
-20,000
0.0%
Central Oregon
Private
Public
Southeast Oregon
South Coast
Growth Rate (rhs)
Recession Losses
Dec '13 Relative to Peak
7

8. Bend and Medford slow some, but
the party has reached Salem
Salem Private Sector Employment Growth
Private Sector Employment
Seasonally Adjusted, 3 Month Moving Average
12%
10%
0%
8%
Oregon
-5%
6%
4%
2%
Medford
-10%
0%
-2%
-4%
-15%
Bend
-6%
-8%
-20%
May-07
-10%
May-09
May-11
May-13
Jan-80
Jan-85
Jan-90 Jan-95
Private
Jan-00 Jan-05
Current Rate
Jan-10
8

9. Housing Outlook
Short Run Stall
Long Run Outlook
Interest Rates Slow Housing's Rebound
30%
25%
Housing Starts Forecast
6%
Mortgage Rate -->
30 Yr Fixed
2.0
5%
15%
5%
25,000
1.5
20,000
4%
<-- Housing Metros
Permit Growth
Differential
15,000
1.0
10,000
0%
3%
-5%
0.5
5,000
0
-10%
Jan-10
2.5
30,000
20%
10%
35,000
2%
Jan-11
Jan-12
Jan-13
0.0
2005
2007
2009
Oregon (lhs)
2011
2013
2015
U.S. (millions, rhs)
9

10. Outlook Remains Stable
Oregon Total Nonfarm Employment
1,800,000
1,750,000
1,700,000
Mar '12
Sep '12
Dec '13
1,650,000
Mar '14
1,600,000
1,550,000
2000Q1
2002Q1
2004Q1
2006Q1
2008Q1
2010Q1
2012Q1
2014Q1
10

11. Oregon
Revenue Outlook

12. Forecast Evolution: Improved
Economic Outlook Offset by Weak Recent Tax
Collections
General and Lottery Fund Revenues
Billions
2013-15 BN
$17.6
$17.4
$17.2
$17.0
$16.8
$16.6
$16.4
$16.2
$16.0
$15.8
Dec Mar May Sep Dec Mar Jun Sep Dec Mar May Sep Dec Mar Jun Sep
'10 '11 11 '11 '11 '12 '12 '12 '12 13 13 '13 '13 '14 '14 '14
Forecast
Close of Session & Special Session
12

13. PIT Collections Stall Heading into the
Peak Tax Filing Season
Recent Personal Income Tax Collections
% change over year ago, 3 month moving sum
16%
14%
12%
10%
8%
6%
4%
2%
0%
Jul
Aug Sep Oct Nov Dec
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan
2013
2014
13
* Preliminary
Note: Jan 2014 would be even weaker if not for IRS processing delay

14. Corporate Taxes: How Far Will
They Fall?
Corporate Excise Tax Collections
% change over year ago, 3 month moving sum
80%
60%
40%
20%
Preliminary
0%
-20%
-40%
Jul
Aug
Sep
Oct
Nov
Dec
Jan Feb
2013
Mar
Apr
May June July
Aug
Sep
Oct
Nov
Dec
Jan
2014
14

15. Performance of Revenue
Instruments Has Varied
Oregon Revenue and the Great Recession
-100%
-50%
0%
50%
100%
150%
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
Recession Losses
FY 14 Relative to Peak
15

16. Oregon
Personal Income Tax Issues

17. Final Matched Returns for
2012
Interest
Wages
Unemployment
Business
IRAs
Social Security
Affected by M66
Pensions
All Other
Oregon taxable income
Sched E
Tax to Pay
Dividends
Cap Gains
-40%
-20%
0%
20%
40%
60%
80%

18. Hangover Expected on 2013
Tax Returns
10
25,000
9
Wilshire 5000 Stock Index
8
Realized Capital Gains ($ billions, left)
7
Nov Forecast
6
20,000
15,000
5
4
10,000
3
2
5,000
1
0
0
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22

19. Are Low Estimated Income Tax
Payments a Sign of Things to Come?
Tax Year
2008
2009
2010
2011
2012
2013
Dec-Jan
Estimated
Payments
Nonwage
Income*
Q2 Final PIT
Payments
-28.4%
-15.2%
11.5%
5.6%
28.8%
0.1%
-35.1%
-21.4%
11.0%
0.6%
35.6%
-5.7%
-45.4%
-2.8%
17.9%
3.3%
25.1%
8.4%
•Nonwage income includes interest, dividends, business (Sched C), capital gains, and S Corp/Rental (Sched E)
•2013 estimated PIT payments through January 29

20. Oregon
March 2014 Revenue Forecast Details

21. March 2014 General Fund
Forecast Summary
Table R.1
Positive
Factor
2013-15 General Fund Forecast Summary
(Millions)
2013 COS
Forecast
December 2013
Forecast
March 2014
Forecast
Structural Revenues
Personal 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
All Other Revenues
$1,027.9
$1,016.3
$1,004.4
-$11.9
-$23.5
$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
-$136.9
-$136.9
-$136.9
$0.0
$0.0
$15,910.1
$16,006.9
$16,027.0
$20.1
$116.9
Personal
Income Taxes
(More Jobs)
Corporate
Income
Taxes
HB3601/M67
Rainy Day
Transfer
Estimate
(FY2017+)
Estate
Taxes
-$50.7
Gross GF Revenues
Legislative Actions
Net Available Resources
Confidence Intervals
67% Confidence
95% Confidence
+/- 6.6%
+/- 13.1%
$1,034.9
$2,069.9
Change from Change from
Prior Forecast COS Forecast
Negative
Factor
$14.75B to $16.82B
$13.71B to $17.85B
Cigarette
Taxes
Court Fees
Video
Lottery
1 Reflects cost of cashflow management actions, ex clusiv e of internal borrow ing.
21

22. Forecast Changes
Difference from September forecast, $ millions
$80
Personal
Other
$60
$40
$20
Corporate
Lottery
Total
28.6
14.8
9.3
$0
-6.8
-$20
-27.1
-$40
2013-15
2015-17
2017-19
2019-21
2021-23
22

23. 10-Year Forecast
Table R.2
General Fund Revenue Forecast Summary (Millions of Dollars, Current Law)
Forecast
Forecast
Forecast
2011-13
Revenue Source
Personal Income Taxes
Corporate Income Taxes
All Others
Gross General Fund
Offsets and Transfers
Net Revenue
%
2013-15
%
Biennium
Chg
Biennium
Chg
12,118.2
15.8% 13,771.6
883.9
6.8%
1,164.9
-5.0%
1,005.9
13.1% 15,781.9
(12.0)
(67.3)
14,155.0
13.0% 15,714.6
%
2017-19
13.8%
Forecast
%
2019-21
Biennium Chg Biennium Chg Biennium
13.6% 15,464.4 12.3% 16,931.4
1,049.3
4.3%
9.5% 18,681.3
Forecast
%
Chg
2021-23
%
Biennium Chg
10.3% 20,561.1
10.1%
1,026.9 -2.1%
1,066.8
3.9%
1,154.8
8.2%
1,045.7
1,123.4
7.4%
1,189.2
5.9%
8.6% 20,871.5
9.8% 22,905.1
9.7%
(79.1)
(41.1)
(43.1)
11.0% 17,411.7 10.8% 18,924.9
8.7% 20,830.4
10.1% 22,862.0
1,004.4 -13.8%
14,167.0
2015-17
Forecast
983.1 -2.1%
11.4% 17,496.8 10.9% 19,004.0
(85.1)
6.4%
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
23

24. Biennial Revenue Growth
24%
20%
PIT
TOTAL
16%
12%
8%
4%
0%
-4%
-8%
-12%
24

25. For More Information
Standard Contact:
155 Cottage Street NE
Salem, OR 97301
(503) 378-3405
oea.info@state.or.us
www.oregon.gov/das/oea
Social Media:
www.OregonEconomicAnalysis.com
@OR_EconAnalysis
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