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. May 2017 Economic &
Revenue Outlook
May 16th, 2017 Oregon Office of Economic Analysis
Mark McMullen
Josh Lehner

2. Economic Update and
Outlook

3. Oregon Office of
Economic Analysis
3
The Slowdown Is Here

4. Oregon Office of
Economic Analysis
4
Slowing Across Industries

5. Oregon Office of
Economic Analysis
5
Slowing Across Regions

6. Oregon Office of
Economic Analysis
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Watch Me Work

7. Oregon Office of
Economic Analysis
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•Fiscal Policy
General Impact Larger OR Impact
Tax Rates Tax Base Broadening
Infrastructure Trade Wars
Deregulation Federal Lands
Immigration Health Care
•Monetary Policy
•Rising Interest Rates
Risk: Federal Policy

8. Oregon Office of
Economic Analysis
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Economic Outlook

9. Revenue Update and
Outlook

10. Oregon Office of
Economic Analysis
10
Slower Income Growth in
2016
-5% 0% 5% 10% 15% 20% 25%
Proprietorships
IRAs
Pensions
Wages
Dividends
Total Income
Capital Gains
Interest
Social Security
Schedule E
Broad-Based Slowdown:
Matched Returns, Full-Year Tax Filers, % change
2014
2015
2016(P)
46%-->

11. Oregon Office of
Economic Analysis
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PIT Withholdings Slow a Bit

12. Oregon Office of
Economic Analysis
12
April Payments on Track
$0.0
$0.1
$0.2
$0.3
$0.4
$0.5
$0.6
$0.7
$0.8
$0.9
$1.0
$1.1
January February March April May June
Billions
Still Processing Year-End Tax Payments
Oregon Cumulative Personal Income Tax Payments
Forecast
2010
2011
2012
2013
2014
2017
2015
2016
Latest Data: May 12, 2017 | Source: Oregon Dept of Revenue, Oregon Office of Economic Analysis
May 12
+20.0%
May 1
+33.8%
April 15
+17.4%
April 1
+14.5%
March 1
-11.1%

13. Oregon Office of
Economic Analysis
13
Refunds Coming Up Short
-$1.3
-$1.1
-$0.9
-$0.7
-$0.5
-$0.3
-$0.1
January February March April May June
Billions
Where Will Refunds Land?
Personal Income Tax Refunds, Cumulative
Forecast
2017 2014
2013
2012
2015
2016
Latest Data: May 12, 2017 | Source: Oregon Dept of Revenue, Oregon Office of Economic Analysis

14. Oregon Office of
Economic Analysis
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Kicker 101
Kicker Base is Determined by the Close of Session Forecast for General Fund Less Corporate Taxes.
Close of Session = May 2015 Forecast + 2015 Legislative Actions

15. Oregon Office of
Economic Analysis
15
What Is Your Cut?
15
* Based on 2014 actual tax returns
** Based on 2014 actual tax returns, PIT kicker amount ($408 million) and the
Oregon Office of Economic Analysis’ forecast for tax liability
Income
Group
Adjusted Gross Income* Rough Estimate of
Kicker Size**
Bottom 20% < $10,489 $5
Second 20% $10,490 - $24,488 $32
Middle 20% $24,489 - $45,159 $91
Fourth 20% $45,160 - $82,786 $191
Next 15% $82,787 - $165,174 $408
Next 4% $165,175 - $368,109 $1,002
Top 1% > $368,109 $4,505
Average $57,165 $210
Median $30-35,000 $85

16. Oregon Office of
Economic Analysis
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Kicker: Not A Done Deal Yet

17. Oregon Office of
Economic Analysis
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2015-17 Errors

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Economic Analysis
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Estate Taxes
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Jul-01 Jul-03 Jul-05 Jul-07 Jul-09 Jul-11 Jul-13 Jul-15
Millions
Oregon Estate Taxes
Monthly Collections
12 Month Average
Source: Oregon Dept. of Revenue, Oregon Office of Economic Analysis

19. Oregon Office of
Economic Analysis
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Estate Taxes
0
50
100
150
200
250
FY 00 FY 05 FY 10 FY 15 FY 20 FY 25
Oregon Estate Taxes
Index, FY 2007=100
Forecast -->
Latest Data: Fiscal Year 2016 | Source: Oregon DOR, Oregon Office of Economic Analysis
Tax Collections

20. Oregon Office of
Economic Analysis
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Lottery Uncertainty

21. Oregon Office of
Economic Analysis
21
New Forecast: Marijuana
Upside
• Usage
• Black, Gray,
Medical
market
conversion
Downside
• Price
• Supply
• Federal
Government

22. Oregon Office of
Economic Analysis
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Corporate Taxes: Are
Declines Over?
100
200
300
400
500
600
700
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Corporate Taxes Are Expected to Stabilize
Corporate Excise Taxes, $ millions, 4 QTR Sum
May 2015 Forecast
May 2017 Forecast
Forecast ->

23. Oregon Office of
Economic Analysis
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Pass-Through Income
$2
$3
$4
$5
$6
$7
$8
$9
2000 2002 2004 2006 2008 2010 2012 2014 2016(P)
Oregon Income Reported by Full-Year Tax Filers, billions
Rent, Partnerships & S-Corps
Proprietorships
28% Above Pre-recession
Peak
66% Above Pre-recession
Peak

24. Forecast Changes

25. Oregon Office of
Economic Analysis
25
General Fund Forecast Summary
Positive
Factor
Negative
Factor
Personal
Income Taxes
Court Fines,
Fees &
Assessments
Corporate
Excise Taxes
Estate Taxes
Insurance
Taxes
(Millions)
2015 COS
Forecast
March 2017
Forecast
May 2017
Forecast
Change from
Prior Forecast
Change from
COS Forecast
Structural Revenues
Personal Income Tax $15,713.5 $15,709.8 $16,020.8 $311.0 $307.3
Corporate Income Tax $1,100.0 $1,136.2 $1,175.7 $39.5 $75.7
All Other Revenues $1,184.6 $1,264.6 $1,285.1 $20.5 $100.5
Gross GF Revenues $17,998.1 $18,110.6 $18,481.6 $371.0 $483.6
Offsets and Transfers -$42.8 -$44.4 -$45.2 -$0.8 -$2.4
Administrative Actions1
-$20.2 -$14.0 -$14.0 $0.0 $6.2
Legislative Actions -$158.9 -$158.3 -$158.3 $0.0 $0.6
Net Available Resources $18,309.1 $18,422.7 $18,792.9 $370.2 $483.8
Confidence Intervals
67% Confidence +/- 0.9% $173.0
95% Confidence +/- 1.9% $346.0
1 Reflects costofcashflow managementactions, exclusive ofinternal borrowing.
2015-17 General Fund Forecast Summary
$18.31B to $18.65B
$18.14B to $18.83B
Table R.1
Along with expenditure
savings, this increases
the ending balance for
2015-17 by $376
million

26. Oregon Office of
Economic Analysis
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Ending Balances Help to Offset
the Kicker in BI2017-19

27. Oregon Office of
Economic Analysis
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Forecast Changes
Difference from March Forecast, $ millions
27
27
373.7
-189.0
108.7
-39.1
-128.3
311.0
-245.9
32.6
-122.4
-217.0
-$300
-$250
-$200
-$150
-$100
-$50
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
2015-17 2017-19 2019-21 2021-23 2023-25
Personal Corporate Lottery Other Total

28. Oregon Office of
Economic Analysis
28
Biennial Revenue Growth
28
28
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Personal Income Taxes Total Net Revenue

29. Oregon Office of
Economic Analysis
29
Reserves
Effective Reserves ($ millions)
Apr
2017
End
2015-17
ESF $356.8 $383.8
RDF $375.5 $388.8
Reserves $732.3 $772.5
Ending
Balance $723.9 $723.9
Total $1,456.2 $1,496.4
% of GF 7.9% 8.1%
0%
2%
4%
6%
8%
10%
$0.0
$0.5
$1.0
$1.5
$2.0
99-01
BN
01-03
BN
03-05
BN
05-07
BN
07-09
BN
09-11
BN
11-13
BN
13-15
BN
15-17
BN
17-19
BN
19-21
BN
Oregon Budgetary Reserves (billions)
Gen. Fund Ending Balance Educ. Stability Fund Rainy Day Fund
Forecast -->
Percentof
General Fund-->
Source:Oregon Office of Economic Analysis

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