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Oregon Economic and Revenue Forecast, December 2019

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The Oregon Office of Economic Analysis forecasts the state economy and General Fund and Lottery Fund revenues. This slide presentation is part of the December 2019 forecast, released November 20th.

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Oregon Economic and Revenue Forecast, December 2019

  1. 1. Dec 2019 Economic & Revenue Outlook November 20th, 2019 Oregon Office of Economic Analysis Mark McMullen Josh Lehner
  2. 2. Economic Update and Outlook
  3. 3. Oregon Office of Economic Analysis 3 Outlook Concerns Still Elevated but Improving Issues and Risks • Trade War • Yield Curve • Business Investment Bright Spot • Consumer Spending • Labor Market Leading Indicators Still Good
  4. 4. Oregon Office of Economic Analysis 4 Oregon Job Growth Slowing a Bit More than Expected
  5. 5. Oregon Office of Economic Analysis 5 Slowdown Driven by Handful of Industries
  6. 6. Oregon Office of Economic Analysis 6 Demand Side •Slower sales growth •Domestic •International •Rising business costs Supply Side •Firms •Uncertain policy • Federal or State •Labor •Slack is gone •Migration dries up •Retirements Potential Sources of Slowing
  7. 7. Oregon Office of Economic Analysis 7 In the News: Mid-Valley Food Processor Closings
  8. 8. Oregon Office of Economic Analysis 8 Layoffs Remain Near Historic Lows So Far
  9. 9. Oregon Office of Economic Analysis 9 Oregon Incomes Surpass National Figures
  10. 10. Oregon Office of Economic Analysis 10 Growth Across the Entire Income Distribution…
  11. 11. Oregon Office of Economic Analysis 11 …And Reaching All Populations
  12. 12. Oregon Office of Economic Analysis 12 Oregon Growing at Potential
  13. 13. Revenue Update and Outlook
  14. 14. Oregon Office of Economic Analysis 14 This Is the Puzzle * Full Year Filers **Excluding Kicker Credits
  15. 15. Oregon Office of Economic Analysis 15 Corporate Collections Outstrip Earnings As Well
  16. 16. Oregon Office of Economic Analysis 16 State Policy Changes Are Part of the Story…
  17. 17. Oregon Office of Economic Analysis 17 …As Is Bracket Creep…
  18. 18. Oregon Office of Economic Analysis 18 …and Federal Tax Policy Is Clearly Playing a Large Role • Timing Shifts • Pulling Costs Into 2017, and Pushing Income Into 2018 • Taking Advantage of Expiring/Limited Deductions • Bonus Depreciation, Section 179 • Tax Management Strategies • Changing business structure: Switching to C-Corps or Passthroughs? Wages to Business Income? Packing or Cracking? Corporate Cash Accounting? • Tax Professionals’ Learning Curve and Uncertainty • Permanent Base Broadening • Corp deduction limits, e.g. net interest deduction • PIT Deduction Limits (operating losses, itemized, SALT) • International Taxation (GILTI, Territorial System)
  19. 19. Oregon Office of Economic Analysis 19 At Least One More Year of Healthy Investment Income
  20. 20. Oregon Office of Economic Analysis 20 Additional Resources for the Current Biennium Dec Forecast 2019-21 Taxes Personal Income Taxes 18,285,768,000 (6,655,000) 2,260,000 Film and Video and Transfer to Counties (45,262,000) 0 0 Corporate Income Taxes 1,325,876,000 55,918,000 135,071,000 Transfer to Rainy Day Fund & PERS UAL (163,803,000) (12,262,000) (5,549,000) Other Revenues 1,557,364,000 7,610,000 11,282,000 Net General Fund Revenues 20,959,943,000 44,611,000 143,064,000 Plus Beginning Balance 2,650,498,712 118,177,000 332,054,000 Appropriations 22,409,455,625 0 0 Estimated Ending Balance 980,055,052 162,788,000 475,118,000 2019-21 Difference December Less Sept December Less COS
  21. 21. Oregon Office of Economic Analysis 21 Lottery Growth Expected, but Forecast Largely Unchanged
  22. 22. Oregon Office of Economic Analysis 22 Recession Planning
  23. 23. Oregon Office of Economic Analysis 23 Recessionary Buffer Effective Reserves ($ millions) October 2019 End 2019-21 ESF $650.2 $858.7 RDF $671.1 $899.4 Reserves $1,321.3 $1,758.1 Ending Balance $980.1 $980.1 Total $2,301.3 $2,738.1 % of GF 10.9% 12.9% 0% 3% 6% 9% 12% 15% 18% 21% 24% $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 99- 01 01- 03 03- 05 05- 07 07- 09 09- 11 11- 13 13- 15 15- 17 17- 19 19- 21 21- 23 23- 25 25- 27 Biennium OregonBudgetary Reserves (billions) Educ. Stability Fund Rainy Day Fund Gen. Fund Ending Balance Forecast --> Percent of General Fund --> Source: Oregon Office of Economic Analysis
  24. 24. Oregon Office of Economic Analysis 24 Contact mark.mcmullen@oregon.gov (503) 378-3455 joshua.lehner@oregon.gov (971) 209-5929 www.OregonEconomicAnalysis.com @OR_EconAnalysis

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