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December 2020
Economic and
Revenue Forecast
November 18th, 2020 Oregon Office of Economic Analysis
Mark McMullen
Josh Lehner
Oregon Office of
Economic Analysis
2
Key forecast assumptions
• Vaccine or medical treatment
• Widely available next summer or early fall
• Federal policy
• Another federal aid package first quarter of 2021
• No explicit election impacts
• Oregon’s 2 week freeze
• Forecast developed in October and finalized early November
• Impact muted by temporary nature, but increases risks
• Likely small impact on personal income taxes and CAT
• Larger impact on Lottery as terminals will be turned off
Oregon Office of
Economic Analysis
3
Vaccine, you’re our only hope
• Key assumption
• Widely available treatment
by mid to late 2021
• Vaccine trail news is
encouraging
• Health issues
• Illness, mortality
• Hospital capacity
• Economic issues
• Consumer confidence and
public policies
• Education or childcare
Oregon Office of
Economic Analysis
4
Federal aid assumptions and impacts
• Timing of another
package
• IHS Markit assumes by end of
2020, our office moved to first
quarter of 2021
• Direct Effects
• Income support to those most
impacted by pandemic
• Indirect Effects
• Equity markets, business sales
• Macro Importance
• Economists somewhat divided
whether need another package
or if recovery is self-sustaining
• No such disagreement on
distributional impact
Oregon Office of
Economic Analysis
5
Recovery likely self-sustaining…
• Economic-related
income is growing
• Aggregate savings in
the economy has
increased more than $1
trillion
• Incomes are up
• Spending is down
• Fewer loans taken out
• Vaccine is coming
Oregon Office of
Economic Analysis
6
.. but the most affected firms and
workers need help
• Permanent damage key
macroeconomic risk
• Business closures
• Long-term unemployment
• No federal support for
businesses today
• Remaining UI support ends
the day after Christmas
Oregon Office of
Economic Analysis
7
Industrial outlook varies considerably
• Early Recoveries
• E-commerce
• Health Care
• Office jobs
• Average Recoveries
• Timber industry
• Financial Activities
• Consumer services
• Public sector
• Late/Never
Recoveries
• Retail
• Manufacturing
Oregon Office of
Economic Analysis
8
Good News: Not everything is terrible
Oregon Office of
Economic Analysis
9
Bad News: Manufacturing is terrible
Oregon Office of
Economic Analysis
10
• Access to technology
• Effectiveness of online
learning
• K-12 and Higher Education
enrollments are down
• Women impacted much
more than man
• Dropping out of labor force to
help kids
• Loss of substitute teaching
positions
• Education will not return to
normal until the pandemic is
over
• Assume some increase in in-
person learning during the
spring, but return to full in-
person learning only next
school year
Online learning has lots of impacts
11%
Oregon Office of
Economic Analysis
11
Bottom line
• Growth will slow noticeably
over the winter
• Medical treatment widely
available next summer
• Return to in-person learning
next fall
• Growth will accelerate, resulting
in faster overall recovery
• Key is minimizing permanent
damage between now and then
Revenue Outlook
Oregon Office of
Economic Analysis
13
Personal Income Tax withholdings
strengthen further
Oregon Office of
Economic Analysis
14
• After briefly weakening
at the start of the
recession, traditional
corporate tax
collections have
bounced back
• During the last two
recessions, corporate
collections were cut in
half
• 2020 collections should
reflect around $60
million in deductions
for CAT payments as
well
Corporate collections remain strong
Oregon Office of
Economic Analysis
15
• Similar to corporate
taxes, personal tax
collections related to
investments and other
nonwage forms of
income often collapse
during recessions
• Should asset markets
take a step back,
revenue losses will
look more like they
did in 2001 or 2007
rather than the
current flat outlook
Nonwage income represents a forecast
risk
Oregon Office of
Economic Analysis
16
• Sales are positive year-over-year
• Incomes are up
• Pent-up demand for gaming across
the country
• Limited other entertainment options
• Driven by very strong sales in
southern Oregon
• Forecast increased however
revenues remain below pre-
pandemic expectations
• 2 week freeze is not incorporated
into these figures
• With a statewide 2 week freeze and
2 more in Multnomah, reduces sales
by $41 million and transfers by $26.5
million
Lottery outlook improves
Bottom Line
Oregon Office of
Economic Analysis
18
Revenue bottom line
19-21 21-23 23-25
Personal Income Taxes 7 -26 102
Corporate Income Taxes 54 99 48
Other 9 42 -3
Total 69 115 146
19-21 21-23 23-25
Lottery 17 35 40
Corporate Activity Tax 21 15 1
Marijuana Tax 16 0 0
Total 54 50 41
19-21 21-23 23-25
Total Sum 124 165 187
$ Millions from Sept
General Fund
Revenues
$ Millions from Sept
Other Revenues
$ Millions from Sept
December 2020 Forecast Changes
Oregon Office of
Economic Analysis
19
Sizable reserves remain
Effective Reserves ($ millions)
Sep
2020
End
2019-21
ESF $745 $427
RDF $883 $942
Reserves $1,628 $1,369
Ending
Balance $1,794 $1,794
Total $3,422 $3,163
% of GF 16.1% 14.9%
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
Oregon Office of
Economic Analysis
20
Contact
mark.mcmullen@oregon.gov
(503) 378-3455
joshua.lehner@oregon.gov
(971) 209-5929
www.OregonEconomicAnalysis.com
@OR_EconAnalysis

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Oregon Economic and Revenue Forecast, December 2020

  • 1. December 2020 Economic and Revenue Forecast November 18th, 2020 Oregon Office of Economic Analysis Mark McMullen Josh Lehner
  • 2. Oregon Office of Economic Analysis 2 Key forecast assumptions • Vaccine or medical treatment • Widely available next summer or early fall • Federal policy • Another federal aid package first quarter of 2021 • No explicit election impacts • Oregon’s 2 week freeze • Forecast developed in October and finalized early November • Impact muted by temporary nature, but increases risks • Likely small impact on personal income taxes and CAT • Larger impact on Lottery as terminals will be turned off
  • 3. Oregon Office of Economic Analysis 3 Vaccine, you’re our only hope • Key assumption • Widely available treatment by mid to late 2021 • Vaccine trail news is encouraging • Health issues • Illness, mortality • Hospital capacity • Economic issues • Consumer confidence and public policies • Education or childcare
  • 4. Oregon Office of Economic Analysis 4 Federal aid assumptions and impacts • Timing of another package • IHS Markit assumes by end of 2020, our office moved to first quarter of 2021 • Direct Effects • Income support to those most impacted by pandemic • Indirect Effects • Equity markets, business sales • Macro Importance • Economists somewhat divided whether need another package or if recovery is self-sustaining • No such disagreement on distributional impact
  • 5. Oregon Office of Economic Analysis 5 Recovery likely self-sustaining… • Economic-related income is growing • Aggregate savings in the economy has increased more than $1 trillion • Incomes are up • Spending is down • Fewer loans taken out • Vaccine is coming
  • 6. Oregon Office of Economic Analysis 6 .. but the most affected firms and workers need help • Permanent damage key macroeconomic risk • Business closures • Long-term unemployment • No federal support for businesses today • Remaining UI support ends the day after Christmas
  • 7. Oregon Office of Economic Analysis 7 Industrial outlook varies considerably • Early Recoveries • E-commerce • Health Care • Office jobs • Average Recoveries • Timber industry • Financial Activities • Consumer services • Public sector • Late/Never Recoveries • Retail • Manufacturing
  • 8. Oregon Office of Economic Analysis 8 Good News: Not everything is terrible
  • 9. Oregon Office of Economic Analysis 9 Bad News: Manufacturing is terrible
  • 10. Oregon Office of Economic Analysis 10 • Access to technology • Effectiveness of online learning • K-12 and Higher Education enrollments are down • Women impacted much more than man • Dropping out of labor force to help kids • Loss of substitute teaching positions • Education will not return to normal until the pandemic is over • Assume some increase in in- person learning during the spring, but return to full in- person learning only next school year Online learning has lots of impacts 11%
  • 11. Oregon Office of Economic Analysis 11 Bottom line • Growth will slow noticeably over the winter • Medical treatment widely available next summer • Return to in-person learning next fall • Growth will accelerate, resulting in faster overall recovery • Key is minimizing permanent damage between now and then
  • 13. Oregon Office of Economic Analysis 13 Personal Income Tax withholdings strengthen further
  • 14. Oregon Office of Economic Analysis 14 • After briefly weakening at the start of the recession, traditional corporate tax collections have bounced back • During the last two recessions, corporate collections were cut in half • 2020 collections should reflect around $60 million in deductions for CAT payments as well Corporate collections remain strong
  • 15. Oregon Office of Economic Analysis 15 • Similar to corporate taxes, personal tax collections related to investments and other nonwage forms of income often collapse during recessions • Should asset markets take a step back, revenue losses will look more like they did in 2001 or 2007 rather than the current flat outlook Nonwage income represents a forecast risk
  • 16. Oregon Office of Economic Analysis 16 • Sales are positive year-over-year • Incomes are up • Pent-up demand for gaming across the country • Limited other entertainment options • Driven by very strong sales in southern Oregon • Forecast increased however revenues remain below pre- pandemic expectations • 2 week freeze is not incorporated into these figures • With a statewide 2 week freeze and 2 more in Multnomah, reduces sales by $41 million and transfers by $26.5 million Lottery outlook improves
  • 18. Oregon Office of Economic Analysis 18 Revenue bottom line 19-21 21-23 23-25 Personal Income Taxes 7 -26 102 Corporate Income Taxes 54 99 48 Other 9 42 -3 Total 69 115 146 19-21 21-23 23-25 Lottery 17 35 40 Corporate Activity Tax 21 15 1 Marijuana Tax 16 0 0 Total 54 50 41 19-21 21-23 23-25 Total Sum 124 165 187 $ Millions from Sept General Fund Revenues $ Millions from Sept Other Revenues $ Millions from Sept December 2020 Forecast Changes
  • 19. Oregon Office of Economic Analysis 19 Sizable reserves remain Effective Reserves ($ millions) Sep 2020 End 2019-21 ESF $745 $427 RDF $883 $942 Reserves $1,628 $1,369 Ending Balance $1,794 $1,794 Total $3,422 $3,163 % of GF 16.1% 14.9% 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
  • 20. Oregon Office of Economic Analysis 20 Contact mark.mcmullen@oregon.gov (503) 378-3455 joshua.lehner@oregon.gov (971) 209-5929 www.OregonEconomicAnalysis.com @OR_EconAnalysis