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HomeMy WebLinkAboutPAC Agenda Deschutes County Agenda Monday, December 6, 2010 1:30 p.m. 1-866-279-1568 *8678842* I. INTRODUCTIONS II. LEADERSHIP UPDATE a. Roblan Emerges as House Democrats’ Co-Speaker Pick b. Bates/Dotterrer Recount Underway i. Senate Democrats Will Not Likely Recount Schrader Seat c. Kitzhaber Administration Announcement Likely This Week III. DECEMBER REVENUE FORECAST OVERVIEW a. $62 Million More for 2009-11 i. Withholdings Changes Frontload Tax Receipts This Biennium b. $272 Million Less for 2011-13 i. $3.5 Billion Short of CSL c. Roll Up Overview (Not Yet Revised) IV. 2011 SESSION AGENDA SETTING a. Agenda Items and Assigned Priorities V. SESSION LOGISTICS a. Schedule Bi-Weekly Conference Call with Delegation i. 2009 Session: Second and Fourth Wednesday at 7:30 a.m. 1 VI. DATES OF INTEREST a. December 14-16: Committee Days i. E-Board: $31.3 Million in Unused Special Appropriation Funds b. January 10-13: Organizational Session/Inauguration c. February 1: Regular Session Begins d. Bill Filing Deadlines and Restrictions TBA VII. OTHER BUSINESS 2 Oregon House Democrats pick Arnie Roblan as co-speaker nominee Published: Sunday, December 05, 2010, 10:27 AM Updated: Sunday, December 05, 2010, 5:56 PM Jeff Mapes, The Oregonian Oregon House Democrats have unanimously chosen a veteran Coos Bay legislator, Arnie Roblan, to be their co- speaker nominee to help govern the evenly divided legislative chamber. Roblan, serving his fourth term, emerged on top after the current House speaker, Dave Hunt, took himself out of the running for the co-speakership during a Democratic retreat on the coast. Several Democrats had become alienated from Hunt as it became clear that he did not have the caucus unified behind him in negotiations with Republicans over a power- sharing agreement. Hunt continues as the Democratic caucus leader and remains part of the four-member team negotiating with the Republican leadership. Roblan, who said he was "honored and humbled" to be chosen by his colleagues, won a first vote that was contested by several candidates. He was then made the co-speaker nominee by acclamation and said he now believes he has all 30 House Democrats behind him - at least for now. "We need to move forward from here with people who can unite our two parties in this remarkably difficult time," Roblan said in a telephone interview from the Salishan Spa and Golf Resort. The caucus action came after a group of about seven Democrats worked with several Republicans to put together their own power-sharing proposal. They proposed that the co-speakers be House Republican Leader Bruce Hanna of Roseburg and Rep. Jeff Barker, D-Aloha. That raised the prospect that Hanna and the House Republicans could put together a power-sharing arrangement that advantaged them because Democrats were split. The Hanna-Barker proposal "made it more important for the caucus to have a good discussion and unify behind a co-speaker nominee," said Geoff Sugerman, Hunt's spokesman. Rep. Arnie Roblan, left, talks with fellow legislators during the 2007 session. Ross William Hamilton/The Oregonian Page 1 of 2Oregon House Democrats pick Arnie Roblan as co-speaker nominee 12/06/2010http://blog.oregonlive.com/politics_impact/print.html?entry=/2010/12/oregon_house_de... 3 Roblan said a key point in negotiations with the Republicans is preserving the right of bills to move forward if they have majority support in the House. When Republicans controlled the House before the 2006 elections, they generally did not advance bills unless it had support of a majority of their caucus. "They're very much nervous" about this, Roblan said of Republican leaders. Still, Roblan said he thought his being chosen as co-speaker nominee would be well-received by Republicans. He said he had worked well with Hanna and other GOP members as chairman of the House Rules Committee, which plays a key role in shaping legislation toward the end of sessions. --Jeff Mapes © 2010 OregonLive.com. All rights reserved. Page 2 of 2Oregon House Democrats pick Arnie Roblan as co-speaker nominee 12/06/2010http://blog.oregonlive.com/politics_impact/print.html?entry=/2010/12/oregon_house_de... 4 1 Public Affairs Counsel From:Public Affairs Counsel <pacounsel@pacounsel.org> Sent:Friday, November 19, 2010 10:05 AM To:'Public Affairs Counsel' Subject:Oregon Revenue Forecast Offers Mixed Bag: Short Term Gains, Long Term Woes Attachments:December 2010 Revenue Forecast Press Overview.pdf; December 2010 Oregon Revenue Forecast.ppt The Oregon Office of Economic Analysis issued a mixed-bag for the latest state revenue forecast this morning. Please see the attached supporting documents for more detailed information. The Good News: $62 Million More for the Current Biennium In the short term, the 2009-11 biennial budget that ends on June 30, 2011 will have $62 million (net) more funds than expected. The forecasters attributed this increase to changes in taxpayer withholding rules which frontloaded cash flow into the Department of Revenue now instead of next year. The extra money will revert to the Rainy Day Fund after June 30 next year, or the legislature can choose to allocate those dollars when it convenes earlier next year. The Bad News: $272 Million Less For The Next Budget Cycle The outlook grew darker for the 2011-13 budget that lawmakers will tackle next year as forecasters anticipated the state would be short another $272 million. This drop is in addition to the already $3.2 billion the state was anticipated to be short of current service levels in the next cycle. The new 2011-13 budget shortfall is approximately $3.5 billion. Please let us know if you have any questions. Thanks, PAC 5 Oregon Economic and Revenue Forecast SUMMARY December 2010 Volume XXX, No. 4 State of Oregon Department of Administrative Services Office of Economic Analysis 6 EXECUTIVE SUMMARY December 2010 Oregon Economic Forecast The third quarter of 2010 preliminary jobs number were down after posting job gains in the first and second quarters of this year. The job losses in the third quarter are reflective of the slowdown seen at the national level. On a year-over-year basis, jobs decreased in the third quarter by 0.4 percent, a considerable improvement from the 5.5 percent year-over-year decline in the third quarter of last year. Of course, it’s difficult to take comfort in the fact that jobs are still down compared to last year. The unemployment rate for Oregon sits at 10.5 percent for October, essentially unchanged for the past twelve months. The unemployment rate tends to be one of the last measurements to improve as the economy enters recovery. In a switch from the start of the recession, private sector jobs managed a slight increase in jobs while the government sector job losses were large enough to cause the total employment to be down in the third quarter. The soft patch hitting the US economy is also playing out in job sectors in Oregon. Manufacturing job declines are up compared to the last three quarters. Within manufacturing, wood products and food processing had the largest job percentage declines. In the service sector, the job declines and gains were mixed with retail and financial activities showing the largest percentage declines and information posting a strong quarter percentage increase in jobs. The government sector continued the loss of temporary census workers and local government education showed a large percentage loss. The US economy stalled a bit with real GDP growth at 1.7 percent for the second quarter and 2.0 percent in the third quarter. The unemployment rate remains steady at a high 9.6 percent. The US House of Representatives changes guard with a Republican majority. The US Senate regains Democrat control but the margin is less. The public clamors for more jobs but not through a deepening of the federal deficit. With Congress divided and little patience for more stimulus spending, who you going to call to bust us out of this weak growth? The Federal Reserve. The Fed has embarked on QEII, Quantitative Easing Part 2. They will purchase $600 billion in Treasury securities, mainly five to 10 year notes, through June 2011 in the hopes of lowering mortgage and corporate bond rates. The impact on the economy is not expected to be huge. Moody’s Economy.com projects the QEII will raise GDP growth by 35 basis points (raise percentage growth by 0.35 points), add about 300,000 jobs and lower the unemployment rate by 25 basis points. This could be the extra edge to get the job creating growth that is eluding the US economy. With economic growth still subdued, consumers cautious to spend, and financial institutions reluctant to lend, the strength of this monetary policy rule may fall into the phrase attributed to John Maynard Keynes: “You can’t push on a string.” Basically, you can pour money into the economy but this doesn’t mean people will spend it. With short-term interest rates close to zero, the hope is 7 that lowering longer term interest rates will spark additional lending and spending in the economy. The question is how sensitive is spending to lower interest rates given that rates are already historically low. With credit markets starting to ease and tepid but still positive economic growth, the hope is for this monetary policy to provide the extra edge outlined above. Oregon also has a needed boost to its economy just has federal stimulus is starting to wind down. Intel announced a major investment at its Ronler Acres campus. Construction jobs are estimated in the thousands and permanent high tech jobs in the hundreds. Although this impact is not huge for the state as a whole in terms of jobs, the more lasting influence is reestablishing the Portland metro area as a center for high tech research and a statement that Oregon is a strong state to do business. Just as with QEII, this may be the extra edge to get the state moving to a stronger recovery. OEA (Office of Economic Analysis – Oregon) forecasts a mild increase of 0.8 percent in total employment in the fourth quarter of 2010. The first quarter of 2011 will marginally pick up with an increase of jobs at 0.9 percent. The year average for 2010 is an employment decline of 1.0 percent. Job growth is mildly positive at 0.9 percent in 2011 with modest job gains starting in the second quarter through the end of the year. The Oregon economy does not see above 2 percent job growth until the fourth quarter of 2011. After registering the first positive job growth last quarter since the first quarter of 2006, the wood products industry lost jobs at the annual rate of 8.6 percent in the third quarter of 2010. After registering the first positive job growth last quarter since the first quarter of 2006, the wood products industry lost jobs at the annual rate of 8.6 percent in the third quarter of 2010. This industry is projected to loose 4.7 percent of workers in 2011, and then add workers at 2.6 percent in 2012 and 6.4 percent in 2013. Even given these stronger growth rates in 2012 and 2013, employment will be ten thousand less than in 2007. The computer and electronic product sector is still projected to loose jobs at 1.7 percent in 2010. Job growth turns positive in 2011 at 2.6 percent and builds strength at 2.9 percent in 2012 and 3.2 percent in 2013. The transportation equipment sector is projected to loose 12.2 percent of jobs in 2010. Although this is less than the 33.9 percent loss in 2009, this is little comfort for a sector that will be down over 50 percent since 2006. Employment in the transportation equipment industry will decline 1.2 percent in 2011, increase by 1.6 percent in 2012 and 2.8 percent in 2013. The metals and machinery sector is expected to continue to loose jobs in 2010 at 7.7 percent. The drop in jobs is lessening and job gains are expected at the end of this year. Job gains are estimated to be 1.2 percent in 2011 and 3.3 percent in 2012. Growth will continue to be positive in 2013 with growth of 3.4 percent. Other durables have turned the corner in 2010 and are expected to add 3.2 percent jobs. This sector includes industries involved in electrical equipment, appliance, and component manufacturing, furniture and cabinet making, and other types of manufacturing such as medical and dental 8 equipment. This sector will increase 4.3 percent in 2011, 3.1 percent in 2012, and 1.7 percent in 2013. Food processing, while highly seasonal, has continued to add jobs through the recession on an annual basis. This sector is expected to complete 2010 with 0.8 percent job growth and then flatten out in 2011 with a decrease of 0.6 percent. Overall annual growth will increase to 3.4 percent in 2012 and 2.2 percent in 2013. Other nondurables, which include paper and allied products, will lose 3.3 percent jobs in 2010. Job growth turns positive at 2.3 percent in 2011, 1.1 percent in 2012, and 0.6 percent in 2013. Construction employment posted a strong positive growth of 7.6 percent for the third quarter of this year. But with weak residential and commercial real estate, the outlook for 2010 is still a loss of 10.8 percent. Job prospects improve in 2011 but with only a 0.5 percent job increase. Jobs growth continues to increase at rate of 2.3 percent in 2012 and 4.3 percent in 2013. Trade, transportation, and utilities sector is projected to mildly loose jobs at a rate of 0.4 percent in 2010, then moderately grow at 1.5 percent in 2011, 3.1 percent in 2012, and 2.3 percent in 2013. Retail employment will loose 0.3 percent in 2010, mildly gain jobs of 0.7 percent in 2011, and further increase job gains of 2.0 percent in 2012 and 1.8 percent in 2013. Wholesale trade jobs will be down slightly in 2010 at 0.2 percent, a gain of 2.0 percent in 2011, and improved growth of 4.3 percent in 2012 and 2.8 percent in 2013. The information sector, which includes traditional publishers such as newspapers and publishers of software, should close out 2010 with job growth of 2.8 percent. The near term forecasts calls for continued growth of 4.5 percent in 2011, 3.1 percent in 2012, and 1.7 percent in 2013. The financial sector will end 2010 with an annual job decline of 2.5 percent. Mild job growth returns in 2011 at 1.0 percent, building strength with grow of 3.0 percent in 2012 and 1.9 percent in 2013. Professional and business services will decrease jobs by 1.5 percent in 2010. Job growth greatly improves with the economy with increases of 3.4 percent in 2011, 3.9 percent in 2012, and 4.6 percent in 2013. Health services is expected to grow at a 0.7 percent rate in 2010, a far cry from the plus 3 percent growth leading up to this recession. Private educational services likewise will see 2010 with a decline in job growth of 3.5 percent. Combined, the job outlook for education and health services is job gains of only 0.1 percent in 2010, stronger growth of 1.4 percent in 2011, and positive growth of 3.2 percent in 2012 and 2.1 percent in 2013. Leisure and hospitality will finish 2010 with an annual job growth of 0.8 percent. Continued mild job growth is projected at 0.4 percent in 2011, 0.6 percent in 2012, and 1.3 percent in 2013. The government sector employment will slightly increase by 0.4 percent in 2010. Budget shortfalls generally lag the recessionary impact on the private sector and branches of government are now 9 coming to grips with balancing their budgets. The total government sector outlook is for job declines of 1.7 percent in 2011, no growth in 2012, and mild job gains of 0.7 percent in 2013. Population growth has slowed with the economy and is projected to be below the U.S. growth rate in 2010 at 0.6 percent. Population growth picks up at 0.7 percent in 2011, 0.9 percent in 2012, and 1.0 percent in 2013, but still below rates seen in 2005 through 2008. Forecast Risks Policy makers at the Federal Reserve hope that QEII (Quantitative Easing Part II) will help stave off a double-dip recession. Many analysts seem to agree and IHS Global Insight has lowered their pessimistic outlook chances from 30 percent to 25 percent. Debate still persists as to whether the federal government needs to implement another round of stimulus spending. Job growth is very weak and questions abound whether employment losses are due to cyclical effects of the business cycle or are more structural and permanent. Oregon’s economy generally follows the U.S. and same questions apply. Wood products employment has been decreasing over time and is impacted by both cyclical and structural factors. Transportation equipment manufacturing appears to have structural factors and the RV sector will not likely come back to its former self as the recovery continues. Will electrical car making possibly replace these lost jobs? The Intel announcement has very positive short term improvements for construction and high tech jobs but also has longer term implications for high tech to play a major role in the Oregon economy. Intel is also a firm that could expand almost anywhere it chooses in the world. Its expansion plans in Oregon is in many ways a statement that this state has many advantages for businesses to locate and expand. Only time will tell if these intangibles will play out in real positive numbers for the state. We will continue to monitor and recognize the potential impacts of risk factors on the Oregon economy. We have identified the major risks now facing the Oregon economy in the list below: • Contagion of the credit crunch and financial market instability. Credit markets are easing, but consumers and businesses still have difficulty getting loans. To the extent that credit markets take longer to come back to some sort of state of normalcy, the current recovery could be slower than projected or thrown off track. Housing and commercial real estate may take longer for credit conditions to improve. Oregon will suffer the consequences along with the rest of the nation. • Prolonged housing market instability. Signs are starting to emerge that the housing market has hit bottom, at least in terms of housing starts, but prices may have further to fall. Though Oregon has been hit hard through this downturn, Oregon’s housing market is relatively better off compared to California, Nevada, Florida, and Arizona. Coupled with the recessionary state of the economy, overbuilding and heightened credit standards will keep demand for housing relatively low. Rather than the correction of the housing bubble further hurting the Oregon housing market, it has been the deepening recession that caused further home price declines and rising foreclosures. Unlike many parts of the economy, there is an upside risk here as well. If the recovery is stronger than forecasted, Oregon’s housing market should revive better than the states that experienced the greater housing market bubbles. 10 • Period of deflation or inflation. With the continuation of very low interest rates and the drop in house prices, expectations could form for a period of deflation. Consumer spending would be greatly curtailed for consumer durables and businesses would be reluctant to expand capital expenditures. Fears would build that the U.S. economy may enter a decade of no growth similar to Japan. With the nation, Oregon would be similarly impacted. Pundits are also looking at the massive federal stimulus package accompanied by two rounds of quantitative easing by the Federal Reserve. They are concerned that the U.S. could enter a period of rapid rising inflation. If this direction for the U.S. is correct, Oregon would likewise suffer from higher inflation. • The temporary return of federal timber payments to Oregon counties. Included in the federal bailout was a provision to reinstate federal timber payments for four years. Oregon counties will receive $254 million, down from the previous $282 million level and will be phased out over the four year window, through 2011. While this temporary reinstatement helps cover short term budgets for Oregon counties, finding or replacing this dwindling revenue source will be imperative as any loss of public services could have adverse impacts on economic activity. • The extent of the global downturn. The U.S. economy has been an important engine of growth for the global economy. The economic woes of the U.S. have been felt throughout the global supply chain and production process. Asian economies, exposed via trade to the U.S., have begun a strong rebound. It is expected that Asian economies will lead the world out of recession, which is good news for Oregon’s exports. China is a top export market for Oregon’s products and a strong Chinese expansion, along with other Pacific Rim countries will aid the Oregon recovery. Financial stability is still a global question with the fiscal worries of Greece and implications for the Euro Zone. • National and regional energy prices. Energy prices are generally lower in 2010 compared to 2008. Changes in regional electric and natural gas prices are expected to be small over the year. This comes at a welcomed time when businesses are looking for cost savings. The benefit from lower energy prices is most likely short-lived as the underlying demand drivers will return once the world economies rebound from this recession. • Initiatives, referendums, and referrals. Generally, the ballot box brings a number of unknowns that could have sweeping impacts on the Oregon economy. Demographic Forecast Oregon’s estimated population on July 1, 2010 reached 3,823,460. That was an increase of 0.54 percent over the 2009 population. The rate of change between 2009 and 2010 was the slowest since 1986. In recent years, the growth rate has slowed down since the high of 2005-06 when it exceeded 1.6 percent. Oregon’s population growth rates have remained below national average for two consecutive years since 1987. Overall, population change since 2000 was much slower than the rate of growth of well over 2.0 percent during the early 1990s. As a result of recent economic downturn, Oregon’s population is expected to continue a slow pace of growth in the near future. Based on the current forecast, Oregon’s population will reach 4.142 million in the year 2017 with an annual rate of growth of 1.1 percent between 2010 and 2017. 11 Oregon’s economic condition heavily influences the state’s population growth. Its economy determines the ability to retain local work force as well as attract job seekers from national and international labor market. As Oregon’s total fertility rate remains below the replacement level and deaths continue to rise due to ageing population, long-term growth comes from net in-migration. Working-age adults come to Oregon as long as we have good economic and employment situations. During the 1980s, that included a major recession and a net loss of population, net migration contributed to 22 percent of the population change. On the other extreme, net migration accounted for 73 percent of the population change during the booming economy of 1990s. This share of migration to population change declined to 57 percent in 2002 and it is further down to 33 percent in 2010. As a sign of slow to modest economic gain, the ratio of net migration-to-population change will increase gradually and will reach 73 percent by the end of the forecast horizon. Although economy and employment situation in Oregon look stagnant at this time, migration situation is not expected to replicate the early 1980s pattern. Potential Oregon out-migrants have no better place to go since other states are also in the same boat in terms of economy and employment. Age structure and its change affect employment, state revenue, and expenditure. Growth in many age groups will show the effects of the baby-boom and their echo generations during the period of 2010-2017. It will also reflect demographics impacted by the depression era birth cohort combined with diminished migration of the working age population and elderly retirees. After a period of slow growth during the early years of the current decade, the elderly population (65+) has picked up a faster pace of growth and will surge as the baby-boom generation starts to enter this age group. The average annual growth of the elderly population will be 4.2 percent during the forecast period as the boomers continue to enter retirement age. The youngest elderly (aged 65-74) will grow at an extremely fast pace for some years during the forecast period, even exceeding 6 percent annual rate of growth due to the direct impact of the baby-boom generation entering retirement age. Reversing several years of shrinking population, the elderly aged 75-84 will start a positive growth as the effect of depression era birth-cohort will dissipate. The oldest elderly (aged 85+) will continue to grow at a moderately but steady rate due to the combination of cohort change, continued positive net migration, and improving longevity. However, the annual growth rate will continue to taper off as the depression era small birth cohort transitions from the younger age group. As the baby-boom generation matures out of oldest working-age cohort combined with sowing net migration, the once fast-paced growth of population aged 45-64 will gradually taper off to below zero percent rate by 2012 and recovery starts after that year. The young adult population (aged 18- 24) will decline by 0.8 percent between 2010 and 2017, reversing from an averaging of 0.9 percent growth experienced between 2000 and 2010. Although the slow growth of college-age population (age 18-24) tend to ease the pressure on public spending on college education, college enrollment typically goes up during the time of high unemployment and scarcity of well paying jobs when even the older population flock back to college to better position themselves in a tough job market. The growth rate for children under the age of five will remain below zero percent in the near future and will see positive growth only after 2014. Although the number of children under the age of five will decline slightly in the near future, the demand for child care services and pre-Kindergarten program will be additionally determined by the labor force participation of the parents. The growth in K-12 population (aged 5-17) will remain low which will translate into slow growth in school enrollments. This school-age population has actually decline in size. The 25-44 age group population has 12 reversed the declining trend of several year and slow growth in the past. The decline was mainly due to the exiting baby-boom cohort. This age group has seen positive growth starting in the year 2003 and will remain 1.0 percent annual average growth during the forecast horizon. Revenue Forecast General Fund Revenues The forecast for General Fund revenues for 2009-11 is $12,462.2 million. This represents an increase of $119.0 million from the September 2010 forecast. The forecast for the 2009-11 biennium is now $1,149.5 million below the Close of Session forecast. The prolonged plunge in personal income taxes, particularly those related to nonwage forms of income, accounts for most of the decrease relative to the Close of Session forecast. The increase relative to the September forecast is largely due to two technical factors, the designation of $57.0 million in tax amnesty revenues and other transfers to the general fund, and an upcoming change in the personal income tax withholding formulas that will take effect in January 2011. After incorporating the use of Rainy Day Funds and other legislative transfers, total available resources amount to $12,590.5 million. Table R.1 (Millions) 2009 COS Forecast September 2010 Forecast December 2010 Forecast Change from Prior Forecast Change from COS Forecast Structural Revenues Personal Income Tax $11,545.7 $10,345.3 $10,443.0 $97.7 -$1,102.7 Corporate Income Tax $831.6 $873.9 $855.2 -$18.7 $23.6 All Other Revenues $1,198.4 $1,088.1 $1,128.0 $39.9 -$70.4 Gross GF Revenues $13,575.7 $12,307.2 $12,426.2 $119.0 -$1,149.5 Administrative Actions1 -$43.7 -$15.7 -$15.7 $0.0 $28.0 Legislative Actions $0.0 $64.3 $180.0 $115.7 $180.0 Net Available Resources $13,532.0 $12,355.8 $12,590.5 $234.7 -$941.5 Confidence Intervals 67% Confidence +/- 3.4%$422.5 95% Confidence +/- 6.8%$845.0 1 Reflects cost of cashflow management actions, exclusive of internal borrowing. 2009-11 General Fund Forecast Summary $12.00B to $12.85B $11.58B to $13.27B The latest revenue forecast for the current biennium represents the most probable outcome given available information. OEA feels that it is important that anyone using this forecast for decision- making purposes recognize the potential for actual revenues to depart significantly from this projection. Table R.1 presents the December forecast for the 2009-11 biennium, including 13 guidelines for budgetary purposes. Section D discusses explicit risks that might cause actual revenues to differ substantially from the forecast. Personal Income Tax On a cash basis, personal income tax collections totaled $1,146.2 million for the first quarter of fiscal year 2011, $44.4 million below the latest forecast. Withholding receipts of $1,146.2 million came in $4.9 million below the forecast. Estimated payments were $39.9 million below the forecast. Final payments exceeded forecast by $1.2 million, while refunds were $0.8 million more than expected. Compared to the year-ago level, total personal income tax collections were up 5.7 percent. The forecast for total personal income tax receipts during the current biennium was increased $97.7 million from the September forecast. If not for the upcoming changes to the personal income tax withholding formulas, the forecast would have been revised downward. Although the changes to withholding rules do not increase tax liability, they do change the timing of tax collections. Withholdings will increase immediately during the second half of fiscal year 2011, while the bulk of the offsetting changes to final tax payments and refunds will not be collected until year-end tax returns are filed in April 2012. Corporate Income Tax Corporate income taxes equaled $113.9 million for the first quarter of fiscal year 2011, $9.3 million lower than September forecast. Quarterly corporate receipts were 61% higher than figures from a year ago. Corporate profits, and associated tax collections, have risen rapidly throughout the past year. The corporate income tax forecast for the biennium as a whole is now $23.6 million above the Close of Session forecast. If this outlook is realized, we would see a corporate kicker to be claimed during the 2011-13 biennium. However, given the large amount of volatility inherent in corporate profits and corporate income taxes, both the existence and size of the corporate kicker remain in question. Non-income Tax Sources of Revenue All other revenues will total $1,128.0 million for the biennium, an increase of $39.9 million from the prior forecast. Aside from a $12.3 million increase in the outlook for liquor and tobacco taxes, the forecast for most types of taxes and fees has been revised lower. The overall increase in the forecast for all other revenues is driven by transfers of special revenues into the general fund, including $31 million in tax amnesty funds. 14 Extended General Fund Revenue Outlook Table R.2 exhibits the long-run forecast for General Fund revenues through the 2015-17 biennium. Total structural General Fund revenues will increase 11.5 percent to $13,855.5 million in 2011-13. Lower expectations for the economic recovery, and the impact of personal income tax withholding schedules led to a decrease of $273 million relative to the September forecast. Personal income tax growth of 15.4 percent will raise collections to $12,052.5 million. Although the turning point is highly uncertain, personal income tax collections will eventually reflect the strong growth in equity prices seen in recent months. The full realization of the corporate income tax changes passed during the 2009 legislative session, together with recent profit growth will push corporate income tax collections up 13.0 percent to $966.2 million. All other revenues will reach $836.9 million. Table R.2 General Fund Revenue Forecast Summary (Millions of Dollars, Current Law) Forecast Forecast Forecast Forecast Forecast 2007-09 % 2009-11 % 2011-13 % 2013-15 % 2015-17 % Revenue Source Biennium Chg Biennium Chg Biennium Chg Biennium Chg Biennium Chg Personal Income Taxes 9,916.5 -10.2% 10,443.0 5.3% 12,052.5 15.4% 13,850.1 14.9% 15,509.0 12.0% Corporate Income Taxes 602.8 -28.6% 855.2 41.9% 966.2 13.0% 995.6 3.1% 1,000.4 0.5% All Others 1,193.6 39.2% 1,128.0 -5.5% 836.9 -25.8% 886.0 5.9% 932.1 5.2% Total General Fund 11,712.9 -8.1% 12,426.2 6.1% 13,855.5 11.5% 15,731.8 13.5% 17,441.5 10.9% Kicker Distributions 1,084.2 - - - - Total Revenue 12,797.1 0.4% 12,426.2 -2.9% 13,855.5 11.5% 15,731.8 13.5% 17,441.5 10.9% 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 General Fund revenues will total $15,731.8 million in 2013-15, an increase of 13.5 percent from the prior period, and a $702.3 million below the September forecast, as changes made to earlier periods of the forecast proliferate through the forecast period. The growth is fueled primarily by a 14.9 percent increase in personal income tax collections to $13,850.1 million. Corporate income taxes will reach $995.6 million, while all other revenues will total $88.6 million. 15 Oregon Index of Leading Indicators (Six-Month Annualized Percent Change, through September 2010) -30% -20% -10% 0% 10% 20% 30% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 -10.0% -6.7% -3.3% 0.0% 3.3% 6.7% 10.0% Leading Index (Left Axis)Diffusion Index <50 Nonfarm Employment (Right Axis) Total Nonfarm Employment (Annual Percentage Change) -7.0 -6.0 -5.0 -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Pe r c e n t C h a n g e Oregon U.S. 16 Oregon's Total Exports (1Q 1997 - 3Q 2010, current dollars) 0.0 1,000.0 2,000.0 3,000.0 4,000.0 5,000.0 6,000.0 Q 1 1 9 9 7 Q 3 1 9 9 7 Q 1 1 9 9 8 Q 3 1 9 9 8 Q 1 1 9 9 9 Q 3 1 9 9 9 Q 1 2 0 0 0 Q 3 2 0 0 0 Q 1 2 0 0 1 Q 3 2 0 0 1 Q 1 2 0 0 2 Q 3 2 0 0 2 Q 1 2 0 0 3 Q 3 2 0 0 3 Q 1 2 0 0 4 Q 3 2 0 0 4 Q 1 2 0 0 5 Q 3 2 0 0 5 Q 1 2 0 0 6 Q 3 2 0 0 6 Q 1 2 0 0 7 Q 3 2 0 0 7 Q 1 2 0 0 8 Q 3 2 0 0 8 Q 1 2 0 0 9 Q 3 2 0 0 9 Q 1 2 0 1 0 Q 3 2 0 1 0 ($ m i l l i o n ) -50.0 -40.0 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 (% c h a n g e ) Year-over-year percent change (right scale) Total Exports (left scale) Oregon Dec 2010 Forecast Comparison: Alternative Scenarios (Percent Change) Employment 2010 2011 201 2 Baseline -1.0 0.9 2.2 Pessimistic -1.1 -0.1 1.7 Optimistic -0.8 2.0 2.9 Personal Income 2010 2011 2012 Baseline 3.1 3.2 4.3 Pessimistic 2.8 1.4 3.6 Optimistic 3.3 4.7 5.1 17 COMPARISON OF LAST THREE FORECASTS Jun 2010 Sep 2010 Dec 2010 PERSONAL INCOME GROWTH -2 0 2 4 6 8 10 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Pe r c e n t EMPLOYMENT GROWTH -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Pe r c e n t 18 Historical Recession Comparison Return to Peak Peak-to-Trough % Change Loss (in 000s) 26 Qtrs21 Qtrs16 Qtrs15 Qtrs5 Qtrs10 Qtrs28 Qtrs8 Qtrs 8 Qtrs7 Qtrs10 Qtrs9 Qtrs3 Qtrs5 Qtrs12 Qtrs5 Qtrs Duration (8.52)(5.99)(3.69)(2.01)(0.97)(1.37)(11.50)(2.99) 148.28,257.360.12,657.312.31,498.3123.32,734.3 Employment OregonU.S.OregonU.S.OregonU.S.OregonU.S. 2008-?? *20011990-911980-821981-82Recession Return to Peak Peak-to-Trough % Change Loss (in 000s) 26 Qtrs21 Qtrs16 Qtrs15 Qtrs5 Qtrs10 Qtrs28 Qtrs8 Qtrs 8 Qtrs7 Qtrs10 Qtrs9 Qtrs3 Qtrs5 Qtrs12 Qtrs5 Qtrs Duration (8.52)(5.99)(3.69)(2.01)(0.97)(1.37)(11.50)(2.99) 148.28,257.360.12,657.312.31,498.3123.32,734.3 Employment OregonU.S.OregonU.S.OregonU.S.OregonU.S. 2008-?? *20011990-911980-821981-82Recession * Estimates based on Global Insight and OEA forecasts Oregon Housing Starts 0 5 10 15 20 25 30 35 19 9 0 19 9 1 19 9 2 19 9 3 19 9 4 19 9 5 19 9 6 19 9 7 19 9 8 19 9 9 20 0 0 20 0 1 20 0 2 20 0 3 20 0 4 20 0 5 20 0 6 20 0 7 20 0 8 20 0 9 20 1 0 20 1 1 20 1 2 20 1 3 20 1 4 20 1 5 20 1 6 20 1 7 -50 -40 -30 -20 -10 0 10 20 30 40 Housing Starts (000s, Left Axis) Percent Change (Right Axis) 19 Personal Income Tax $11,545.7 $10,345.3 $10,443.0 $97.7 -$1,102.7 Corporate Income Tax $831.6 $873.9 $855.2 -$18.7 $23.6 Other Revenues $1,198.4 $1,088.1 $1,128.0 $39.9 -$70.4 Total GF Resources $13,575.7 $12,307.2 $12,426.2 $119.0 -$1,149.5 Less: Anticipated Administrative Actions $43.7 $15.7 $15.7 $0.0 -$28.0 Plus: Legislative Actions $0.0 $180.0 $123.0 -$57.0 $123.0 Proj. Expenditures $13,298.1 $12,849.0 $12,471.5 -$377.5 -$826.6 Ending Balance $233.8 -$557.5 $61.9 $619.4 -$171.9 General Fund Resources 2009-11 Biennium General Fund (Millions) COS Forecast Sep 2010 Forecast Dec 2010 Forecast Change from September Change from COS 2009 Comparison of General Fund Resource Forecasts ($Billions) 12.8 12.4 15.7 13.2 12.3 14.1 16.4 13.9 10 11 12 13 14 15 16 17 2007-09 2009-11 2011-13 2013-15 December 2010 September 2010 20 Biennial Growth in General Fund Revenue -10% -5% 0% 5% 10% 15% 20% 25% 30% B I 1 9 9 1 -9 3 B I 1 9 9 3 -9 5 B I 1 9 9 5 -9 7 B I 1 9 9 7 -9 9 B I 1 9 9 9 -0 1 B I 2 0 0 1 -0 3 B I 2 0 0 3 -0 5 B I 2 0 0 5 -0 7 B I 2 0 0 7 -0 9 B I 2 0 0 9 -1 1 B I 2 0 1 1 -1 3 B I 2 0 1 3 -1 5 Collections Kicker and Pension Adjusted Collections (Millions) 2007-09 Biennium 2009-11 Biennium 2011-13 Biennium Rainy Day Fund Beginning Balance $0.0 $112.5 $10.6 Net Deposits3 $94.3 -$103.4 $61.9 Interest $18.3 $1.5 $3.6 Ending Balance1 $112.5 $10.6 $76.1 Education Stability Fund Beginning Balance $178.9 $0.1 $102.1 Net Deposits -$178.9 $102.0 $193.8 Interest2 $17.2 $1.5 $10.5 Triggered Withdrawals -$17.1 -$1.5 -$10.5 Ending Balance $0.1 $102.1 $296.0 Total Reserves $112.6 $112.7 $372.1 Oregon's Budgetary Reserves Footnotes: 1. Under current law, only 2/3rds of the beginning balance is available for withdrawal. Withdrawal subject to economic and financial triggers. 2. Education Stability Fund interest is distributed to the Oregon Education Fund (75%) and the State Scholarship Commission (25%). 3. Includes transfer of ending General Fund balances, up to 1% of budgeted appropriations, as well as private donations. 21 Corporate Income Tax Collections (Quarterly, Year-over-year percent change) -100% -50% 0% 50% 100% 150% 200% 250% 300% 1 9 9 6 :7 1 9 9 7 :7 1 9 9 8 :7 1 9 9 9 :7 2 0 0 0 :7 2 0 0 1 :7 2 0 0 2 :7 2 0 0 3 :7 2 0 0 4 :7 2 0 0 5 :7 2 0 0 6 :7 2 0 0 7 :7 2 0 0 8 :7 2 0 0 9 :7 2 0 1 0 :7 Personal Income Tax Collections (Quarterly, Year-over-year percent change) -40% -30% -20% -10% 0% 10% 20% 30% 1 9 9 6 :7 1 9 9 7 :1 1 9 9 7 :7 1 9 9 8 :1 1 9 9 8 :7 1 9 9 9 :1 19 9 9 :7 2 0 0 0 :1 2 0 0 0 :7 2 0 0 1 :1 2 0 0 1 :7 2 0 0 2 :1 2 0 0 2 :7 2 0 0 3 :1 2 0 0 3 :7 2 0 0 4 :1 2 0 0 4 :7 2 0 0 5 :1 20 0 5 :7 2 0 0 6 :1 2 0 0 6 :7 2 0 0 7 :1 2 0 0 7 :7 2 0 0 8 :1 2 0 0 8 :7 2 0 0 9 :1 2 0 0 9 :7 2 0 1 0 :1 2 0 1 0 :7 22 Sep 2010 Dec 2010 (Millions)Forecast Forecast Amount Percent Beginning Balance $1.4 $1.4 - 0.0 % Earnings $1,061.6 $1,060.3 (1.3) -0.1% Administrative Savings $20.4 $29.3 9.0 Other Resources1 $0.8 $0.9 0.1 15.6% Total Resources $1,084.1 $1,091.9 7.8 0.7 % Allocations 1,076.8 1,070.5 (6.3) -0.6% Ending Balance $7.3 $21.4 14.1 193.5% Note: Some totals may not foot due to rounding. 1. Includes interest earnings and reversions 2. Includes Education Stability Fund, Parks and Natural Resource Fund, and Debt Service. Lottery Resources (Millions of Dollars) Change from Sep 2009-11Biennium LOTTERY LONG-TERM FORECAST $700 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 $1,600 $1,700 2007-09 2009-11 2011-13 2013-15 September 2010 June 2010 Biennia following 2009-11 do not include projected beginning balances 23 State Lottery Resources ($Millions) $ 0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 85-87 87-89 89-91 91-93 93-95 95-97 97-99 99-01 01-03 03-05 05-07 07-09 09-11 Proj. 11-13 Proj. 13-15 Proj. Resources Available for Allocation Parks (15%) & Other Dedicated Programs Education Endowment Fund (15-18%) Debt Service Tax Surplus / Credit Surplus / Biennium Year (Shortfall) Refund (Shortfall) Credit 1979-81 1981 (141.0) none (25.1)none 1981-83 1983 (115.2) none (109.9) none 1983-85 1985 88.7 7.7%13.4 10.6% 1985-87 1987 224.2 16.6%6.8 6.2% 1987-89 1989 175.2 9.8%36.2 19.7% 1989-91 1991 185.9 suspended (23.0)none 1991-93 1993 60.1 none*17.9 suspended 1993-95 1994/5 162.8 6.3%167.0 50.1% 1995-97 1996/7 431.5 14.4% 202.7 42.2% 1997-99 1997/8 167.3 4.6%(68.6)none 1999-01 2000 253.6 6.0%(43.9)none 2001-03 2002 (1,249.4) none (439.5) none 2003-05 2004/5 (401.3) none 101.0 36.0% 2005-07 2006 1,071.2 18.6% 344.1 suspended 2007-09 2008 (1,113.1) none (236.4) none Dollar figures in millions *1991-93 personal surplus was less than 2% Data Source: Legislative Revenue Office, Office of Economic Analysis Personal Corporate 2 Percent Surplus Kicker History - 18 -24 Pr e s e n t e d b y : O f f i c e o f E c o n o m i c A n a l y s i s Da t e : N o v e m b e r 1 9 , 2 0 1 0 Ec o n o m i c a n d R e v e n u e F o r e c a s t De c e m b e r 2 0 1 0 Ho u s e & S e n a t e R e v e n u e C o m m i t t e e s 25 2 Ec o n o m i c a n d R e v e n u e F o r e c a s t O R E G O N P R E L I M I N A R Y EC O N O M I C F O R E C A S T OR E G O N F I N A L E C O N O M I C F O R E C A S T PE R S O N A L I N C O M E TA X M O D E L S CO R P O R A T E I N C O M E TA X M O D E L S Fo r e c a s t e r J u d g e m e n t LE G I S L A T I V E & P O L I C Y C H A N G E S FI N A L R E V E N U E E S T I M A T E U. S . E c o n o m i c Hi s t o r y a n d F o r e c a s t (G l o b a l I n s i g h t , I n c . ) Or e g o n E c o n o m i c Hi s t o r y Or e g o n C o r p o r a t e In c o m e T a x H i s t o r y O r e g o n P e r s o n a l In c o m e T a x H i s t o r y Go v e r n o r ’ s C o u n c i l of E c o n o m i c Ad v i s o r s D A S A d v i s o r y Co m m i t t e e OR E G O N E C O N O M I C M O D E L Go v e r n o r ’ s C o u n c i l o f E c o n o m i c Ad v i s o r s “ P r e - M e e t i n g ” C o u n c i l o f R e v e n u e Fo r e c a s t A d v i s o r s N o n - i n c o m e t a x re v e n u e p r o j e c t i o n s 26 3 3 Ev e r C h a n g i n g P i c t u r e f o r t h e U S Ec o n o m y … Of f i c e o f E c o n o m i c A n a l y s i s “T h e p a c e o f r e c o v e r y i n ou t p u t a n d e m p l o y m e n t i n t h e U. S . e c o n o m y l o o k s a l i t t l e s l o w e r n o w t h a n i t di d t h r e e m o n t h s a g o , a c c o r d i n g t o 4 3 f o r e c a s t e r s s u r v e y ed b y t h e F e d e r a l R e s e r v e B a n k o f Ph i l a d e l p h i a . T h e f o r e c a s t e r s a l s o p r e d i c t w e a k e r r e c o v e r y i n t h e l a b o r m a r k e t . ” N o v e m b e r 1 5 , 2 0 1 0 27 4 4 -8-6-4-202468 20 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 Ba s e l i n e ( 6 0 % ) Pe s s i m i s t i c ( 2 5 % ) Op t i m i s t i c ( 1 5 % ) (P e r c e n t c h a n g e , a n n u a l r a t e ) Re a l G D P G r o w t h i n Al t e r n a t i v e S c e n a r i o s Co p y r i g h t © 2 0 1 0 G l o b a l I n s i g h t , I n c . Ju l y B a s e l i n e (15%) (2 0 % ) 28 5 5 Bo t t o m L i n e f o r U S E c o n o m y • T h e “ r e c o v e r y - r e c e s s i o n ” i s i n i t s s e c o n d y e a r . T e c h n i c a l r e c e s s i o n in t h e U . S . e n d e d l a s t s u m m e r , w i t h t h e u n e m p l o y m e n t r a t e t o p i n g ou t a t 1 0 . 1 % i n t h e f o u r t h q u a r t e r of 2 0 0 9 . T h e l a b o r m a r k e t w i l l re m a i n w e a k w i t h u n e m p l o y m e n t a v e r a g i n g 9 . 7 % i n 2 0 1 0 . • C r e d i t m a r k e t s a r e s l o w l y r e t u r n i n g t o p r e - L e h m a n c o l l a p s e d a y s b u t ri s k p r e m i u m s a r e s t i l l p r e s e n t . R e s i d e n t i a l a n d c o m m e r c i a l r e a l es t a t e s t i l l t i g h t . • T h e h o u s i n g m a r k e t w i l l c o n t i n u e t o r e m a i n f r a g i l e . H o u s i n g s t a r t s ma r g i n a l l y i m p r o v e d i n t h e p a s t y ea r o f f t h e i r h i s t o r i c l o w s . B u t re c e n t m o n t h s p o i n t t o a b u m p y r oa d t h i s y e a r . P r i c e s w i l l c o n t i n u e to d e c l i n e t h r o u g h o u t 2 0 1 0 . • I n f l a t i o n i s n o t a t h r e a t t o d a y o r e v e n n e x t y e a r b u t t h e s t a g e i s s e t fo r c a r e f u l l y e x e c u t e d e x i t s t r a t e g i e s t o a v o i d i n f l a t i o n i n t h e f u t u r e . • A f t e r a n i n i t i a l s u r g e o f e c o n o m i c g r o w t h i n t h e f o u r t h q u a r t e r 2 0 0 9 an d f i r s t q u a r t e r 2 0 1 0 , t h e e c o n o m y i s w a n i n g . G D P g r o w t h w a s re v i s e d d o w n f o r t h e s e c o n d q u a r t e r a n d w i l l r e m a i n b e l o w p o t e n t i a l th r o u g h 2 0 1 1 . Co p y r i g h t © 2 0 1 0 G l o b a l I n s i g h t , I n c . Of f i c e o f E c o n o m i c A n a l y s i s 29 6 • 1 0 . 5 % u n e m p l o y m e n t r a t e f o r O c t o b e r 2 0 1 0 ( O c t U S r a t e i s 9 . 6 % ) i s do w n f r o m t h e h i g h e s t r a t e o f 1 1 . 6 % i n M a y a n d J u n e 2 0 0 9 , b u t es s e n t i a l l y u n c h a n g e d t h e p a s t t w e l v e m o n t h s . •3 8 th fa s t e s t j o b g r o w t h a t - 0 . 3 % f o r a l l s t a t e s f o r S e p t 2 0 1 0 o v e r S e p t 20 0 9 . • T o t a l n o n f a r m e m p l o y m e n t d r o p p e d - 0 . 4 % y e a r - o v e r - y e a r f o r t h e 3 rd qu a r t e r o f 2 0 1 0 . S . A . j o b g a i n s i n f i v e o f f i r s t t e n m o n t h s o f 2 0 1 0 . T o t a l no n f a r m u p 1 1 , 8 0 0 s i n c e D e c w i t h t h e pr i v a t e s e c t o r u p 1 0 , 0 0 0 ( 0 . 7 8 % ) . • 2 . 3 % p e r s o n a l i n c o m e g r o w t h f o r 2 nd qu a r t e r o f 2 0 1 0 o v e r 2 nd quarter of 20 0 9 . A n n u a l i z e d 2 nd qu a r t e r 2 0 1 0 g r o w t h a t 2 . 5 % . • O r e g o n e x p o r t s i n c r e a s e d 2 5 . 1 % i n t h e f i r s t n i n e m o n t h s o f 2 0 1 0 co m p a r e d t o t h e s a m e p e r i o d l a s t y e a r a n d h a v e r e g a i n e d t h e m a j o r i t y of t h e i r l o s s e s f r o m l a t e 2 0 0 8 a n d e a r l y 2 0 0 9 . Re c e n t O r e g o n E c o n o m y F a c t s 30 7 In t e l A n n o u n c e m e n t • T h e e x p e n d i t u r e o f $ 6 t o $ 8 b i l l i o n d o l l a r s ( m o s t o f w h i c h i s l i k e l y i n O r e g o n ) i s ap p r o x i m a t e l y 2 p e r c e n t o f t h e t o t a l i n v e s t m e n t o n i n d u s t r i a l a n d o t h e r eq u i p m e n t a n d m a n u f a c t u r i n g s t r u c t u r e s e x p e c t e d t o b e s p e n t i n t h e U . S . i n 20 1 0 . • E x p e c t a t i o n f o r j o b s – 6 , 0 0 0 t o 8 , 0 0 0 c o n s t r u c t i o n j o b s in O R a n d A Z o v e r 2 + y e a r s – 8 0 0 t o 1 , 0 0 0 p e r m a n e n t h i g h t e c h j o b s i n O R a n d A Z • I s s u e s : – H o w m a n y c o n s t r u c t i o n w o r k e r s a r e s h i f t e d f r o m o t h e r j o b s ? – H o w m a n y c o n s t r u c t i o n w o r k e r s a r e h i r e d o v e r 2 + y e a r s ? ( S u r e l y n o t 5, 0 0 0 o n d a y o n e a n d k e p t o n u n t i l t h e e n d o f t h e p r o j e c t ) – H o w m a n y h i g h t e c h j o b s a r e s h i f t e d f r o m e x i s t i n g p o s i t i o n s ? – D i r e c t , i n d i r e c t , a n d i n d u c e d j o b s ? 31 8 20 0 9 19 8 2 19 4 9 19 5 4 19 5 7 19 8 1 19 5 8 19 6 1 19 7 5 19 5 2 19 5 3 19 7 0 19 6 0 19 6 7 19 7 1 19 4 8 19 5 0 19 5 5 19 5 1 19 5 9 19 6 5 19 7 2 19 7 7 1978 19 8 0 19 9 1 19 6 6 19 7 3 19 7 6 19 7 9 19 8 8 19 8 9 19 8 3 19 9 9 20 0 1 20 0 2 20 0 3 20 0 8 19 7 4 19 8 5 19 8 6 19 9 2 19 9 8 20 0 0 19 5 6 19 6 2 19 6 3 19 6 4 19 6 8 19 6 9 20 0 4 20 0 5 20 0 6 20 0 7 19 8 4 19 8 7 19 9 0 19 9 3 19 9 4 19 9 5 19 9 6 19 9 7 -7 . 5 % to - 6 % -6 % t o -4 . 5 % -4 . 5 % to - 3 % -3 % t o -1 . 5 % -1 . 5 % to 0 % 0% t o 1. 5 % 1. 5 % t o 3% 3% t o 4. 5 % 4. 5 % t o 6% 6% t o 7. 5 % 7.5% to 9% Or e g o n A n n u a l E m p l o y m e n t Gr o w t h 1 9 4 7 - 2 0 1 0 * Av e r a g e : 2 . 2 3 % Me d i a n : 2 . 8 6 % 20 1 0 *2 0 1 0 e s t i m a t e b a s e d o n D e c e m b e r f o r e c a s t 32 9 Le a d i n g I n d i c a t o r s 3 o f 1 1 I n d i c a t o r s a r e P o s i t i v e O r e g o n I n d e x o f L e a d i n g I n d i c a t o r s (S i x - M o n t h A n n u a l i z e d P e r c e n t C h a n g e , t h r o u g h S e p t e m b e r 2 0 1 0 ) -3 0 % -2 0 % -1 0 % 0% 10 % 20 % 30 % 19 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 -10.0%-6.7%-3.3%0.0%3.3%6.7%10.0% Le a d i n g I n d e x ( L e f t A x i s ) Di f f u s i o n I n d e x < 5 0 No n f a r m E m p l o y m e n t ( R i g h t A x i s ) 33 10 In i t i a l C l a i m s (t h r o u g h O c t o b e r 2 0 1 0 ) In i t i a l U n e m p l o y m e n t C l a i m s p e r 1 , 0 0 0 L a b o r F o r c e ( S A ) 012345678 Ja n - 8 7 J a n - 8 9 J a n - 9 1 J a n - 9 3 J a n - 9 5 J a n - 9 7 J a n - 9 9 J a n - 0 1 J a n - 0 3 J a n - 0 5 J a n - 0 7 J a n - 0 9 Or e g o n Un i t e d S t a t e s 34 11 Fo r e c a s t C h a n g e s Or e g o n T o t a l N o n f a r m E m p l o y m e n t ( 0 0 0 s ) 1, 5 7 5 1, 6 2 5 1, 6 7 5 1, 7 2 5 1, 7 7 5 1, 8 2 5 1, 8 7 5 1, 9 2 5 2 0 0 6 Q 1 2 0 0 6 Q 3 2 0 0 7 Q 1 2 0 0 7 Q 3 2 0 0 8 Q 1 2 0 0 8 Q 3 2 0 0 9 Q 1 2 0 0 9 Q 3 2 0 1 0 Q 1 2 0 1 0 Q 3 2 0 1 1 Q 1 2 0 1 1 Q 3 2 0 1 2 Q 1 2 0 1 2 Q 3 2 0 1 3 Q 1 2 0 1 3 Q 3 2 0 1 4 Q 1 2 0 1 4 Q 3 2 0 1 5 Q 1 2 0 1 5 Q 3 2 0 1 6 Q 1 2016Q3 2017Q1 2017Q3 Ma r - 0 8 Se p - 0 8 De c - 0 8 Ma r - 0 9 Ma y - 0 9 Se p - 0 9 De c - 0 9 Ma r - 1 0 Ju n - 1 0 Se p - 1 0 De c - 1 0 35 12 To t a l N o n - f a r m E m p l o y m e n t (A n n u a l P e r c e n t C h a n g e ) To t a l N o n f a r m E m p l o y m e n t (A n n u a l P e r c e n t a g e C h a n g e ) -7 . 0 -6 . 0 -5 . 0 -4 . 0 -3 . 0 -2 . 0 -1 . 0 0. 0 1. 0 2. 0 3. 0 4. 0 20 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 P e r c e n t C h a n g e Or e g o n U.S. 36 13 CO M P A R I S O N O F L A S T T H R E E F O R E C A S T S Ju n 2 0 1 0 S e p 2 0 1 0 D e c 2 0 1 0 PE R S O N A L I N C O M E G R O W T H -20246810 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 P e r c e n t EM P L O Y M E N T G R O W T H -7-6-5-4-3-2-101234 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 200720082009201020112012201320142015 P e r c e n t Fo r e c a s t C o m p a r i s o n s 37 14 Ri s k s t o t h e F o r e c a s t … ▲ Up s i d e ▲ Fi n a n c i a l m a r k e t s r e t u r n m o r e q u i c k l y t o n o r m a l ▲ Qu i c k e r , s t r o n g e r r e l e a s e o f p e n t - u p d e m a n d ▲ Mo r e r o b u s t g l o b a l g r o w t h ▼ Do w n s i d e ▼ Ho u s i n g d o w n t u r n c o n t i n u e s ▼ Af t e r s h o c k s f r o m t h e f i n a n c i a l c r i s i s ▼ Ch i n a b u b b l e ? E u r o Z o n e F i n a n c i a l s ? ► Ot h e r C o n s i d e r a t i o n s ► Im p a c t o f M e a s u r e s 6 6 a n d 6 7 ► He a l t h c a r e r e f o r m 38 15 15 Bo t t o m L i n e f o r t h e O r e g o n E c o n o m y • T h e “ t e c h n i c a l ” r e c e s s i o n i n O r e g o n e n d e d l a t e l a s t su m m e r o r f a l l . T h e “ j o b l e s s ” r e c o v e r y h a s t a k e n h o l d . • J o b l o s s e s w i l l c o n t i n u e i n t o t h e t h i r d q u a r t e r o f 2 0 1 0 , wi t h o n l y m i l d j o b g r o w t h t h r o u g h 2 0 1 1 . • H o u s i n g p r i c e s w i l l s t i l l d e c l i n e t h r o u g h o u t 2 0 1 0 b u t lo o k i n g m o r e l i k e a b o t t o m h a s b e e n r e a c h e d i n ho u s i n g p e r m i t s ( e v e n w i t h t h e J u l y d r o p f o l l o w i n g t h e ex p i r a t i o n o f t h e t a x c r e d i t ) . • H o u s i n g w i l l n o t l e a d d u r i n g t h e r e c o v e r y . F i r s t se c t o r s l i k e l y t o c o m e b a c k : p r o f e s s i o n a n d b u s i n e s s se r v i c e s , h e a l t h c a r e s e r v i c e s , c o m p u t e r a n d el e c t r o n i c p r o d u c t s , r e t a i l . 39 16 Ge n e r a l F u n d R e v e n u e Fo r e c a s t • Fo r e c a s t t r a c k i n g s l i g h t l y b e h i n d S e p t e m b e r fo r e c a s t – G e n e r a l l y , a “ m i x e d b a g ” w i t h w e a k e s t i m a t e d pa y m e n t s i n F Y 1 1 Q 1 • 20 0 9 - 1 1 u p $ 6 1 . 9 m i l l i o n r e l a t i v e t o S e p t e m b e r fo r e c a s t – R e f l e c t s w i t h h o l d i n g g u i d a n c e c h a n g e s e f f e c t i v e J a n 1 , 20 1 1 • 20 1 1 - 1 3 d o w n $ 2 7 2 . 7 m i l l i o n 40 17 Re c e n t P I T R e v e n u e Pe r f o r m a n c e • W i t h h o l d i n g – S t r e n g t h e n i n g s i n c e t h e s p r i n g , s o l i d Y / Y g a i n s • T o t a l P I T u p y e a r - o v e r - y e a r t h e p a s t t w o qu a r t e r s – I m p r o v e m e n t s Y / Y i n w i t h h o l d i n g , e s t i m a t e d , re f u n d s • E c o n o m i c i m p r o v e m e n t , M 6 6 c o n t r i b u t i n g a s w e l l 41 18 Pe r s o n a l I n c o m e T a x F o r e c a s t • U p $ 9 7 . 7 m i l l i o n i n 2 0 0 9 - 1 1 – M i n o r w e a k n e s s i n n e a r t e r m h o w e v e r w i t h h o l d i n g gu i d a n c e a n d s u b s e q u e n t t a b l e c h a n g e s d r i v e t h e fo r e c a s t i n c r e a s e • D e c r e a s e d b y l a r g e r a m o u n t s f o r o u t - y e a r s o f fo r e c a s t , r e f l e c t i n g v i e w o f w e a k e r g r o w t h th r o u g h f o r e c a s t p e r i o d , p l u s r e f u n d a d j u s t m e n t du e t o w i t h h o l d i n g c h a n g e s 42 19 PI T G r o w t h P e r s o n a l I n c o m e T a x C o l l e c t i o n s ( Q u a r t e r l y , Y e a r - o v e r - y e a r p e r c e n t c h a n g e ) - 4 0 % - 3 0 % - 2 0 % - 1 0 % 0 % 1 0 % 2 0 % 3 0 % 1 9 9 6 : 7 1 9 9 7 : 1 1 9 9 7 : 7 1 9 9 8 : 1 1 9 9 8 : 7 1 9 9 9 : 1 1 9 9 9 : 7 2 0 0 0 : 1 2 0 0 0 : 7 2 0 0 1 : 1 2 0 0 1 : 7 2 0 0 2 : 1 2 0 0 2 : 7 2 0 0 3 : 1 2 0 0 3 : 7 2 0 0 4 : 1 2 0 0 4 : 7 2 0 0 5 : 1 2 0 0 5 : 7 2 0 0 6 : 1 2 0 0 6 : 7 2 0 0 7 : 1 2 0 0 7 : 7 2 0 0 8 : 1 2 0 0 8 : 7 2 0 0 9 : 1 2 0 0 9 :7 2 0 1 0 :1 2 0 1 0 :7 43 20 Co r p o r a t e I n c o m e T a x / O t h e r GF R e v e n u e F o r e c a s t • C o r p o r a t e i n c o m e t a x e s d e c r e a s e d $ 1 8 . 7 mi l l i o n i n 2 0 0 9 - 1 1 B N – R o u g h l y $ 7 m i l l i o n ab o v e ki c k e r t h r e s h o l d ( c u r r e n t ki c k e r e s t i m a t e a t $ 2 3 . 6 M ) • O t h e r c h a n g e s ( u p $ 3 9 . 9 m i l l i o n ) : – E s t a t e & I n s u r a n c e t a x e s , I n t e r e s t E a r n i n g s l o w e r – T o b a c c o t a x e s h i g h e r – $ 5 7 M i n o n e - t i m e t r a n s f e r s ( A m n e s t y $ 3 1 M ) 44 21 Co r p o r a t e G r o w t h C o r p o r a t e I n c o m e T a x C o l l e c t i o n s ( Q u a r t e r l y , Y e a r - o v e r - y e a r p e r c e n t c h a n g e ) - 1 0 0 % - 5 0 % 0 % 5 0 % 1 0 0 % 1 5 0 % 2 0 0 % 2 5 0 % 3 0 0 % 1 9 9 6 : 7 1 9 9 7 : 7 1 9 9 8 : 7 1 9 9 9 : 7 2 0 0 0 : 7 2 0 0 1 : 7 2 0 0 2 : 7 2 0 0 3 : 7 2 0 0 4 : 7 2 0 0 5 : 7 2 0 0 6 : 7 2 0 0 7 : 7 2 0 0 8 : 7 2 0 0 9 : 7 45 22 20 0 9 - 1 1 G F R e v e n u e Pe r s o n a l I n c o m e T a x $1 1 , 5 4 5 . 7 $ 1 0 , 3 4 5 . 3 $1 0 , 4 4 3 . 0 $97.7 -$1,102.7 Co r p o r a t e I n c o m e T a x $8 3 1 . 6 $ 8 7 3 . 9 $8 5 5 . 2 -$18.7 $23.6 Ot h e r R e v e n u e s $1 , 1 9 8 . 4 $ 1 , 0 8 8 . 1 $1 , 1 2 8 . 0 $39.9 -$70.4 To t a l G F R e s o u r c e s $1 3 , 5 7 5 . 7 $ 1 2 , 3 0 7 . 2 $1 2 , 4 2 6 . 2 $119.0 -$1,149.5 L e s s : A n t i c i p a t e d A d m i n i s t r a t i v e A c t i o n s $ 4 3 . 7 $1 5 . 7 $1 5 . 7 $0.0 -$28.0 P l u s : L e g i s l a t i v e A c t i o n s $0 . 0 $ 1 8 0 . 0 $ 1 2 3 . 0 -$57.0 $123.0 Pr o j . E x p e n d i t u r e s $1 3 , 2 9 8 . 1 $ 1 2 , 8 4 9 . 0 $1 2 , 4 7 1 . 5 -$377.5 -$826.6 En d i n g B a l a n c e $2 3 3 . 8 - $ 5 5 7 . 5 $6 1 . 9 $619.4 -$171.9 Ge n e r a l F u n d R e s o u r c e s 20 0 9 - 1 1 B i e n n i u m Ge n e r a l F u n d (M i l l i o n s ) CO S Fo r e c a s t Se p 2 0 1 0 Fo r e c a s t De c 2 0 1 0 Fo r e c a s t Ch a n g e f r o m Se p t e m b e r Change from COS 2009 46 23 Bu d g e t a r y R e s e r v e O u t l o o k (M i l l i o n s ) 20 0 7 - 0 9 Bi e n n i u m 20 0 9 - 1 1 Bi e n n i u m 2011-13 Biennium Ra i n y D a y F u n d Be g i n n i n g B a l a n c e $0 . 0 $1 1 2 . 5 $10.6 Ne t D e p o s i t s 3 $9 4 . 3 -$ 1 0 3 . 4 $61.9 In t e r e s t $1 8 . 3 $1 . 5 $3.6 En d i n g B a l a n c e 1 $1 1 2 . 5 $1 0 . 6 $76.1 Ed u c a t i o n S t a b i l i t y F u n d Be g i n n i n g B a l a n c e $1 7 8 . 9 $0 . 1 $102.1 Ne t D e p o s i t s -$ 1 7 8 . 9 $1 0 2 . 0 $193.8 In t e r e s t 2 $1 7 . 2 $1 . 5 $10.5 Tr i g g e r e d W i t h d r a w a l s -$ 1 7 . 1 -$ 1 . 5 -$10.5 En d i n g B a l a n c e $0 . 1 $1 0 2 . 1 $296.0 To t a l R e s e r v e s $1 1 2 . 6 $1 1 2 . 7 $372.1 Or e g o n ' s B u d g e t a r y R e s e r v e s 47 24 Re v e n u e I s s u e s / R i s k s • F o r e c a s t C o m p l i c a t i o n s w i t h N e w T a x Me a s u r e s – T r a c k i n g d i f f i c u l t , e s p e c i a l l y i n n e a r - t e r m – I n c r e a s e d v o l a t i l i t y • I m p a c t o f F e d e r a l C h a n g e s o n t a x p a y e r be h a v i o r 48 25 Lo t t e r y R e v e n u e F o r e c a s t • B a s e l i n e n e a r - t e r m f o r e c a s t h e l d s t e a d y – A d d i t i o n a l a d m i n i s t r a t i v e s a v i n g s o f $ 9 m i l l i o n re l a t i v e t o S e p t e m b e r . • O u t - y e a r s d e c r e a s e d s l i g h t l y – L o w e r e x p e c t a t i o n s f o r c o n s u m e r s p e n d i n g 49 26 Lo t t e r y R e v e n u e F o r e c a s t Se p 2 0 1 0 D e c 2 0 1 0 (M i l l i o n s ) Fo r e c a s t F o r e c a s t A m o u n t P e r c e n t Be g i n n i n g B a l a n c e $1 . 4 $1 . 4 - 0 . 0 % Ea r n i n g s $1 , 0 6 1 . 6 $1 , 0 6 0 . 3 (1 . 2 ) - 0 . 1 % Ad m i n i s t r a t i v e S a v i n g s $2 0 . 4 $2 9 . 3 9. 0 Ot h e r R e s o u r c e s 1 $0 . 8 $0 . 9 0. 1 1 5 . 6 % To t a l R e s o u r c e s $1 , 0 8 4 . 1 $1 , 0 9 1 . 9 7. 8 0 . 7 % Al l o c a t i o n s 1, 0 7 6 . 8 1, 0 7 0 . 5 (6 . 3 ) - 0 . 6 % En d i n g B a l a n c e $7 . 3 $2 1 . 4 14 . 2 1 9 5 . 4 % Lo t t e r y R e s o u r c e s (M i l l i o n s o f D o l l a r s ) Ch a n g e f r o m S e p 20 0 9 - 1 1 B i e n n i u m 50 27 27 Fo r M o r e I n f o r m a t i o n Of f i c e o f E c o n o m i c A n a l y s i s 15 5 C o t t a g e S t r e e t N E , U 2 0 Sa l e m , O R 9 7 3 0 1 - 3 9 6 6 (5 0 3 ) 3 7 8 - 3 4 0 5 Em a i l : oe a . i n f o @ s t a t e . o r . u s We b s i t e : ht t p : / / o r e g o n . g o v / d a s / o e a Bl o g : ht t p : / / o r e g o n e c o n o m i c a n a l y s i s . w o r d p r e s s . c o m / Tw i t t e r : ht t p : / / t w i t t e r . c o m / O R _ E c o n A n a l y s i s 51 Tentative 2011-13 Budget Projections - Including All 2010 Legislative Actions (June 2010 Forecast) Percent GF LF Total GF LF Total Change Revenues Projected Beginning Balance - 1.4 1.4 - 4.0 4.0 Carryforward 52.0 52.0 - 1% Appropriations to Rainy Day Fund/Beginning Balance - - Half Lottery 09-11 Ending Balance to K-12 Capital Acct - (2.0) (2.0) Projected Revenues 12,733.3 1,078.1 13,811.4 14,750.8 1,161.2 15,912.1 Less Dedications (ESF, County)(223.5) (223.5) (247.1) (247.1) One-time Resources Federal ARRA ESF/RDF: K-12 115.7 84.3 Other Total Resources 12,849.0 992.3 13,841.3 14,750.8 916.2 15,667.0 13% Expenditures Education - State School Fund 5,258.2 494.1 5,752.3 6,304.6 409.8 6,714.5 17% Education - All Other 1,726.9 96.2 1,823.1 1,994.5 97.4 2,091.9 15% Human Services 3,523.7 10.9 3,534.6 5,288.3 11.3 5,299.6 50% Public Safety 1,855.0 7.2 1,862.2 2,212.6 7.7 2,220.3 19% Economic & Community Development 29.2 119.9 149.0 27.1 135.4 162.5 9% Natural Resources 146.9 182.0 328.9 160.0 189.6 349.6 6% Transportation 23.1 85.4 108.6 81.8 85.2 167.0 54% Consumer & Business Services 12.9 - 12.9 14.6 - 14.6 13% Administration 194.4 11.6 206.0 205.3 16.5 221.9 8% Legislative 75.2 - 75.2 90.5 - 90.5 20% Judicial 507.2 - 507.2 609.9 - 609.9 20% Program Subtotal 13,352.7 1,007.4 14,360.1 16,989.3 953.0 17,942.3 25% EFund 20.0 - 20.0 40.0 - 40.0 Supplemental State Agency Funding - - - 172.0 4.0 176.0 Other Special Purpose Appropriations 53.5 - 53.5 - Total Expenditures 13,426.1 1,007.4 14,433.5 17,201.3 957.0 18,158.3 26% Ending Balance (577.1) (15.1) (592.3) 172.0 9.6 181.6 Net Fiscal Position (2,622.5) (50.4) (2,672.9) Notes: Both revenues and expenditures include anticipated K-12 trigger of $200 million in 2009-11. Lottery Funds negative ending balance results from a reduction in dedicated BM 66 revenues. Supplemental State Agency Funding for costs associated with salaries, benefits, and other unanticipated and unknown expenses. Millions of Dollars. Components of 2011-13 Expenditure Increases Millions of Dollars PERS 367.9 Statewide Backfill of one-time funds 1,469.0 ARRA, K-12 Trigger, etc Caseload Growth 486.9 Increase in Debt Service 246.5 Phase-ins 247.3 Includes State Hospital 2,817.7 Standard position and inflation increases, including salary pot 907.1 Total Increase 2009-11 to 2011-13 3,724.8 Legislatively Approved Tentative Budget - Current Service Level 2009-11 2011-13 6/11/201052 1 Public Affairs Counsel From:Dave Kanner <Dave_Kanner@co.deschutes.or.us> Sent:Tuesday, November 30, 2010 9:43 AM To:ericah@pacounsel.org; pacounsel@pacounsel.org Cc:alan_unger@co.deschutes.or.us;tammy_baney@co.deschutes.or.us;dennis_luke@co.desch utes.or.us;; Subject:County priorities for Dec. 6 conf. call Mark, Erica – In preparation for our conference call with you next week, the Board had a discussion yesterday about our legislative priorities for 2011. It does not appear that we need to have any legislation introduced on our behalf. We mostly want to get behind legislation that will be introduced by other people. Priority 1 Legislation to facilitate the creation of Regional Health Authorities. Deschutes, Crook and Jefferson Counties have stepped up to be the state pilot project for the regional health authority concept. It looks like there will be a bill introduced to pave the way for this, although we believe we can do this even in the absence of legislation. I will have more info for you next week on exactly who will introduce the legislation. Transportation Planning Rule revisions. A lot of people are going to be pushing this. You might check with Doug Riggs on whether COCO has a specific LC in the hopper already. There was some discussion at a recent EDCO meeting with the Oregon Business Council of a 3-to-5 year moratorium on TPR implementation. I know Senator Telfer would be willing to support this, although I don’t know how viable the concept is. Priority 2 Destination resort modifications. Sen. Dingfelder’s task force has developed a framework for changes to the law. Not sure if there’s an LC already drafted. Nick Lelack, our planning director, as been on the task force. We definitely want to support this. Modifications to allowed uses on EFU land. There has been a task force working on this one as well. Nick and Tammy have been participating in their meetings. It doesn’t look like the concepts the task force is zeroing in on will be much help in Deschutes County, but we want to track this one closely and use the legislation as an opportunity to tell our story and explain the effects of state land use law on us. The DEQ’s LC 848. We had provided this to you under separate cover. Court fines and fees. You’re no doubt aware of the move afoot to move all state court fines and fees into the general fund and to standardize conciliation fees statewide and move those into the general fund as well. This will no doubt be a big issue for AOC. Extension Service consolidation. This is another one AOC will be working hard. Law Library contracting. ORS 9.820 et seq stipulates that only those counties larger than 400,000 population may contract out law library services. It’s my understanding that Rep. Nathanson is planning to introduce legislation to allow all counties to do so. We’d very much like to support this bill. Perhaps you could check with her office on whether there’s an LC already drafted. Temporary restaurant licensing. Legislation will be introduced to modify ORS 624 with regard to temporary restuarant licenses. I’ll forward additional information separately. I believe there’s already an LC out there on this one. 53 2 Priority 3 We’ve heard rumors that there’ll be legislation to create a goal 11 exception in South Deschutes County. There’s one particular lobbyist who has repeatedly floated this idea. Similarly, we’ve heard rumors that there might be modifications to 2009’s HB 2228 regarding transfer of development credits in Skyline Forest. Both of these would be important to Deschutes County and would have to be tracked. Talk to you next week. Dave No virus found in this message. Checked by AVG - www.avg.com Version: 10.0.1170 / Virus Database: 426/3289 - Release Date: 11/30/10 54