Presented by: Office of Economic Analysis

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House Senate Revenue Committees
Economic and Revenue ForecastDecember 2008
Presented by Office of Economic Analysis Date
November 19, 2008
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Economic and Revenue Forecast
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Bottom Line U.S. Economy

• The U.S. recession is deepening
• Tightening credit will restrain spending by
  households, businesses, and state and local
  governments
• The housing market slide will continue through
  mid-2009
• Inflation will subside as commodity prices
  retreat
• The economic recovery will begin next spring, but
  growth will remain below potential until early
  2010
• Risks are concentrated on the downside

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October
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Recent Oregon Economy Facts

• 7.3 unemployment rate for October 2008 (October
  US rate is 6.5) is up from the latest lowest
  rate of 5.0 in April 2007. Oregons
  unemployment rate for June 5.5 matched the US
  rate. Oregons rate had been above the US rate
  for past 12 years.
• 41st fastest job growth at -0.7 for all states
  for September 2008 over September 2007.
• Total nonfarm employment dropped -0.1
  year-over-year for the 3rd quarter of 2008
  (preliminary data). Job losses (S.A.) for March
  thru May, and August thru October 2008.
• 5.1 personal income growth for 2nd quarter of
  2008 over 2nd quarter of 2007. Annualized 2nd
  quarter 2008 growth at 7.3 (reflects high
  recorded transfer payments from federal stimulus
  package).
• Oregon exports rise 30 in the 3rd quarter
  compared to the same period last year. (Export
  growth is expected to decline with global
  economic slowing)

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Oregon December 2008 Forecast Comparison
Alternative scenarios
(Percent change)
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Major Oregon RisksSame as Face the U.S.

• Financial Markets
• Housing Sector
• Financial Markets
• Energy
• Financial Markets
• Inflation?

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Remember, we were likely in a recession before
the full force of the financial crisis hit

• Oregon does not have an extensive financial
  activities sector.
• Housing is down but surviving better than CA, AZ,
  NV, FL and many other states.
• Sales tax states are having a harder time
  relative to income tax states. The consumer is
  MIA.
• Strong correlation between states that had the
  biggest housing bubble and the biggest budget
  problems.
• Oregon will fare worse to the extent the
  recession is full blown across all sectors.

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General Fund Revenue Forecast

• Slight decreases in near-term
• BI 07-09 down 165.9 million
• Negative ending balance
• No kicker expected
• 2009-11 down sharply
• 718.4 million lower than September

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2007-09 GF Revenue
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Forecast Changes from September 2008
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PIT Forecast Tracking (July through October)
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Personal Income Tax Forecast

• Down 160.6 million in BI 2007-09
• Sharply decreased for BI 2009-11
• 711 million lower than in September
• Capital gains will likely tell story
• Different from BI 2001-03?

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Corporate Income Tax Forecast Tracking (July
through October)
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Corporate Income Tax Forecast

• No change from September.
• Forecast for corporate profits has not materially
  changed
• Already forecasting decline in collections

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Risks to Forecast

• General departure from current economic outlook,
  particularly with respect to corporate profits,
  personal income, and asset markets.
• Timing and nature of rebound
• Capital Gains

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Lottery Revenue Forecast

• Decrease in baseline forecast
• Consumption slumping everywhere
• Long-term growth lowered
• Transfer rate increased July 1, 2009.

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Lottery Revenues
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Extended Lottery Forecast (Millions)
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Budgetary Reserve Outlook
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Looking Ahead

• OEA will provide revenue update prior to March
  forecast.
• Tracking update with commentary likely in early
  January.

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For more information
Office of Economic Analysis 155 Cottage Street
NE, U20 Salem, OR 97301-3966 (503)
378-3405 email oea.info_at_das.state.or.us http//o
regon.gov/DAS/OEA/
Office of Economic Analysis