- General Fund revenues continue to grow, however the growth is slightly slower than forecast in the most recent quarter
- Baseline economic outlook has firmed as the recovery maintains momentum, albeit at a subpar pace
- The General Fund plus Lottery Fund forecast for the 2011-13 BN has been revised down $35.1 million (-0.2 percent)
- Since the Close of Session, the combined General Fund and Lottery Fund revenue forecast has been revised down $341.1 million (-2.2 percent)
This morning the Oregon Office of Economic Analysis is releasing the March 2012 Economic and Revenue Forecast. All documents, including a copy of the slides, are available on our main website. What follows is a very brief summary of the forecast in graphs and tables. Please click here for a copy of the Press Packet (Executive Summary plus Graphs).
The first table and graph show the revenue forecast changes made since the Close of Session for the 2011-13 BN. Currently, combined General Fund and Lottery Fund revenues have been revised lower by $341.1 million. At this time, prior to any potential legislative actions this session, these reductions result in a projected ending balance for the General Fund of $140.8 million and for the Lottery Fund an ending balance of $3.7 million.
After growing at a strong rate in FY 2011, tax revenue growth is projected to slow in the current biennium. One of the issues our office has is a clear messaging problem. Revenues are increasing, however the forecast is down. Revenues themselves are not down and are not declining. Rather the updated forecast has growth rates that are slower than previous forecast(s).
The overall economic outlook is largely unchanged. The slight downgrade to Oregon employment reflects more the recent trend than any further deterioration in the baseline outlook. Effectively, the difference between the green and red lines is pushing out the return to peak timeline by 1.5 months (Nov 2014). Thus making it a sobering 7 years since the recession began that Oregon regains all the jobs lost during the recession.
As detailed in a previous post, the decline in Oregon’s unemployment rate is real and reflects positive underlying trends in the data. The decline is not due to a shrinking labor force and is not largely driven by the increase in the number of individuals who have given up looking for work. The vast majority of the improvement is due to a declining number of unemployed individuals which is more than matched by an increase in the number of employed individuals. The fundamentals of the unemployment rate change is very encouraging.
While our baseline forecast is our best guess and most likely outcome, clearly there are other factors and risks that will affect the economic and revenue outlook. The last graphic shows our alternative scenarios for Oregon employment as well as growth rates for employment and personal income under the various scenarios. Should the U.S. and Oregon fall back into recession, the associated revenue impacts are currently estimated at approximately $1 billion to the negative.
Finally, Oregon is an income tax state. Given that the biennial budget covers two years, there are two Aprils each biennium and the amount of information learned each tax filing season is substantially large both in terms of revenue to the state and also about the various income components for Oregonians. So far in the 2011-13 BN, we have not had an April. While tax year 2011 is in the books, the amount of variability in tax collections still remains quite large as tax preparation is just now beginning to ramp up. It is not until we see the tax collections for this coming April (and subsequent extension filers) that we will have a good grasp of just how good or bad this fiscal year actually will be.