Oregon Office of Economic Analysis

• Recent tax collections have been slightly ahead of forecast in recent months, resulting in an upward revision to the near-term revenue outlook
• Our office has built in a larger pull-forward of income into 2012, resulting in a larger April this year and lower levels of payments in subsequent Aprils
• The economic outlook is qualitatively the same, leaving the longer-run revenue forecast effectively unchanged
• 2011-13 BN General Fund and Lottery Fund available resources are up $162 million relative to the December forecast
• 2013-15 BN revenues are revised lower by about $74 million, however available resources for the BN are up $87 million due to a larger current biennium ending balance carried forward as the beginning balance in 2013-15

This morning our office released the March 2013 quarterly economic and revenue forecast. The full document, files and slides may be found over on our main website.

As shown in the graph below, our office’s economic outlook has really been unchanged for the past 5 forecasts. While they remain qualitatively the same, each of those adjustments translate into around $100 million in revenue, which from a budgeting perspective is a significant amount.

Resources for 2011-13 are revised higher and now are about $90 million above the close of session forecast. This means the k-word now has the possibility of coming into play. Corporate revenues are about $4 million above close of session, making the corporate k-work a distinct possibility. The personal k-word threshold is about $176 million away. To reach it, we would need this coming April be like 2008 – taxes filed based on calendar year 2007 – but right now we are not expecting that level of revenue. This near-term upward revision is due to both recent tracking (2012q4 came in stronger) and also building in a larger pull-forward effect due to federal tax changes. We have always had a pull-forward impact in the outlook, however based on the information we have received from our revenue advisors plus conversations with other states, we have now increased this impact.

The table below shows how the outlook has changed for both the 2011-13 and 2013-15 biennia. If you were to ask if the 2013-15 General Fund was up or down, the answer is a somewhat confusing both. The underlying revenue outlook is down $68 million, however available resources are up about $93 million. This is due to the way the ending balance works and how it is carried forward into future biennia. If there is an ending balance, an amount equal to 1% of appropriations gets transferred to the rainy day fund. All other money above and beyond this 1% gets transferred to the beginning balance of the next biennium. So by raising the 2011-13 General Fund outlook by $161 million, this increases the ending balance by $161 million, which then goes into the 2013-15 beginning balance (the three stars). Since the ending balance for 2011-13 was already larger than 1% of appropriations, any revenue increases in the current biennium that do not get spent or redirected before the end of the fiscal year get translated into additional resources for the next budget period.

Lottery available resources are up slightly in 2011-13 due mostly to stronger video lottery sales during the holiday season, however the outlook is revised somewhat lower due to the expiration of the payroll tax cut hitting consumers’ disposable income.

All told, recent forecasts have shown that revenues are coming in today at or slightly above the expected rate which provides a larger ending balance for this budget period should this April tax filing season bring surprising bad news. Also the outlook for 2013-15 has stabilized in recent quarters as the Governor and now the Legislature craft the budget for the next biennium

Just a reminder that there are always lots of good items in the full forecast document, so you should read it if interested. I’ll be pulling some portions out and highlighting them on the blog in the coming weeks, in particular a more thorough look at the Lottery outlook, student loan debt and new regional economic graphs.