Post on 21-Jan-2016
description
Public OfficialsCompensation Commission
July 9, 2008
George Naughton
Department of Administrative Services
(503) 378-5460
Lessons from our History:
Strong Economic Growth during the 1990’s
3
1990’s: State enjoyed huge economic growth and diversification
• Total gross state product increased by 98% from 1991-2001.
• High-tech industry growth.
• Population growth – 11th fastest growing state.
• Personal income grew at annual rate of 5.6%, exceeding the nation.
• Exports increased by a compound annual rate of 5.8%.
• State General Fund grew from $4,628.1 million in 1989-91 to $10,121.8 million in 1999-2001 – dollars primarily went to K-12, Oregon Health Plan, and Public Safety.
• Kicker returned for personal income tax filers 4 times, totaling about $1.1 billion; for corporate tax filers 2 times, totaling about $400 million.
4
Decennial Population Growth (in percent): 1990 – 2000
CLATSOP
WASHINGTON
MULTNOMAH
COLUMBIA
DOUGLAS
LANE
LINCOLN
POLK
YAMHILL
TILLAMOOK
MARION
COOS
DESCHUTES
MALHEURHARNEYLAKEKLAMATHJACKSONJOSEPHINE
CURRY
HOOD RIVER
BENTON LINN
JEFFERSON
CROOK
WALLOWAUMATILLAMORROW
GILLIAM
WASCO
SHERMAN
WHEELER
GRANT
BAKER
UNION
> 20 %
Source: U.S. Census Bureau, 1990 and 2000 Censuses
CLACKAMAS
Office of Economic Analysis
Population Change
10 – 20 % Less than 10 %
Oregon: 20.4%
5
State and Local Resources for K-12 School Funding
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0 Local
State
Bil
lio
ns
of
Do
lla
rs
6
-
1,000
2,000
3,000
4,000
5,000
6,000
Jan
-95
Jan
-96
Jan
-97
Jan
-98
Jan
-99
Jan
-00
Jan
-01
Jan
-02
Jan
-03
Jan
-04
Jan
-05
Jan
-06
Jan
-07
Jan
-08
Jan
-09
Jan
-10
Jan
-11
Jan
-12
Jan
-13
Jan
-14
Jan
-15
Jan
-16
Jan
-17
Ad
dit
ion
al In
mat
es
Direct Impact
Indirect Impact
Historical October 2007 Forecast
Office of Economic Analysis, October 2007
Estimated Impact of Measure 11 on Oregon's Prison System
7
1989-91 General & Lottery Fund ExpendituresTotal: $4,804.6 Million
Public Safety/Judicial
$631.013%
All Other$898.919%
Other Education
$308.76%
State School Fund
$1,176.125%
Higher Education
$693.314%
Human Resources$1,096.6
23%
2001-03 Legislatively Approved General Fund & Lottery Funds Budget - End of Biennium
Total: $10,426.7
Higher Education
$761.27%
Human Resources$2,480.3
24%State School
Fund$4,200.9
40%
Other Education$730.4
7%
All Other$618.4
6%
Public Safety/Judicial
$1,635.516%
Approved General Fund & Lottery Funds
Impact of 2001-03 Recession on State Budget
9
2001-03
• Close of Session forecast projects $12.1 billion General Fund/Lottery Funds ($11.45 GF/$0.65 LF). Legislature approves expenditures of $12 billion. Preliminary 2003-05 forecast is approximately $13 billion (GF plus Lottery).
• Quarterly General Fund forecasts demonstrate effects of recession:
2001-03 2003-05
September 2001 11,159.4 12,313.0
December 2001 10,747.5 11,944.8
March 2002 10,604.0 11,973.9
June 2002 10,098.2 11,528.3
September 2002 9,718.6 11,392.5
December 2002 9,585.6 10,880.5
• Five special sessions plus a rebalance during the 2003 regular session to rebalance the budget using one-time resources, program reductions, and additional revenues.
10
Poverty Rate, 1999
CLATSOP
WASHINGTON
MULTNOMAH
COLUMBIA
DOUGLAS
LANE
LINCOLN
POLK
YAMHILL
TILLAMOOK
MARION
COOS
DESCHUTES
MALHEURHARNEYLAKEKLAMATH
JACKSON
JOSEPHINE
CURRY
HOOD RIVER
BENTON LINN
JEFFERSON
CROOK
WALLOWAUMATILLA
MORROWGILLIAM
WASCO
SHERMAN
WHEELER
GRANT
BAKER
UNION
> 15 %
Source: U.S. Census Bureau, Census 2000
CLACKAMAS
Office of Economic Analysis
% of personsunder poverty
10 – 15 % Less than 10 %
Oregon: 11.6%
11
Estimated Poverty Rate, 2004
CLATSOP
WASHINGTON
MULTNOMAH
COLUMBIA
DOUGLAS
LANE
LINCOLN
POLK
YAMHILL
TILLAMOOK
MARION
COOS
DESCHUTES
MALHEURHARNEYLAKEKLAMATH
JACKSON
JOSEPHINE
CURRY
HOOD RIVER
BENTON LINN
JEFFERSON
CROOK
WALLOWAUMATILLA
MORROWGILLIAM
WASCO
SHERMAN
WHEELER
GRANT
BAKER
UNION
> 15 %
Source: U.S. Census Bureau, Data Integration Division, Small Area Estimates Branch
CLACKAMAS
Office of Economic Analysis
% of personsunder poverty
10 – 15 % Less than 10 %
Oregon: 12.9%
Economic Recovery in 2003
13
Highlights of Oregon Economy
• After the recession of 2001-03, Oregon experienced three years of strong economic growth. During this period, Oregon’s economic indicators exceeded national averages.
• Employment picture in Oregon was extremely strong beginning in 2003– 2.3% annual growth in calendar year 2004– 3.4% annual growth in calendar years 2005 and 2006– For all three years, Oregon’s employment growth was between one and one-and-a-half
percentage points higher than the national average.
• Oregon’s basic strengths– Diverse economy with substantial international presence– Relatively lower energy costs – A high quality of life– Well-educated workforce– Affordable housing– Business cost advantages– Pacific Rim orientation– Strong population growth due mainly to in-migration
14
Non-Farm Employment Growth(Annual Percentage Change)
-3%
-2%
-1%
0%
1%
2%
3%
4%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Oregon U.S.
Long-Term Employment Trends
Oregon’s overall employment trends have mirrored the U.S. with slightly more job loss during the recession but stronger recent and projected growth
Source: Office of Economic Analysis
• The Oregon economy follows the path of the national economy• Job growth turned positive in July 2003• Oregon’s employment growth will continue to be fueled by strong exports, population
growth and business investment
Projected
15
Lottery Resources Available to the State (Millions)
Office of Economic Analysis
Note: Resources do not include Video Lottery proceeds dedicated to the Counties. Beginning balance is included. 2003-09 debt service figures do not reflect any Education Endowment Fund or reserve earnings designated for debt service on education bonds .
$ 0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
85-87 87-89 89-91 91-93 93-95 95-97 97-99 99-01 01-03 03-05 05-07 07-09Proj.
09-11Proj.
11-13Proj.
Resources Available for Allocation
Parks (15%) & Other Dedicated Programs
Education Stability Fund (15-18%)
Debt Service
16
2007-09 Legislatively Approved BudgetTotal Funds
Budgeted Resources Total: $48,328 Million
Lottery Funds2%
Federal Funds19%
Other Funds50%
General Fund29%
ExpendituresTotal: $48,328 Million
Other Education5%
Higher Education10%
Public Safety/Judicial
7%All Other40%
Human Services25%
State School Fund13%
17
2007-09 Legislatively Approved Budget General Fund and Lottery Funds
* Includes beginning balance & carry forward
Resources BudgetedTotal: $15,275 Million
Insurance1.0%
Personal Income Tax71.5%
All Other3.6%
Cigarette/Tobacco Taxes0.8% Corporate Income Tax
5.8%
GF Beginning Balance9.7%
Lottery*7.6%
ExpendituresTotal: $15,121 Million
Other Education7.0%
Higher Education6.0%
Public Safety/Judicial15.8%
All Other7.2%
Human Services22.7%
State School Fund41.3%
18
Expenditures by CategoryGeneral Fund and Lottery Funds
Special Payments
69%
Services and Supplies
8%Capital Outlay
0%
Personal Services
20%
Debt Service3%
2007-09 Legislatively Approved BudgetTotal: $15,121 million
19
• Continued growth of the Education Stability Fund – 18% of biennial net Lottery revenues are dedicated to this reserve account
• Establishment of a Rainy Day Fund in the 2007-09 Budget– Seeded with Oregon’s projected 2005-07 Corporate Kicker of $319.3 million– All interest earnings on the Rainy Day Fund are retained in the Rainy Day Fund– Automatic transfer to the Rainy Day Fund of one percent of Oregon’s General Fund expenditures from the State’s ending fund balance at the completion of each biennium
• $921 million budgeted reserve for 2007-09 biennium is approximately 6.6% of anticipated biennial general fund expenditures
Increasing Oregon’s Budget Reserves
(1)Reflects Ending Balance after distribution of $1.2 billion in personal “kicker” distributions(2)Reflects $319.3 million in initial corporate “kicker” deposit and interest earnings
Budgeted Reserves
($ Millions)
2005-07 2007-09
Education Stability Fund $ 236 $ 396
Rainy Day Fund --
341(2)
Ending Balance/Emergency Fund __319(1) 184
TOTAL $ 555 $ 921
20
The State’s reserve funds are now legally required and a permanent component of the State’s balance sheet
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
99-01 01-03 03-05 05-07 07-09 09-11 11-13
18% Lottery Revenues to
ESF
RDF Created in 2005-07
($ in millions)
6.6%
8.7%
0.2%
4.3%
7.4%
2.7%
Rainy Day Fund Education Stability Fund Projected Rainy Day Fund Deposit Undesignated, Unreserved Fund Balance Reserves as % of Biennial GF Revenues
0.0%
Undesignated Fund Balances andProjected Reserves
Looking Forward at Budget Drivers
22
Revenue Drivers
• Revenue Growth Factors– Employment– Wage Rates– Investment Returns– Profit Levels
• Long term risks– Burgeoning retirement income erodes taxable
income base.
23
What has caused General Fund expenditure growth?
• Primary– Population– Voter Approved Initiatives– Legislative Policy decisions– Federal Budget Adjustments
• Secondary– Inflation– Lawsuits
24
Num
ber o
f per
sons
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
1980 1985 1990 1995 2000 2005 2010 2015 2020
Ages 5-17
Ages 0-4
Office of Economic AnalysisSources: U.S. Census Bureau; CPRC/PSU; OEA
Young-age Population:1980-2020
25
Num
ber o
f per
sons
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1980 1985 1990 1995 2000 2005 2010 2015 2020
Ages 18-24
Ages 25-44
Ages 45-64
Office of Economic AnalysisSources: U.S. Census Bureau; OEA
Working-age Population:1980-2020
26
Num
ber o
f per
sons
0
100,000
200,000
300,000
400,000
500,000
600,000
1980 1985 1990 1995 2000 2005 2010 2015 2020
Ages 85+
Ages 65-74
Ages 75-84
Office of Economic AnalysisSources: U.S. Census Bureau; Office of Economic Analysis
Elderly Population:1980-2020
Other Significant Issues
28
K-12 School Funding per ADMw(State School Fund and School Improvement Fund)
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
1990 1995 2000 2005 2007 2008
School Year
Actual
Inflation-Adjusted(1990-91 Dollars)
29
K-12 School FundingClosing the QEM Gap
(“State EBL” only includes State School Fund Base)
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
03-05 05-07 07-09 09-11 11-13 13-15
Biennium
61% Target
10% Growth
State EBL
Local Revenue
QEM
30
Higher Education FundingPercent of General Fund and Lottery Funds
1983-85 through 2007-09
12.8% 12.9%
15.3%
13.1%
11.7%
9.7%
6.4% 6.3%7.0% 6.9%
6.0% 5.8% 6.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
1983-85Adopted
1985-87Adopted
1987-89Adopted
1989-91Adopted
1991-93Adopted
1993-95Adopted
1995-97Adopted
1997-99Adopted
1999-01Adopted
2001-03Adopted
2003-05Adopted
2005-07Adopted
2007-09Adopted
31
0%
5%
10%
15%
20%
25%
1990 1992 1994 1996 1998 2000 2002 2004 2006
Oregon Health CareUninsurance Rates: 1990-2006
Source: Office for Oregon Health Policy and Research, Oregon Population Survey 2006.
Adults 18-64
Children 0-17
32
Other Issues
• Economic Downturn
• Federal Budget Adjustments
• Additional Lawsuits
• Potential Voter Approved Initiatives
– Mandatory Minimum Sentences for Property Crimes: Full biennial costs could be between $275 and $430 million.
• Pent-up Budget Demand
– Deferred Maintenance: Outstanding deferred maintenance costs for state and University owned facilities exceed $800 million.
– Seismic: Rehabilitation costs could exceed $750 million depending on approach.