INFORMATIONAL: MAY 15 REVENUE FORECAST

 

HOUSE REVENUE TAPES 165-166, A-B

 

JOINT REVENUE COMMITTEE

May 15, 2003†† 9:00 AM†† STATE CAPITOL BUILDING

 

Members Present:††††††††††† ††††††††††† Representative Lane Shetterly, Chair

††††††††††††††††††††††† ††††††††††† ††††††††††† Representative Wayne Scott, Vice Chair

††††††††††††††††††††††† ††††††††††† ††††††††††† Representative Joanne Verger, Vice Chair

††††††††††††††††††††††† ††††††††††† ††††††††††† Representative Phil Barnhart

††††††††††††††††††††††† ††††††††††† ††††††††††† Representative Vicki Berger

††††††††††††††††††††††† ††††††††††† ††††††††††† Representative Pat Farr

††††††††††††††††††††††† ††††††††††† ††††††††††† Representative Mark Hass

††††††††††††††††††††††† ††††††††††† ††††††††††† Representative Elaine Hopson

††††††††††††††††††††††† ††††††††††† ††††††††††† Representative Max Williams†††††††††††

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Ryan Deckert, Chair

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Ted Ferrioli, Vice Chair

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Tony Corcoran

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Charlie Ringo

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Bruce Starr††††††† †††††††††††††††††††††††

 

Members Excused:††††††††† ††††††††††† Senator Lenn Hannon

 

Witness Present:††††††††††† ††††††††††† Tom Potiowsky, State Economist

††††††††††††††††††††††† ††††††††††† ††††††††††† Michael Kennedy, Revenue Economist

†††††††††††††††††††††††

Staff Present:††† ††††††††††† ††††††††††† Paul Warner, Legislative Revenue Office

††††††††††††††††††††††† ††††††††††† ††††††††††† Lizbeth Martin-Mahar, Legislative Revenue Office

††††††††††††††††††††††† ††††††††††† ††††††††††† Tara Lantz, Committee Assistant

 

TAPE 165, SIDE A

 

004

Chair Shetterly

Calls meeting to order at 9:04 am.

 

017

Tom Potiowsky

Gives brief overview of the economic forecast process (Exhibit 1, slide 2).

 

 

 

041

Potiowsky

Discusses U.S. business investment from the last four years (Exhibit 1, slide 3).

 

 

 

055

Potiowsky

Discusses consumer sentiment (Exhibit 1, slide 4).

 

 

 

062

Potiowsky

Discusses federal funds rate (Exhibit 1, slide 5).

 

 

 

072

Potiowsky

Discusses recent news and national economic recovery signs (Exhibit 1, slide 6).

 

 

 

106

Potiowsky

Discusses Oregonís exports (Exhibit 1, slide 8).

 

 

 

127

Potiowsky

Discusses Oregon employment growth (Exhibit 1, slide 9) and unemployment rates (Exhibit 1, slide 10).

 

 

 

155

Potiowsky

Discusses flat employment after recovery (Exhibit 1, slide 11).

 

Discussion on confidence in data follows.

 

 

 

190

Sen. Deckert

Asks what factors lead them to believe there is a recovery.

 

 

 

191

Potiowsky

Responds that low interest rates, federal fiscal packages, stabilizing industries, and consumer spending are all factors.

 

 

 

222

Potiowsky

Discusses expected employment growth (Exhibit 1, slide 12).

 

 

 

235

Potiowsky

Discusses lumber and wood product employment growth (Exhibit 1, slide 13), high tech employment growth (Exhibit 1, slide 14), and construction employment growth (Exhibit 1, slide 15).

 

 

 

272

Potiowsky

Discusses per capita income (Exhibit 1, slide 16).

 

 

 

279

Rep. Barnhart

Asks if there are any significant changes in national per capita income.

 

 

 

281

Potiowsky

Responds that Oregon is following in step with the U.S.

 

 

 

298

Potiowsky

Discusses risk factors to the forecast 2003-2005 (Exhibit 1, slide 17).

 

 

 

336

Potiowsky

Discusses national deflation.

 

 

 

399

Sen. Corcoran

Asks about the federal tax break package and how it would benefit.

 

 

 

401

Potiowsky

Responds that the upper class would not spend money in the short term, but would invest in companies in the long term.

 

 

 

421

Sen. Corcoran

Asks why they donít give tax breaks to lower class people who will spend it.

 

 

 

425

Potiowsky

Responds that he agrees.

 

 

 

431

Potiowsky

Continues discussion of risk factors.

 

TAPE 166, SIDE A

 

024

Rep. Farr

Asks at what point the federal tax breaks would make an impact on the economy.

 

 

 

035

Potiowsky

Responds that there will be indications such as personal savings, which wouldnít be bad, but wouldnít have an immediate effect.

 

Discussion follows.

 

 

 

066

Rep. Barnhart

Asks to what extent SARS would affect tourism in Oregon.

 

 

 

069

Potiowsky

Responds that it will not be large.

 

 

 

090

Sen. Corcoran

Asks why capital projects that involve tax increases would strain the economy.

 

 

 

093

Potiowsky

Responds that they would not.

 

 

 

108

Rep. Hass

Asks about the effect of loss of federal money due to budget cuts.

 

 

 

111

Potiowsky

Responds that it would not greatly affect the federal side and for Oregon it is a double hit.

 

 

 

119

Potiowsky

Continues discussing risk factors.

 

 

 

145

Potiowsky

Compares personal income growth for the last three forecasts (Exhibit 1, slide 18) and employment growth for the last three forecasts (Exhibit 1, slide 19).

 

 

 

156

Michael Kennedy

Discusses significant revisions of personal income tax factors (Exhibit 1, slide 22).

 

 

 

181

Kennedy

Discusses estimate liability from collections (Exhibit 1, slide 23).

 

 

 

200

Kennedy

Compares final tax payments with refunds (Exhibit 1, slide 24).

 

 

 

243

Kennedy

Discussion weakening withholding (Exhibit 1, slide 26).

 

 

 

254

Kennedy

Discusses flat estimated payment in 2003 (Exhibit 1, slide 27).

 

 

 

264

Sen. Deckert

Asks if there would be more assurance of predictability now.

 

 

 

 

Kennedy

Responds affirmatively.

 

 

 

287

Kennedy

Compares the May and March income and liability forecasts (Exhibit 1, slide 28).

 

 

 

342

Kennedy

Discusses effect tax rates (Exhibit 1, slide 29).

 

 

 

400

Kennedy

Discusses signs of corporate recovery (Exhibit 1, slide 30).

 

 

 

415

Kennedy

Discusses the general fund forecast (Exhibit 1, slide 32).

 

 

 

440

Kennedy

Discusses immediate risks (Exhibit 1, slide 33).

 

 

 

478

Kennedy

Discusses general fund revenue forecast (Exhibit 1, slide 34).

 

TAPE 165, SIDE B

 

042

Kennedy

Compares actual revenue with COS forecast (Exhibit 1, slide 35).

 

 

 

072

Kennedy

Gives recommendations (Exhibit 1, slide 36).

 

Clarifying questions and answers interspersed.

 

 

 

100

Rep. Barnhart

Asks if the high rate concerns them as well.

 

 

 

112

Kennedy

Discusses extended general fund forecast (Exhibit 1, slide 37).

 

 

 

121

Kennedy

Discusses general fund revenue growth (Exhibit 1, slide 38).

 

 

 

140

Kennedy

Discusses long-term risks (Exhibit 1, slide 39).

 

 

 

171

Kennedy

Discusses lottery revenues (Exhibit 1, slide 41).

 

 

 

201

Kennedy

Discusses extended lottery forecast (Exhibit 1, slide 42).

 

 

 

213

Kennedy

Discusses lottery resources available to the state (Exhibit 1, slide 43).

 

 

 

226

Rep. Hass

States that Oregon is too dependent on the income tax and should look at a sales tax.

 

 

 

246

Sen. Corcoran

States that they should look at a rainy fund with such a high possibility of a kicker.

 

 

 

254

Rep. Barnhart

Agrees with Sen. Corcoran in looking at policy changes.

 

 

 

262

Sen. Ferrioli

Questions the assumption that research and development wonít follow manufacturing trends.

 

 

 

276

Potiowsky

Responds that it is one of the recognized risks and that it is unknown how technology will change.

 

297

Chair Shetterly

Meeting adjourned at 10:17 pm.

 

 

 

 

 

Tape Log Submitted by,

 

 

 

Tara Lantz, Committee Assistant

 

Exhibit Summary:

1.       Tom Potiowsky, Oregonís Economic and Revenue Outlook Presentation, 22pp.

2.       Tom Potiowsky, Oregon Economic and Revenue Forecast, 17pp.

3.       Lizbeth Martin-Mahar, LRO Forecast Summary, 6pp.