ORIENTATION MEETING

 

TAPES 14-16, A-B

 

SENATE REVENUE COMMITTEE

JANUARY 30, 2003†† 1:00 PM†† STATE CAPITOL BUILDING

 

Members Present:††††††††††† ††††††††††† Senator Ryan Deckert, Chair

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

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Lenn Hannon

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

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

 

Members Excused:††††††††† ††††††††††† Senator Ted Ferrioli, Vice-Chair

 

Invited Witnesses Present:††††††††††† Tom Potiowsky, State Economist, Office of Economic Analysis

††††††††††††††††††††††† ††††††††††† ††††††††††† Michael Kennedy, Revenue Economist, Office of Economic Analysis††††††††††

 

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

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

 

TAPE 14, SIDE A

 

003

Chair Deckert

Calls meeting to order at 1:05 pm.

 

 

009

Paul Warner

Refers members to memo in response to Rep. Shetterlyís request for a review of the General Fund revenue forecasting process. Exhibit 1.

 

 

 

031

Tom Potiowsky

Begins presentation on Oregonís Revenue Forecast Process. Exhibit 2, slide 1.

 

 

 

038

Potiowsky

Discusses forecast objective. Exhibit 2, slide 2.

 

 

 

054

Potiowsky

Discusses General Fund forecast components.

 

 

 

060

Potiowsky

Discusses economic and revenue models. Exhibit 2, slide 3.

 

Questions and answers interspersed.

 

 

 

110

Sen. Hannon

Asks how Oregonís economic drop compared to the national trend and commented on following trends and forecasting for two years rather than one.

 

Discussion follows.

 

 

 

154

Sen. Deckert

Asks how much of the drop in the economy can be attributed to 9/11.

 

 

 

160

Potiowsky

Responds that there is no way to give an exact number because there were many other factors to the recession.

 

Discussion follows.

 

 

 

191

Michael Kennedy

Discusses Personal Income Tax Model. Exhibit 2, slide 4.

 

 

 

225

Kennedy

Discusses the tax calculator and developing the total liabilities forecast. Exhibit 2, slide 5.

 

Questions and answers interspersed.

 

 

 

295

Kennedy

Discusses personal income tax and quarterly collections models. Exhibit 2, slide 6.

 

 

 

306

Kennedy

Discusses the timing of collections in relation to tax year 2001.

 

 

 

328

Kennedy

Discusses the history of the personal income tax collections forecast. Exhibit 2, slide 7.

 

 

 

337

Kennedy

Discusses the Corporate Income Tax Model. Exhibit 2, slide 8.

 

 

 

343

Kennedy

Discusses corporate income tax quarterly collections models. Exhibit 2, slide 10.

 

 

 

350

Kennedy

Discusses the relationship between corporate income tax collections and liability. Exhibit 2, slide 9.

 

 

 

363

Kennedy

Discusses the history of the corporate income tax collections forecast.

 

Questions and answers interspersed.

 

 

 

411

Sen. Hannon

Asks about the effects of the corporate kicker.

 

Discussion follows.

 

TAPE 15, SIDE A

 

010

Kennedy

Discusses Close Of Session (COS) forecast.

 

 

 

015

Kennedy

Discusses the historical performance of forecast. Exhibit 2, slide 11.

 

 

 

018

Kennedy

Discusses graph showing that revenues exhibit considerable volatility. Exhibit 2, slide 12.

 

 

 

047

Kennedy

Discusses actual revenues compared to COS Forecast and a naÔve trend.

 

 

 

082

Kennedy

Discusses data available for December forecast. Exhibit 2, slide 14.

 

 

 

093

Kenedy

Discusses factors that make quarterly PIT collections volatile. Exhibit 2, slide 13.

 

 

 

148

Sen. Deckert

Asks if there were ways to build the budget incrementally.

 

 

 

164

Kennedy

Responds that heís never heard of such a methodology.

 

 

 

170

Sen. Hannon

Responds that that might make it difficult to be cushioning the budget all the time.

 

Discussion follows.

 

 

 

202

Sen. Hannon

Brings up the Washington State model of giving a high and low estimate and taking the middle road and proposes that Oregon should look at different approaches such as this.

 

Discussion follows.

 

 

 

280

Potiowsky

Discusses the recent unusual events that have affected the economy.

 

 

 

300

Potiowsky

Discusses estimated Oregon employment growth rates available for the May 2001 forecast compared to revised data to date.

 

 

 

336

Kennedy

Reviews the current General Fund Revenue Forecast. Exhibit 2, slide 16.

 

 

 

347

Kennedy

Discusses the historical and forecast General Fund growth, not including kicker refunds.

 

Questions and answers interspersed.

 

TAPE 14, SIDE B

 

010

Kennedy

Discusses factors influencing projected growth in general fund revenues. Exhibit 2, slide 17.

 

 

 

025

Kennedy

Discusses the December Personal Income Growth Forecast. Exhibit 2, slide 18.

 

 

 

045

Kennedy

Discusses graph showing that historically, capital gains and retirement income has outpaced gross income growth.

 

 

 

056

Sen. Hannon

Points out that capital gains have not outpaced gross income growth in the past year and a half.

 

 

 

061

Kennedy

Responds that it will be interesting to see what happens with capital gains in the 2001 data.

 

 

 

073

Warner

Points out that there wonít be a major drop in capital gains in the next year because they are starting out from such a low level.

 

Discussion follows.

 

 

 

092

Sen. Hannon

Asks about the effects of corporations on the forecast.

 

 

 

101

Kennedy

Responds that the personal income tax was the major driving force in the forecast.

 

Discussion follows.

 

 

 

123

Kennedy

Discusses the history of the effective tax rate. Exhibit 2, slide20

 

 

 

146

Kennedy

Discusses graph showing that the PIT forecast is slightly below the long-term trend.

 

Questions and answers interspersed.

 

 

 

154

Sen. Hannon

Asks how the proposed moving of dates at the federal level, such as the marriage penalty, would effect the personal income tax growth.

 

 

 

168

Warner

Responds that the economists are waiting to look at the effects of the proposed federal legislation until they get an actual bill, but that in general the changing of those dates should increase Oregonís tax growth.

 

Discussion follows.

 

 

 

240

Warner

Outlines review of the revenue forecast process at request of Rep. Shetterly. Exhibit 3.

 

 

 

268

Warner

Discusses the reasons for the difference between the close of session and the current forecast beginning with wage and salary income. Exhibit 3.

 

Questions and answers interspersed.

 

 

 

389

Warner

Discusses corporate income as it affects the difference between the close of session and the current forecast.Exhibit 3.

 

TAPE 15, SIDE B

 

012

Warner

Discusses capital gains, other business and investment income, and miscellaneous factors as they affect the difference between the close of session and the current forecast. Exhibit 3.

 

 

 

065

Warner

Briefly discusses history of the forecast process.

 

 

 

095

Warner

Discusses strength of current forecast system. Exhibit 3.

 

Questions and answers interspersed.

 

 

 

143

Warner

Discusses recommended technical changes. Exhibit 3.

 

Questions and answers interspersed.

 

 

 

204

Warner

Discusses recommended structural and reporting changes beginning with establishing a Revenue Forecast Board. Exhibit 3.

 

 

 

235

Sen. Deckert

Asks if Warner thinks that will make process more politicized and if it is necessary.

 

Discussion follows.

 

 

 

322

Warner

Discusses the recommendation of creation of a new Revenue Forecast Advisory Committee. Exhibit 3.

 

 

 

351

Warner

Discusses the recommendation of providing a monthly revenue tracking report. Exhibit 3.

 

 

 

377

Warner

Discusses the recommendation of having a budgetary review of the Office of Economic Analysis functions. Exhibit 3.

 

Questions and answers follow.

 

 

 

401

Sen. Starr

Suggests that Warner talk to Sen. Beyer about some of the recommendations.

 

TAPE 16, SIDE A

 

007

Sen. Deckert

Asks Warner about making statutory changes.

 

Discussion follows.

 

 

 

017

Sen. Deckert

Asks about how the kicker would effect the statutory changes.

 

Discussion follows about changing the constitutional wording regarding the kicker and changing the methodology of the forecast in order to affect the kicker.

 

 

 

063

Sen. Deckert

Adjourns meeting at 2:58 pm.

 

 

 

 

 

 

 

 

 

 

 

 

Tape Log Submitted by,

 

 

 

Tara Lantz, Committee Assistant Reviewed by Kim Taylor James

 

Exhibit Summary:

1.      Paul Warner, Review of Revenue Forecasting Process, 7pp.

2.      Tom Potiowsky and Michael Kennedy, Oregonís Revenue Forecast Process, 11pp.

3.      Paul Warner, Revenue Forecast Review, 1p.

4.      Paul Warner, Oregon Economic and Revenue Forecast, 123pp.