Transcript Understanding School Funding

OREGON’S NEW REVENUE
SYSTEM AND THE CHANGING
ECONOMY:
IMPLICATIONS FOR SCHOOL
FINANCE
LEGISLATIVE REVENUE OFFICE
OREGON’S REVENUE
SYSTEM
• HOW HAS THE
SYSTEM
CHANGED?
• WHAT ARE THE
CHARACTERISTICS
OF THE NEW
SYSTEM?
• WHAT DOES IT
ALL MEAN FOR
SCHOOL FINANCE?
2
2004-05
2002-03
2000-01
1998-99
1996-97
1994-95
1,000
1992-93
1990-91
1988-89
1986-87
1984-85
1982-83
1980-81
1978-79
2,000
1976-77
1974-75
1972-73
1970-71
Millions of Dollars
Oregon Income and Property
Taxes
6,000
5,000
4,000
PERSONAL INCOME TAX
3,000
PROPERTY TAX
Property Tax
Personal Income Tax
0
Fiscal Year
3
OREGON’S GENERAL
REVENUE MIX
TAXES
% OF TOTAL % OF TOTAL
1989-90
1998-99
54
46 (57)
FEDERAL
20
23 (19)
CHARGES
13
17 (15)
MISC.
13
14 (10)
98-99 US AVERAGE IN PARENTHESIS
4
STATES RANKED BY LARGEST TAX AS
% OF STATE TAX COLLECTIONS
TAX
% OF STATE
TAX
COLLECTIONS
PER INCOME
68.9
WASHINGTON
SALES
61.6
FLORIDA
SALES
60.6
TENNESSEE
SALES
57.4
STATE
OREGON
1999-2000 FISCAL YEAR
5
OREGON’S STATE & LOCAL
REVENUE SYSTEM
OREGON
%OF
INCOME
21.7
US
% OF
INCOME
19.4
OREGON
RANK
TAX
10.0
11.1
45
PERSONAL
4.4
2.6
2
CORP.
0.4
0.5
27
SALES
1.0
3.9
50
PROPERTY
3.0
3.3
28
GENERAL
1998-99 FISCAL YEAR
15
6
CHARACTERISTICS OF
OREGON’S REVENUE
SYSTEM
• LOW TAX BURDEN
• HEAVY RELIANCE ON NON-TAX
REVENUE
• HIGH PERSONAL INCOME TAX
BURDEN
• LOW CONSUMPTION TAX BURDEN
• AVERAGE PROPERTY TAX BURDEN
7
LEGACY OF OREGON’S
PROPERTY TAX INITIATIVES
PROGRESSIVITY
STABILITY
CENTRALIZATION
TAX BURDEN
SIZE OF
GOVERNMENT
UP
DOWN
UP
DOWN
EVEN
8
OREGON’S TAX BURDEN:
WHO PAYS?
14%
Effective Tax Rate
12%
Other
Taxes
10%
Property
Taxes
8%
6%
Income
Taxes
4%
2%
0%
9
29
49
69
89
109 129 149 169 189 209 229
Income ($,000)
9
THE ECONOMIC
ENVIRONMENT
• ARE WE IN A
RECESSION?
• HOW LONG WILL
THE SLOWDOWN
LAST?
• WHAT ARE
OREGON’S
PROSPECTS?
10
1991-2000 Was a Great
Decade
 The unemployment rate fell from 7% to 4%.
 Core inflation fell from 5.5% to 2.5%.
 Productivity and real wage growth
accelerated.
 Household net worth doubled.
 The federal budget shifted from deficit to
surplus.
11
OREGON’S ECONOMY
PERFORMED VERY WELL IN
THE 1990’S
• JOBS UP 30.1%
• WAGES UP 53.3%
• POPULATION UP
18.3%
• PER CAPITA
INCOME UP 58.7%
• PRICES UP 43.2%
12
The Good Times Are Over
 Industrial production has fallen for 13




straight months. Longest consecutive
monthly decline since 1932.
Jobs have declined by 1.6 million over
the past 6 months.
Consumer confidence is at an 8-year
low.
Capacity utilization is lowest since
1983.
The stock market peaked in March of
2000.
13
ECONOMIC IMPACT OF
TERRORIST ATTACK
•
•
•
•
•
•
PUSHES WEAK ECONOMY
INTO RECESSION
CONSUMER CONFIDENCE
DECLINES
FISCAL AND MONETARY
POLICY TURN MORE
AGGRESSIVE
V-SHAPED ECONOMY OVER
NEXT TWO YEARS
ADDITIONAL COSTS ADDED
TO TRANSPORTATION &
DISTRIBUTION SYSTEM
COST OF CAPITAL INCREASES
BECAUSE WORLD IS MORE
UNCERTAIN
14
WHAT KIND OF RECESSION?
• 1990-91
EXPERIENCE
• ROLE OF BUSINESS
INVESTMENT
SPENDING
• INTERNATIONAL
TRADE
• FEDERAL FISCAL
AND MONETARY
POLICY
15
CONSENSUS CALLS FOR
MILD RECESSION
12%
10%
Expansion
(Yellow)
Annual Rate of Growth in GDP
(1996 Dollars)
The current expansion:
10 years and counting
8%
6%
4%
2%
0%
-2%1975
1980
1985
1990
1995
2000
2005
-4%
First Soft
Landing
-6%
-8%
-10%
Contraction
(Red)
Second Hard
(Recession)
Landing? 16
Office of Economic Analysis
OREGON ALREADY IN
RECESSION
(CHANGE OCTOBER 01 VERSUS OCTOBER 00)
0
-5000
-10000
-15000
TOTAL
EMPLOYMENT
MANUFACTURING
CONSTRUCTION
-20000
TRADE
-25000
SERVICES
-30000
17
IS THIS THE EARLY 1980s
ALL OVER AGAIN??
• YES
• CYCLICALLY
SENSITIVE INDUSTRY
STRUCTURE
• DEFENSE BUILD-UP
• HIGH LAND,LABOR &
ENERGY COSTS
• STRONG $/WEAK
FOREIGN TRADE
18
IS THIS THE EARLY 1980s
ALL OVER AGAIN??
• NO:
• INTEREST
RATES/INFLATION
ENVIRONMENT
• HIGH
TECHNOLOGY
• STRONG WESTERN
REGION
• DEMOGRAPHICS
19
SEPTEMBER FORECAST CALLED
FOR RESUMPTION OF MODEST JOB
GROWTH
Employment Growth
6%
5%
4%
Oregon’s employment growth rate
dropped below the nation’s for the first
time since 1985
3%
2%
1%
0%
-1%
Oregon
U.S.
-2%
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
20
Office of Economic Analysis
THE STATE BUDGET
SITUATION
• THE SEPTEMBER REVENUE
FORECAST PROJECTS A
GENERAL FUND DEFICIT
OF $212 MILLION.
• ACROSS THE BOARD
GENERAL FUND CUT OF
$212 MILLION WOULD BE
1.86%.
• THE DECEMBER
FORECAST WILL
INCORPORATE THE
ESTIMATED EFFECTS OF
SEPTEMBER 11.
21
Biennial Growth in General Fund
Revenues
25%
22%
21%
20%
22%
18%
15%
19%
18%
14% 14%
13%
11%
11%
10%
8%
7%
5%
5%
0%
79-81
83-85
87-89
General Fund Revenue
91-93
95-97
99-01
03-05
(Proj.)
Long Term Average
22
Office of Economic Analysis
REVENUE GROWTH IS
SLOWING
(% CHANGE COMPARED TO YEAR EARLIER)
16
14
12
10
8
6
4
2
0
-2
-4
2001/3
2001/1
2000/3
2000/1
99/3
99/1
98/3
98/1
97/3
97/1
96/3
96/1
95/3
WITHHOLDING
RECEIPTS
23
CORPORATE COLLECTIONS
ARE FALLING SHARPLY
(% CHANGE COMPARED TO YEAR EARLIER)
80
60
40
CORPORATE
INCOME TAX
COLLECTIONS
20
0
-20
-40
/
20 4
00
/1
20
00
/
20 2
00
/3
20
00
/4
20
01
/
20 1
01
/2
20
01
/3
99
/3
99
99
/2
-60
24
The Capital Gains Windfall Will
Soon Disappear
700
(Billions of dollars)
(Percent)
14
600
12
500
10
400
8
300
6
200
4
100
2
0
0
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Taxable Capital Gains
Percent of Federal Tax Base
25
Lottery resources available to the
state
Lottery Resources Available to the State
800
Debt Service
700
Education Endowment
Fund
Parks and Natural
Resouces Fund
and
Gambling Addiction
Millions
600
500
400
Resources Available for
Allocation
300
200
100
0
85-87 87-89 89-91 91-93 93-95 95-97 97-99 99-01 01-03 03-05 05-07
Proj. Proj. Proj.
26
Office of Economic Analysis
GENERAL FUND ENDING
BALANCE: HISTORY &
PROJECTION
800
600
400
ENDING BALANCE
HISTORY
ENDING BALANCE
FORECAST
200
0
-200
-400
-600
95-97
97-99
99-01 '01-03F '03-05F
27
2001-2003 BUDGET:
GENERAL FUND & OTHER
DICRETIONARY FUNDS
K-12
11
COMMUNITY
COLLEGES
HIGHER ED
2.3
10.9
41.8
HUMAN SERVICES
PUBLIC SAFETY
22.7
7.5
3.8
BUDGET INCLUDES GENERAL
FUND, LOTTERY, MUPL &
NATURAL
RESOURCES
OTHER PROGRAMS
28
FUTURE UNKNOWNS
• DURATION & IMPACT
OF INTERNATIONAL
CONFLICT
• NATIONAL ECONOMY:
LENGTH & DEPTH OF
RECESSION, STRENGTH
OF RECOVERY
• OREGON’S PLACE IN
THE NEW
ENVIRONMENT
• ROLE OF GOVERNMENT
IN NEW ENVIRONMENT
29
2001-03 K-12/ESD
RESOURCES
SCHOOL RESOURCES
2001-03 BIENNIUM
(IN MILLIONS OF $)
STATE SCHOOL FUND
SCHOOL IMPROVEMENT FUND
TOTAL STATE
LOCAL REVENUE
TOTAL REVENUE
4,971.6
220
5,191.6
2,135.7
7,327.3
30
2001-03 STATE RESOURCES
FOR SCHOOLS/ESDs
SOURCE
2001-03 BIENNIUM
(IN MILLIONS OF $)
GENERAL FUND*
LOTTERY
MUPL
PRIVATE TIMBER
TOTAL STATE
*INCLUDES SCHOOL IMPROVEMENT, LOCAL
OPTION & DATA INTEGRITY
4,791.2
288.4
99.2
23.7
5,202.5
31