CONNECTING THE DOTS Current Events Forecast Revenue Estimate 1 - - PDF document

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11/17/2016 ECONOMICS AND REVENUE Connecting the Dots CONNECTING THE DOTS Current Events Forecast Revenue Estimate 1 11/17/2016 CONNECTING THE DOTS Current Events Forecast Revenue Estimate CONNECTING THE DOTS Current Events Forecast

SLIDE 1

11/17/2016 1

ECONOMICS AND REVENUE

Connecting the Dots

CONNECTING THE DOTS

Current Events Forecast Revenue Estimate

SLIDE 2

11/17/2016 2

CONNECTING THE DOTS

Current Events Forecast Revenue Estimate

CONNECTING THE DOTS

Current Events Forecast Revenue Estimate

SLIDE 3

11/17/2016 3

CONNECTING THE DOTS

Current Events Forecast Revenue Estimate

CURRENT EVENTS

State Government

SABHRS accounting cash received Other accounting transactions Tax return data Mining and well drilling data Portfolio of investments State land leasing information Other

Headlines and what’s happening

Newspapers Known lawsuits

SLIDE 4

11/17/2016 4

FORECASTS AND REVENUE ESTIMATES

Economy Forecast IHS and others Overall economic indicators

 Gross State Product/Personal Income  Wages  Several commodity prices  Other

Demographics Other commodity forecast sources Company surveys: estimated production Revenue Estimate by LFD Individual Income Tax Corporation Tax Property Tax Insurance Tax Oil and Natural Gas Taxes All general fund sources Related state special sources

IHS ECONOMIC FORECAST

LFD uses several state specific and national forecasts in revenue modeling Gross state product, while not specifically used in LFD modeling, encompasses underlying trends and is consistent with overall economic forecast and parameters used by LFD The following slides walk through the IHS trends for

 Gross State Product (GSP)  Personal income (PI)  Total wage disbursements (Wages)  Employment

SLIDE 5

11/17/2016 5

CY 2016 A SLOW GROWTH YEAR FOR GSP

$ Change in Montana Gross State Product (GSP): LFD calculations based on November IHS data

$1,000
$500

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $ Millions

GSP DRAG FROM MINING & AG CLEARS OUT IN CY 2017

$ Growth in GSP by Industry Sector: LFD calculations based on November IHS data

$1,500
$1,000
$500

$0 $500 $1,000 $1,500 $2,000 $2,500 2014 2015 2016 2017 2018 2019 $ Millions Government Services Trade, Transp.& Utilities Manufacturing Construction Mining Agriculture

SLIDE 6

11/17/2016 6

SERVICES CONTINUE TO GROW

$ GSP Growth in Services Only - LFD calculations based on November IHS data $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 2014 2015 2016 2017 2018 2019 $ Millions Management, Admin, Other Professional & Business Services, Information Leisure & Hospitality Health Services & Private Educational Financial Activities

RECENT ECONOMIC SHIFT FROM MINING & AG

5.2% 7.2% 5.4% 6.4% 19.1% 41.9% 14.8%

2013

Agriculture Mining Construction Manufacturing Trade, Transp.& Utilities Services Government 3.5% 3.2% 6.2% 6.9% 19.5% 45.4% 15.3%

2017

SLIDE 7

11/17/2016 7

GSP, PI & WAGES: SIMILAR GROWTH PATTERNS

% Growth in CY GSP , PI, Wages - LFD calculations based on November IHS data

0% 2% 4% 6% 8% 10% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 GSP Personal Income Wage Disbursements

$ CHANGE IN PERSONAL INCOME BY CALENDAR YEAR

LFD calculations based on November IHS data

$1,000
$500

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $ Millions

SLIDE 8

11/17/2016 8

$ CHANGE WAGE DISBURSEMENTS BY CALENDAR YEAR

LFD calculations based on November IHS data

$500

$0 $500 $1,000 $1,500 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $ Millions

GF REVENUE MORE VOLATILE THAN THE ECONOMY

0% 5% 10% 15% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 General Fund GSP Personal Income Wage Disbursements % Growth in FY GF, GSP , PI, Wages - LFD calculations based on SABHRS & November IHS data

SLIDE 9

11/17/2016 9

LFD REVENUE ESTIMATE BY FISCAL YEAR

10.8%11.6% 7.1% 6.8%

7.5%
10.0%

9.6% 5.0% 11.0% 0.0% 5.9%

3.6%

4.2% 5.4% 5.1%

0% 5% 10% 15% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2019 BIENNIUM GROWTH BY MAJOR SOURCE

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% FY 2017 FY 2018 FY 2019 Remaining Sources Oil & Natural Gas Taxes Corporation Income Tax Individual Income Tax 5.1% 4.2% 5.4%

SLIDE 10

11/17/2016 10

INDIVIDUAL INCOME TAX CONTRIBUTION TO GROWTH:

DRIVEN BY LIABILITY GROWTH WITH A TAXPAYER SHIFT IN FY 2017

1.0%

0.0% 1.0% 2.0% 3.0% 4.0% FY 2017 FY 2018 FY 2019 Audits Trended Base Tax Liability

2.2% 3.4% 3.8%

CORPORATION INCOME TAX CONTRIBUTION TO GROWTH:

LED BY NATURAL RESOURCES WITH AUDIT & REFUND SHIFTS

0.0% 0.5% 1.0% 1.5% 2.0% FY 2017 FY 2018 FY 2019 Increased Audits Reduced Refunds Tax Liability 1.3% 0.7% 0.2%

SLIDE 11

11/17/2016 11

OIL & NATURAL GAS TAXES GROWTH

Tax holiday production becomes taxable Price increases partially offset declining production

REMAINING SOURCES CONTRIBUTION TO GROWTH:

PROPERTY TAX 2-YEAR REAPPRAISAL & HIGHER INTEREST EARNINGS

0.0% 0.5% 1.0% 1.5% 2.0% FY 2017 FY 2018 FY 2019 Remainder Interest Earnings Property Tax 0.4% 1.2% 1.1%

SLIDE 12

11/17/2016 12

CONNECTING THE DOTS

Current Events:

Boomers retiring Technology industry growth High tourism year for national parks

Revenue Estimate:

Retirement income growth higher than GSP Slow and steady growth on small segment

f the economy

Not a large source of revenue gain

REVENUE TEAM

Overall estimate details
Specific source details
More connecting the dots