Five-Year Forecast Greg Grootendorst, Chief Economist, Hampton Roads - - PowerPoint PPT Presentation
Five-Year Forecast Greg Grootendorst, Chief Economist, Hampton Roads Planning District Commission Farrell Hanzaker, Chief Financial Officer, Virginia Beach Schools David Bradley, Director of Budget and Management Services Hampton Roads Economic
Greg Grootendorst, Chief Economist, Hampton Roads Planning District Commission Farrell Hanzaker, Chief Financial Officer, Virginia Beach Schools David Bradley, Director of Budget and Management Services
Greg Grootendorst Chief Economist, HRPDC November 20, 2018
Source: Bureau of Economic Analysis and HRPDC
14,000 14,500 15,000 15,500 16,000 16,500 17,000 17,500 18,000 18,500 19,000 Billions of Dollars (2009) Prerecession High: $15.8 Trillion Current Value: $18.7 Trillion Recession Low: $15.1 Trillion
GDP is up 23.8 % from the recession low
Source: Bureau of Labor Statistics and HRPDC
115,000 120,000 125,000 130,000 135,000 140,000 145,000 150,000 155,000 Thousands of Employees Prerecession High: 138,432,000 Current Value: 149,750,000 Recession Low: 129,733,000
Payroll employment has grown steadily at an annualized rate of 1.7 % since the recession low.
Source: Bureau of Labor Statistics and HRPDC
0% 2% 4% 6% 8% 10% 12% Unemployment Rate Prerecession Low: 4.4% Current Value: 3.7% Recession High: 10.0%
The unemployment rate has been reduced by over half since the height of the recession and is now well below re-recession levels.
Source: Yahoo Finance and HRPDC
500 1,000 1,500 2,000 2,500 3,000 3,500 Index Value Prerecession High: 1,549.4 Current Value: 2,722.2 Recession Low: 735.1
The S&P stock market index is 270% from the pre-recession low, and up 76% from the pre-recession high
Source: Bureau of Labor Statistics and HRPDC
0% 2% 4% 6% 8% 10%
Percent Job Loss Relative to Peak Months Since Peak Employment
U.S. Virginia Hampton Roads
Source: Bureau of Economic Analysis, and HRPDC
$50 $55 $60 $65 $70 $75 $80 $85 $90 Billions of 2009 Dollars
Non- Zero Axis
$83.6B $81.8B
Source: Bureau of Economic Analysis, and HRPDC
(Inflation-Adjusted)
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Annualized Change in Gross Product
(2014 - 2017)
Metropolitan Areas with Population between 1 and 4 Million Hampton Roads: 0.8%
700 710 720 730 740 750 760 770 780 790 800
Seasonally Adjusted Payrolls, Thousands
781,600 Jul, 2007 733,800 Feb, 2010 785,400 Sep, 2018
Source: Bureau of Labor Statistics and HRPDC
August ‘08 – August ‘18
Source: Bureau of Labor Statistics and HRPDC
Local Government Construction Information Wholesale Trade Real Estate & Leasing Manufacturing Retail Trade Administrative & Support State Government Finance & Insurance Transportation & Utilities Education Services Management Other Services Leisure & Hospitality Scientific & Technical Federal Government Healthcare & Social
Change in Employment
August ‘17 – August ‘18
Source: Bureau of Labor Statistics and HRPDC
Healthcare & Social Local Government Education Services Real Estate & Leasing Federal Government Information Finance & Insurance Wholesale Trade State Government Construction Other Services Transportation & Utilities Retail Trade Management Leisure & Hospitality Administrative & Support Manufacturing Scientific & Technical
Change in Employment
Seasonally Adjusted
Source: Bureau of Labor Statistics and HRPDC
0% 2% 4% 6% 8% 10% 12% Unemployment Rate U.S. Hampton Roads Virginia
Source: Bureau of Economic Analysis, and HRPDC
75% 80% 85% 90% 95% 100% 105% 110%
Ratio of Hampton Roads PCI to U.S. & Virginia
Share of US PCI Share of Virginia PCI
105% 96% 92%
Source: U.S. Census Bureau and HRPDC
$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 Income in 2017 Dollars Hampton Roads U.S.
Source: Bureau of Economic Analysis and HRPDC
(U.S. Quarterly Data, Seasonally Adjusted) $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 Billions of Real Dollars (2017 $'s)
Korean War on Terror 80's Cold War Buildup Vietnam War
Source: Bureau of Economic Analysis and HRPDC
500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 U.S. Military Personnel Hampton Roads Military Personnel Hampton Roads U.S.
Source: USAspending.gov and HRPDC
(Inflation-Adjusted) $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 Millions of 2016 Dollars
(5-Year Moving Average)
Fiscal Year
Source: Port of Virginia and HRPDC
5 10 15 20 25 Millions of Short Tons Exports Imports
Containers: Ships: Share:
Source: Virginia Tourism Corporation and HRPDC
(Inflation-Adjusted) $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 Billions of 2017 Dollars 13.2% Hotel Revenue:
Down 2.9% in 10 Years Employment: Up 6.6% in 10 years
Source: Virginia Department of Taxation and HRPDC
$1.2 $1.4 $1.6 $1.8 $2.0 $2.2 Billions of Dollars of Sales (Seasonally Adjusted)
+11.8% +28.0% Annualized growth rate of 1.2% since 2006 Inflation adjusted annualized growth rate of -1.1% since 2006
Source: Fair Housing Finance Agency and HRPDC
0% 5% 10% 15% 20% 25% 30%
Year-over-Year Growth in HPI
Hampton Roads Virginia U.S.
Source: National Association of Homebuilders and HRPDC
10 20 30 40 50 60 70 80 90 100 Housing Opportunity Index
(% of Homes Sold Affordable to a Median Income Family)
Source: Weldon Cooper Center for Public Service and HRPDC
1960 -- 927,854 2017 -- 1,729,326 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000 Population
1.8% 0.9% 0.5% 0.6% 0.8% 1.8% 1.8%
Source: U.S. Census Bureau and HRPDC
1.8% 0.9% 0.5% 0.6% 0.8% 1.8% 1.8%
100,000 50,000 50,000 100,000
Under 5 years 5 to 9 years 10 to 14 years 15 to 19 years 20 to 24 years 25 to 29 years 30 to 34 years 35 to 39 years 40 to 44 years 45 to 49 years 50 to 54 years 55 to 59 years 60 to 64 years 65 to 69 years 70 to 74 years 75 to 79 years 80 to 84 years 85 years and over
Population Age Categories
Females Males (Greatest)
Silent Boomers Gen X Millen Next..
Source: Virginia Department of Education and HRPDC
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2008* 2009* 2010* 2011* 2012* 2013* 2014* 2015* 2016* 2017* 2018* 4 Year Graduation Rate Hampton Roads Virginia Graduation Rate Virginia Graduation Rate- Cohort
* Dates are Graduation Rates Calculated Using the Cohort Method
(Inflation-Adjusted)
Source: Virginia Department of Education, Bureau of Economic Analysis and HRPDC
Forecast $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2017 Dollars Per Pupil Hampton Roads Virginia
Source: U.S. Census Bureau and HRPDC
Hampton Roads U.S. Average
Highschool Equivalence 91.5% 88.0% College Attainment 32.1% 32.0% Graduate or Professional Degree 12.3% 12.3%
Source: Auditor of Public Accounts and HRPDC
0% 20% 40% 60% 80% 100% 120% 140% 160%
Source: Auditor of Public Accounts and HRPDC
Hampton Roads vs. United States
% Who Worked Outside County of Residence
1 39
% of People Who Have a Bachelor's Degree
1 39
Median Age
1 39
Gini Coefficient (Measure of Income Equality)
1 39
% of Population that Moved in the Past Year
1 39
Per Capita Income
1 39
% of Labor Force in the Armed Forces
1 39
Highest Value Lowest Value
8.3 % 45.9% 18.3% $32,493 .45 36.1 32.1%
3 1 22 4 32 27 35 HR Rank in the Comparable Metro Areas
30,000 20,000 10,000 10,000 20,000 30,000 Under 5 years 5 to 9 years 10 to 14 years 15 to 19 years 20 to 24 years 25 to 29 years 30 to 34 years 35 to 39 years 40 to 44 years 45 to 49 years 50 to 54 years 55 to 59 years 60 to 64 years 65 to 69 years 70 to 74 years 75 to 79 years 80 to 84 years 85 years and over Female Male
Source: U.S. Census Bureau and HRPDC
Source: Weldon Cooper Center and HRPDC
50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
85,218 453,628
Source: Weldon Cooper Center, U.S. Census Bureau, and HRPDC
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 5-Year Annualized Growth Rate
Hampton Roads Virginia United States Virginia Beach
Source: Bureau of Labor Statistics and HRPDC
5000 10000 15000 20000 25000 30000 Agriculture, Forestry & Fishing Transportation & Warehousing Management of Companies Information Wholesale Trade Real Estate & Rental & Leasing Arts, Entertainment & Rec Manufacturing Other Services Public Administration Finance and Insurance Construction Administrative & Support Professional, Scientific & Tech Educational Services Health Care & Social Ast. Retail Trade Accommodation and Food Undisclosed
Source: Bureau of Labor Statistics and HRPDC
0% 20% 40% 60% 80% Wholesale Trade Construction Real Estate & Rental & Leasing Information Administrative & Support Transportation & Warehousing Retail Trade Manufacturing Finance and Insurance Educational Services Other Services Management of Companies Professional, Scientific & Tech Public Administration Arts, Entertainment & Rec Accommodation and Food Health Care & Social Ast. Agriculture, Forestry & Fishing
Unemployment Rate Not in Labor Force 10 - Year Employment Growth 10 - Year Population Growth Median Household Income Owner-Occupied Housing Rate Average Family Size Median Age
Virginia Beach
2.8% 30.1% 2.7% 5.6% 72,586 $ 65% 3.10 36.2
Hampton Roads
3.2% 32.9% 0.6% 5.8% 60,059 $ 61% 3.14 35.6
Virginia
3.0% 33.8% 4.8% 9.0% 66,149 $ 66% 3.17 37.8
United States
3.7% 36.5% 6.3% 8.1% 55,322 $ 64% 3.24 37.7
20 40 60 80 100 120 140 160
Millions of Jobs
Recessions
9 Years 10 Years 9.5 Years
Source: National Bureau of Economic Research, Bureau of Labor Statistics and HRPDC
Source: Blue Chip Economic Indicators and HRPDC
0% 2% 4% 6% 8% Annualized Percent Change
Consensus Forecast
Source: Congressional Budget Office and HRPDC
$0 $200 $400 Billions of Inflation-Adjusted Dollars (2012) On-Budget Deficit Total Deficit
Forecast
Sources: HRPDC, HRTPO, and the U.S. Census Bureau
Sources: HRPDC, HRTPO, and the U.S. Census Bureau
Other Revenue Sources
Anticipate reducing the reliance on reversion funding by $1 million each year of the forecast period
Local, State and Federal Revenue
This forecast reflects increases in revenue at the state and local levels and continues to reverse the impact of significant cuts VBCPS has sustained since 2008
2019-20 2020-21 2021-22 2022- 23 2023- 24 State Shared Sales Tax +2.5% +2.75% +2.75% +3.0% +3.0% Other State Revenue +2.5% +2.75% +2.75% +3.0% +3.0% Local Revenue (RSF)* +1.06% +2.24% +2.27% +2.25% +2.25% Federal Revenue
Non-Personnel Expenses
All non-personnel budget line items impacted by inflation are expected to increase by approximately 2.5% each year of the forecast period
Capital outlay expenditures are expected to increase by approximately $450,000 to purchase five additional replacement school buses each year from FY 2019-20 to FY 2022-23
Personnel Services and Fringe Benefits
Salary increase of 3.0% for FY 2019-20 and 2.0% for each of the forecast years from FY 2020-23 to FY 2023-24
Health insurance rates are projected to rise by 3% each year from FY 2019-20 to FY 2023-24
Funding to continue the expansion of full-day kindergarten will be allocated each forecast year from FY 2020-21 to FY 2022-23
Programmatic Priorities - expansion of existing programs or adding new programs (e.g. expansion of preschool and full-day kindergarten)
Technology - replace broken and aging whiteboards with standalone interactive displays
Employee Compensation - competitive pay increases, primarily associated with increasing allowances for advanced degrees, reclassifying teacher assistants and moving selected positions to the Teacher Pay Scale
Employee Benefits - rising costs associated with health care
State and Federal Mandates - new financial transparency provision in the Every Student Succeeds Act of 2015 (ESSA)
The following list highlights examples of factors that place considerable pressure on the School Operating budget.
Lagging State Funding - state budget allocates nine percent less on K-12 instruction than it
did in 2005
School Safety – need resources targeted to help fund VBCPS’ security enhancements and
address recommendations from the Blue Ribbon Panel on School Safety and Security
Structurally Flawed Operating budget strategy - FY 2018/19 marks the ninth consecutive
year VBCPS is relying on one-time reversion funds for ongoing expenses ($6.8 million)
Enrollment and demographics - slow decline in student enrollment projected to continue
Projected Deficits
Utilizing the revenue and
expenditure assumptions from the previous slide, VBCPS is projecting the following deficits over the forecast period.
( 10,217,160 ) ( 10,563,310 ) ( 9,913,185 ) ( 7,039,690 )
4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 740,000,000 760,000,000 780,000,000 800,000,000 820,000,000 840,000,000 860,000,000 880,000,000 900,000,000 920,000,000 940,000,000 FY 2018-19 Adopted FY 2019-20 Forecast FY 2020-21 Forecast FY 2021-22 Forecast FY 2022-23 Forecast FY 2023-24 Forecast Revenue Expenditures Baseline Deficit
FY 2018-19 Adopted FY 2019-20 Forecast FY 2020-21 Forecast FY 2021-22 Forecast FY 2022-23 Forecast FY 2023-24 Forecast Revenue Sharing Formula 442,120,415 446,791,534 456,785,596 467,174,673 477,671,905 488,438,456 Schools Use of Sandbridge TIF 409,000 409,000
477,000 477,000 477,000 477,000 477,000 477,000 Charges for Services 2,816,638 2,816,638 2,816,638 2,816,638 2,816,638 2,816,638 Miscellaneous Revenue 224,703 224,703 224,703 224,703 224,703 224,703 State Shared Sales Tax 75,344,490 77,228,102 79,351,875 81,534,052 83,980,073 86,499,475 Other State Revenue 272,725,078 286,276,659 294,149,267 302,238,372 311,305,523 320,644,689 Federal Revenue 12,200,000 12,200,000 12,200,000 12,200,000 12,200,000 12,200,000 School Reversion/Fund Balance 6,800,000 5,800,000 4,800,000 3,800,000 2,800,000 1,800,000 813,117,324 832,223,636 850,805,079 870,465,438 891,475,842 913,100,961 FY 2018-19 Adopted FY 2019-20 Forecast FY 2020-21 Forecast FY 2021-22 Forecast FY 2022-23 Forecast FY 2023-24 Forecast Personnel Services 471,393,129 485,534,923 496,850,242 508,391,868 520,164,328 530,567,614 Fringe Benefits FICA 35,882,382 37,143,422 38,009,044 38,891,978 39,792,571 40,588,422 VRS 71,058,250 76,131,876 77,906,118 79,715,845 81,561,767 83,193,002 Health Insurance 60,655,983 62,475,662 64,349,932 66,280,430 68,268,843 70,316,909 Life Insurance 5,820,627 6,360,507 6,508,738 6,659,933 6,814,153 6,950,436 All Other Fringe Benefits 3,299,581 3,299,581 3,299,581 3,299,581 3,299,581 3,299,581 Contractual Services 50,138,408 51,391,868 52,676,665 53,993,582 55,343,421 56,727,007 Other Charges 54,852,900 56,224,223 57,629,828 59,070,574 60,547,338 62,061,022 Capital Outlay 5,402,082 5,852,082 6,302,082 6,752,082 7,202,082 6,085,421 Land, Structures and Improvement 222,577 222,577 222,577 222,577 222,577 222,577 PAYGO 500,000 Debt Service 41,951,320 45,356,997 45,153,910 45,569,058 45,921,986 47,807,686 Transfers to Other Funds Athletics Fund 4,524,774 4,524,774 4,524,774 4,524,774 4,524,774 4,524,774 Categorical Grants Fund 3,612,280 3,612,280 3,612,280 3,612,280 3,612,280 3,612,280 Green Run Collegiate Fund 3,803,031 3,910,143 3,976,468 4,044,186 4,113,327 4,183,920 813,117,324 842,040,915 861,022,239 881,028,748 901,389,027 920,140,651
$577 $300 $350 $400 $450 $500 $550 $600 $650 $700 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 Millions Budget Actual Projection
$174 $100 $110 $120 $130 $140 $150 $160 $170 $180 $190 $200 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 Millions Budget Actual Projection
$74 $57 $50 $9 $- $10 $20 $30 $40 $50 $60 $70 $80 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 Millions Budget Actual Projection
General Sales BPOL Restaurant Hotel
$22 $10 $15 $20 $25 $30 $35 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 Millions Budget Actual Projection
$111 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 Millions Budget Actual Projection
$23 $10 $12 $14 $16 $18 $20 $22 $24 $26 $28 $30 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 Millions Budget Actual Projection
3% salary increase in FY 20; 2% for following years 2.5% inflation each year 1% rate increase in VRS every 2 years beginning in FY 21 3% annual increase in healthcare costs City CIP and Operating Budget commitments Debt based on current debt schedules and projected
issuances
Virginia Beach has historically budgeted for full salaries and used savings from attrition (fund
balance) in following years of the CIP
In FY 19:
$2.3 million in attrition savings to offset the elimination of cigarette and automobile license tax $3 million in attrition savings for horizontal and vertical compression
Key issues to consider:
Impact on future CIP Flexibility during economic downturn Safeguard AAA bond rating
$17.4M $19.2M $28.5M $1.274 $1.152 $9.2M $1.306 $1.10 $1.13 $1.16 $1.19 $1.22 $1.25 $1.28 $1.31 $1.34 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Billions Revenues Expenditures $32.3M
$72,586 $61,399 $45,000 $50,000 $55,000 $60,000 $65,000 $70,000 $75,000 $80,000 $85,000 $90,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Median Household Income Adjusted to 2007 Dollars
$1,915 $1,611 $1,628 $1,623 $1,300 $1,400 $1,500 $1,600 $1,700 $1,800 $1,900 $2,000 $2,100 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Millions Fiscal Year Budget Inflation Adjusted (Constant Dollars)
16.80% 18.10%
0% 5% 10% 15% 20% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Operating Budget Growth Median Household Income Growth
Relative Measures of Tax Burden
Locality Per Capita Expenditures as a % of Per Capita Income Virginia Beach 6.32% Chesapeake 7.21% Hampton 9.36% Newport News 9.39% Norfolk 8.84% Portsmouth 9.44% Suffolk 7.39%
Regional economy improving but still lagging behind other MSAs Budget process will address deficits Future decisions Decision on compensation increases
Budgeting for attrition
Possible recession on the horizon? Enterprise Fund discussion forthcoming (March)