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Public Policy Analysis ECON 439/539 May 16, 2007

Public Policy Analysis ECON 439/539 May 16, 2007. George Naughton Department of Administrative Services Budget and Management Division (503) 378-5460. Highlights of Oregon Economy. Oregon’s economy continues to show improvement and is well positioned for growth in 2007 and beyond

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Public Policy Analysis ECON 439/539 May 16, 2007

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  1. Public Policy AnalysisECON 439/539May 16, 2007 George Naughton Department of Administrative Services Budget and Management Division (503) 378-5460

  2. Highlights of Oregon Economy • Oregon’s economy continues to show improvement and is well positioned for growth in 2007 and beyond • Employment picture in Oregon has been strong since 2003 • Oregon’s basic strengths • Diverse economy with substantial international presence • Relatively lower energy costs • A high quality of life • Well-educated workforce • Affordable housing • Business cost advantages • Pacific Rim orientation • Oregon’s economic growth is on track due to the following factors • Strong population growth due mainly to in-migration • National rebound in corporate spending • Increased trade and exports

  3. Population Growth Oregon’s strong economy has continued to add to the State’s population growth and such growth is projected to continue well into the future Projected

  4. Decennial Population Growth (in percent): 1990 – 2000 Oregon: 20.4% CLATSOP COLUMBIA HOOD RIVER WASHINGTON SHERMAN MULTNOMAH WALLOWA TILLAMOOK UMATILLA MORROW GILLIAM UNION CLACKAMAS YAMHILL WASCO MARION POLK WHEELER BAKER JEFFERSON LINCOLN GRANT BENTON LINN CROOK Population Change LANE DESCHUTES > 20 % 10 – 20 % COOS DOUGLAS Less than 10 % JOSEPHINE JACKSON KLAMATH LAKE HARNEY MALHEUR CURRY Source: U.S. Census Bureau, 1990 and 2000 Censuses Office of Economic Analysis

  5. Long-Term Employment Trends Oregon’s overall employment trends have mirrored the U.S. with slightly more job loss during the recession but stronger recent and projected growth Projected • The Oregon economy follows the path of the national economy • Job growth turned positive in July 2003 and is positive for almost all sectors of the economy • Oregon’s employment growth will continue to be fueled by strong exports, population growth and business investment Source: Office of Economic Analysis

  6. Robust Job Growth All sectors have added jobs since the employment trough of June 2003 Total Job Growth through August 2006: 151,100

  7. North/Central America Europe Asia/Australia Oregon Exports Oregon enjoys a wide range of trading partners Source: MISER, 2006 (Note: Smaller trading partners totaling 14.10% are not listed)

  8. Budget Process Overview The budget process has four major cycles: Agency Request Governor’s Recommended Budget Legislatively Adopted Budget Execution

  9. Continuous Development Constant Constant Constant Constant

  10. Modified Zero-Based Budget • Legislatively Approved Budget organized by agency and program. • Base Budget adjustments: • Salary and benefit increases • Essential packages: • Phase-ins/phase-outs/one-time expenditures • Inflation increases • Mandated caseload adjustments for some programs.

  11. Modified Zero-Based Budget (cont) • Policy packages: • Other Funds and Federal Funds expenditure reductions required by declining revenues. • Adjustments due to emergency legislative action. • Policy and program changes: • New or expanded programs. • Increased funding for existing programs. • Funding to support legislative concepts. • New capital construction and information technology projects. • Debt service on new projects.

  12. Budget FrameworkPrinciples that Transcend the Decision-Maker • Must Balance within available resources • Start with mandatory items. • Implement core missions: • Focus on the essentials. • Emphasize programs with widely-distributed benefits. • Target investment where it will provide the most impact in the long run: • Focus on prevention. • Reduce overhead costs. • Plan for the Future

  13. General Fund Forecast Comparison Fiscal Years, in Millions

  14. Lottery Resources Available to the State Note: Resources do not include Video Lottery proceeds dedicated to the Counties. Beginning balance is included. Office of Economic Analysis 2003-09 debt service figures do not reflect any Education Endowment Fund or reserve earnings designated for debt service on education bonds .

  15. 2007-09 Governor’s BudgetTotal Funds

  16. 2007-09 Governor’s BudgetGeneral Fund and Lottery Funds * Includes beginning balance & carry forward

  17. General Fund and Lottery FundsBudget Trends General Fund and Lottery Trends General Fund & Lottery Funds Budgets Over Past Three Biennia Overall Expenditure $14,929 million $12,478 million $11,053 million

  18. Expenditures by CategoryGeneral Fund and Lottery Funds 2007-09 Total: $14,929 million

  19. What has caused the General Fund expenditure growth since 1989? • Primary • Population • Initiatives • Policy decisions • Secondary • Inflation • Lawsuits

  20. State and Local Resources for K-12 School Funding Billions of Dollars

  21. Inflation-Adjusted K-12 School Funding Allocation per ADMw

  22. Community College Support FundPer Student

  23. Oregon University System Education & General ServicesGeneral Fund and Other Funds Per Student

  24. Estimated Impact of Measure 11 on Oregon's Prison System

  25. Department of State Police2007-09 Governor’s Recommended BudgetSworn Patrol Positions

  26. Poverty Rate, 1999 Oregon: 11.6% CLATSOP COLUMBIA HOOD RIVER WASHINGTON SHERMAN MULTNOMAH UMATILLA WALLOWA TILLAMOOK MORROW GILLIAM UNION YAMHILL CLACKAMAS WASCO POLK MARION WHEELER BAKER JEFFERSON LINCOLN GRANT BENTON LINN % of persons under poverty CROOK LANE DESCHUTES > 15 % 10 – 15 % COOS DOUGLAS Less than 10 % JOSEPHINE KLAMATH LAKE HARNEY MALHEUR CURRY JACKSON Source: U.S. Census Bureau, Census 2000 Office of Economic Analysis

  27. Estimated Poverty Rate, 2004 Oregon: 12.9% CLATSOP COLUMBIA HOOD RIVER WASHINGTON SHERMAN MULTNOMAH UMATILLA WALLOWA TILLAMOOK MORROW GILLIAM UNION YAMHILL CLACKAMAS WASCO POLK MARION WHEELER BAKER JEFFERSON LINCOLN GRANT BENTON LINN % of persons under poverty CROOK LANE DESCHUTES > 15 % 10 – 15 % COOS DOUGLAS Less than 10 % JOSEPHINE KLAMATH LAKE HARNEY MALHEUR CURRY JACKSON Source: U.S. Census Bureau, Data Integration Division, Small Area Estimates Branch Office of Economic Analysis

  28. 2007-09 General Fund Revenue ForecastIncluding Impact of Kicker Calculation(December 2006 Forecast)

  29. 2007-09 General Fund Budget Projections(December 2006 Forecast)

  30. 2007-09 Governor’s Recommended BudgetBudget Reserves * Reflect Ending Balance after distribution of $1.3 billion kickers.

  31. Budget FrameworkPrinciples that Transcend the Decision-Maker • Must Balance within available resources • Start with mandatory items. • Implement core missions: • Focus on the essentials. • Emphasize programs with widely-distributed benefits. • Target investment where it will provide the most impact in the long run: • Focus on prevention. • Reduce overhead costs. • Plan for the Future

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